TaxTMI 
TaxTMI 
2014 (7) TMI 576
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.... Department may please be quashed. (iv) That, a writ of mandamus may kindly be issued directing the respondents to return all the seized documents in possession of the officers of the M.P. VAT Department. (v) That, it may kindly be held that the search carried out by the M.P. VAT Department is illegal and void. (vi) Any other relief considered necessary and expedient under the facts of the case along with the cost of this litigation may kindly be allowed to the petitioner." The petitioner has challenged the letter of authorisation, issued by respondent No. 2, authorising the search of premises of the petitioner under section 55 of the M.P. Value Added Tax Act, 2002 and the search conducted in the premises on August 28, 2010. The aforesaid letter of authorisation and search are assailed by the petitioner in this petition on the ground that search of business and residential premises of the petitioner-company were made without any valid reasons, illegal authorisation and without showing the authorisation for search to the persons present at the business premises and residential premises of the managing director of the petitioner. The search is also assailed on the grou....
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....etitioner to draw a proper panchnama and give receipt of documents which were intended to be taken away by the search parties, stored in 3 boxes, but it was denied by the search party. When insistence was made for issuance of receipt and it was denied then it gave rise to a dispute with the staff present at the site and search party. The staff of the petitioner approached to the incharge of police station, Saleemnabad, District Katni, made a complaint in respect of non-issuance of receipt of documents, which were intended to be taken away from the factory premises. On this information, the T. I., Saleemnabad, reached to the site and a letter was handed over to him at 10.30 in the night on August 28, 2010. A copy of the letter is enclosed as annexure P1. (d) on the intervention of incharge of police station, Saleemnabad, a letter, addressed to the person in-charge to the search party requesting him to give the receipt of boxes those were taken away by the search party, was served, but by putting a note on the same application that no such procedure is provided under section 55 of the VAT Act and the receipt was not issued. A copy of letter dated August 28, 2010 addressed to the i....
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....the petitioner is that no reasons were before respondent No. 2 to constitute a reasonable belief that the petitioner was evading payment of tax or indulged in evasion of tax to constitute a reason to believe for initiation of search action. (k) that the respondents while conducting the search took the help of private security agents, while under sub-section (7) of section 55 of the VAT Act, it was mandatory on the part of search party to take assistance of local police officers and nowhere it provides to take help of private security agencies. (l) That the petitioner moved an application before the Commercial Tax Officer, Anti Evasion Bureau, Jabalpur, requesting him to inspect the search file, so that the petitioner may satisfy itself that the search was conducted under the proper authorisation of the Commissioner, but no permission was granted, as was prayed by annexure P4. On the aforesaid grounds, the petitioner has prayed that the authorisation, search and seizure made by the respondents may be declared as illegal and void and the entire proceedings may be quashed. The respondents have filed reply in which they have justified their action in respect of issuance of ....
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....were stated to be at Delhi, therefore it was not possible for the respondents to scrutinize the record, so they prepared the seizure in exercise of powers under section 55(4) of the VAT Act. The documents were kept in a box for the purpose of seizure. (g) That it is evident that the seizure of documents were not effected at the spot and the documents were sealed for the purposes of effecting proper seizure as per the proviso to sub-section (4) of section 55 of the VAT Act. That on August 28, 2010, the available officers of the petitioner caused obstructions to the inspecting team while returning back from the main gate. The main gate was closed and the other employees of the petitioner came over there. The inspecting team, thereafter, intimated the police, local administration and with the help of police and District Administration the sealed container/boxes were carried out by the inspecting team. That immediately at police station, Saleemnabad, the report with regard to the obstructions caused by the employees of the petitioner was lodged as annexure R5. A criminal case as crime No. 287/2010 under sections 147, 353 and 342 of I.P.C., was registered against Jayant Goswami, Push....
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....time was sought. Time period up to September 30, 2010 was granted. (m) That on September 29, 2010 again the application was filed for grant of time and time period up to October 6, 2010 was granted. (n) That so far as deployment of private security guard for search is concerned, it was denied. It is explained that the help of private security guard was restricted only up to the entrance gate of administrative building. There was no reason to accompany them within the premises of the petitioner. The respondents seek the assistance of police officers whenever they feel resistance by the dealer. In the present case there was no reason for obstructing or objecting the investigation by the dealer and accordingly on August 28, 2010 the police was not intimated, however, after the obstruction was caused by the petitioner, the police was intimated immediately and a report was lodged. The petitioner has not made any averment with regard to participation in the investigation process by the security people in his earlier complaints. The security guards were engaged for ensuring the security of the vehicles of the officers and other allied purposes. It is stated that the security guards ....
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.... Submitting aforesaid, it is contended that this petition is pre-mature and may be dismissed. The petitioner has filed rejoinder to the return filed by the respondents in which in para 3 of the rejoinder, it is stated that in this case the authorisation was given as per annexure R3 under section 55(3) to section 55(6). Section 55(6) empowers the authorities to search a place of business of such dealer or any place whether such place is the place of business or not, where the Commissioner believes that documents, registers or stock of the business is kept. He is also authorized to break open the lock of any door, box, locker, safe almirah or any other in order to continue inspection where the keys thereof are not produced on demand or not available. Section 55(8) provides that while making entry, search and seizure under section 55 of the VAT Act the authorities exercise the same power and have to follow the same procedure as are exercised by and or required to be followed by police officer in relation to entry, search and seizure under the provisions of the Code of Criminal Procedure, 1973. Thus the procedure as laid down under section 100 of the Cr. P.C., is to be mandatorily f....
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....ch were kept in a box. It is explained that the proviso of sub-section (4) specifically provides that if the Commissioner cannot examine the documents on spot, the same can be sealed in a box. The list of document has to be given only when the seal of the seized box is opened in the presence of dealer or his agent in presence of at least two other persons and after examination of the documents, the Commissioner shall seize such documents and grant a receipt thereof. So it is clear that the respondents have collected the documents, accounts and registers relating to the business of the petitioner and put them in a box, duly sealed in the presence of the officers of the company. This finds support with the statement of Anil Gupta, annexure R4. At the time of seizure of the box, containing documents, the officers of the petitioner were present and they have duly signed the slip, which was affixed on the box. (c) The officers and staff of the petitioner had created all the possible hindrances to the stop the inspection and faced with such a situation, the inspection party had lodged an F.I.R., and the case was registered against the officers and employees of the petitioner. (d) T....
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....ation formed the opinion that there were sufficient reasons to believe that the petitioner was indulged in evasion of tax and on the basis of this directed issuance of authorisation letter under section 55 of the VAT Act and thereafter authorisation letter, annexure R2, dated August 25, 2002 was issued. Various officers whose names are appearing in annexure R2 were authorised under section 55(3) to 55(7) for search and seizure of accounts books, documents and goods. From the perusal of the aforesaid, it is apparent that there was sufficient material before respondent No. 2 for issuance of authorisation in respect of search and seizure. From the perusal of order dated August 25, 2010 it is also apparent that respondent No. 2 applied his mind and after recording his satisfaction in this regard, the letter of authorisation was issued. In these circumstances, the first contention of the petitioner that the letter of authorisation was issued without recording sufficient reasons or without applying mind by respondent No. 2 has no force. Now the second contention of the petitioner may be looked into. The petitioner's contention is that before conduction of search by the authority, ....
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....of the petitioner that before carrying out inspection/search such authorisation letter was not shown to the staff/employee of the petitioner cannot be disbelieved. Now the third contention of the petitioner is, that at the time of search and seizure independent witnesses were not called, in this regard the reply of the respondents may be looked into. The respondents in para 5 of the reply have stated thus: "5. That, bare perusal of the provisions recorded by the inspection team and also on the perusal of the provisions of sub-section (4) of section 55 of the VAT Act, 2002, it is evident that the seizure of the documents has not been effected at the spot and the documents have been sealed for the purposes of effecting proper seizure as per the proviso of sub-section (4) of section 55 of the Act of 2002. It is respectfully submitted that on August 28, 2010 the available officers of the petitioner's caused obstructions to the inspecting team while returning back from the main gate. The main gate was closed and the other employees of the petitioner came over there. The inspecting team, thereafter, intimated the police and administration and with the help of police and Distric....
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....u. It is height of things that a respected officer of Assistant Commissioner level/CTO level have used slang language and threatened closure of the company and functioning of the unit. Kindly as such take suitable action under Rules. Yours faithfully, -Sd/ For SVIL Mines 28.8.2010." From the perusal of the aforesaid, it is apparent that the employees immediately intimated to the police in respect of non-seizure and nonissuing receipt of documents which were taken into possession by the respondent and were tried to be taken over from the premises of the petitioner. It is apparent from the perusal of the aforesaid that when the employees asked the list and receipt of documents, which were taken over by the respondents the dispute arose. Even from the perusal of report lodged by the respondents at police station, which is on record as annexure R5, there is no reference that the authorisation letter was shown to the employees or the petitioner. There was no obstruction or resistance by the employees till the documents were taken over by the respondents from the premises of the petitioner. It appears that the employees resisted for taking over the seized and sealed....
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....ting to the business of such dealer and all the goods kept in such place of business shall be open to inspection by the Commissioner. (4) If on scrutiny of the records produced by the dealer or on inspection of his place of business under sub-section (3), the Commissioner is satisfied that the dealer has evaded payment of tax payable by him for any year, he may for reasons to be recorded in writing, seize such accounts, registers or documents relating to the business of such dealer as he considers necessary, and grant a receipt therefor to the dealer and shall detain them only for so long as may be necessary, for examination thereof or for assessment of tax or for prosecution: Provided that if the Commissioner cannot examine the documents relating to the business of such dealer on the spot, he may, for reasons to be recorded in writing, seal such documents in a box or bag or container or packet and seize the box or bag or container or packet and after the seizure, the Commissioner shall serve upon the dealer, a notice in the prescribed form, and on the date fixed, he shall open the seal of the seized box or bag or container or packet in the presence of the dealer or an agent ....
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....ot accounted for such goods with the intention of evading tax, the Commissioner may seize all such goods and take all necessary steps for their removal, proper custody and preservation: Provided that a list of all goods seized under this clause shall be prepared by the Commissioner in the presence of at least two respectable persons and a copy thereof shall, on demand, be furnished to the dealer or, as the case may be, to the person from whose possession or custody they were seized. (b) The Commissioner shall as soon as possible, after seizure of the goods under clause (a), serve upon the dealer, a notice in the prescribed form to show cause within a period of thirty days of service of such notice as to why a penalty equal to 3.5 times the amount of tax payable and calculable on the price which such goods would have fetched on their assumed sale in Madhya Pradesh, on the date of seizure, be not imposed on him for the dealer's default in not making entries in respect of such goods in his books of account or register or other documents, as the case may be, maintained by him in the course of his business. (c) If the Commissioner, after taking into consideration the explan....
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....he penalty imposed under clause (c) shall be without prejudice to any other action under any other provision of this Act. (h) Where any objection is made to the seizure of the goods seized under clause (a) on the ground that such goods do not belong to the dealer or are not otherwise liable to seizure, the Commissioner shall proceed to decide the objection: Provided that no such objection shall be entertained- (i) where, before the objection is made, the goods seized had already been sold, or (ii) where the Commissioner considers that the objection was designedly or unnecessarily made. (i) All questions including question relating to right, title or interest in the goods seized arising between the parties to such proceeding or their representatives and relevant to the adjudication of the claim or objection, shall be determined by the Commissioner dealing with the claim or objection. (j) Upon the determination of the question referred to in clause (i), the Commissioner shall, in accordance with such determination: (i) allow the claim or objection and release the seized goods either wholly or to such extent as he thinks fit, or (ii) disallow the claim or objec....
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....ents in a box or bag or container or packet and seize the box or bag or container or packet and after the seizure, the Commissioner shall serve upon the dealer a notice in the prescribed form and on the date fixed, he shall open the seal of the seized box or bag or container or packet in the presence of the dealer or an agent of the dealer entitled to appear in accordance with the provisions of section 23 and in presence of at least two other persons examine the documents kept in the box or bag or container or packet and after examination of the documents, the Commissioner may seize such documents as he considers necessary and grant a receipt thereof to the dealer. From the perusal of the aforesaid provision, it is apparent that subsection (4) takes care in respect of seizure of documents, but before it the Commissioner has to record his reasons in writing. No such satisfaction note is produced before us that the authorized officer after inspection of the premises of the petitioner was of the view that seizure of the documents was necessary. The provision also provides that at the time of seizure a receipt of document shall be issued to the dealer and the Commissioner can detain....
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....bitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do. (5) The search shall be made in their presence, and a list of all things seized in the course of such search and of the places in which they are respectively found shall be prepared by such officer or other person and signed by such witnesses; but no person witnessing a search under this section shall be required to attend the court as a witness of the search unless specially summoned by it. (6) The occupant of the place searched, or some person in his behalf, shall, in every instance, be permitted to attend during the search, and a copy of the list prepared under this section, signed by the said witnesses, shall be delivered to such occupant or person. (7) When any person is searched under sub-section (3), a list of all things taken possession of shall be prepared, and a copy thereof shall be delivered to such person. (8) Any person who, without reasonable cause, refuses or negle....
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....Shrikishan Jhaver [1967] 20 STC 453 (SC); [1967] 66 ITR 664 (SC); AIR 1968 SC 59, the apex court held thus in para 17 (page 468 in 20 STC): ". . . We are therefore of opinion that safeguards provided in section 165 also apply to searches made under sub-section (2). These safeguards are-(i) the empowered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) he must record in writing the grounds of his belief, and (iv) he must specify in such writing so far as possible the thing for which search is to be made. After he has done these things, he can make the search. These safeguards, which in our opinion apply to searches under sub-section (2) also clearly show that the power to search under sub-section (2) is not arbitrary. In view of these safeguards and other safeguards provided in Chapter VII of the Code of Criminal Procedure, which also apply so far as may be to searches made under sub-section (2), we can see no reason to hold that the restriction, if any, on the right to hol....
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....icit articles under the NDPS Act. It appears to have been incorporated in the Act keeping in view the severity of the punishment. The rationale behind the provision is even otherwise manifest. The search before a Gazetted Officer or a Magistrate would impart much more authenticity and creditworthiness to the search and seizure proceeding. It would also verily strengthen the prosecution case. There is, thus, no justification for the empowered officer, who goes to search the person, on prior information, to effect the search, of not informing the concerned person of the existence of his right to have his search conducted before a Gazetted Officer or a Magistrate so as to enable him to avail of that right. It is, however, not necessary to give the information to the person to be searched about his right in writing. It is sufficient if such information is communicated to the concerned person orally and as far as possible in the presence of some independent and respectable persons witnessing the arrest and search. The prosecution must, however, at the trial, establish that the empowered officer had conveyed the information to the concerned person of his right of being searched in the pr....
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....premium on ignorance of law. The argument loses sight of a clear distinction between ignorance of the law and ignorance of the right to a 'reasonable, fair and just procedure'. ... 28. This court cannot overlook the context in which the NDPS Act operates and particularly the factor of widespread illiteracy among persons subject to investigation for drug offences. It must be borne in mind that severer the punishment, greater has to be the care taken to see that all the safeguards provided in a statute are scrupulously followed. We are not able to find any reason as to why the empowered officer should shirk from affording a real opportunity to the suspect, by intimating to him that he has a right 'that if he requires' to be searched in the presence of a Gazetted Officer or a Magistrate, he shall be searched only in that manner. As already observed the compliance with the procedural safeguards contained in section 50 are intended to serve dual purpose-to protect a person against false accusation and frivolous charges as also to lend credibility to the search and seizure conducted by the empowered officer. The argument that keeping in view the growing drug menace,....
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....to condone acts of lawlessness conducted by the investigating agency during search operations and may also undermine respect for law and may have the effect of unconscionably compromising the administration of justice. That cannot be permitted. An accused is entitled to a fair trial. A conviction resulting from an unfair trial is contrary to our concept of justice. The use of evidence collected in breach of the safeguards provided by section 50 at the trial, would render the trial unfair." In view of the aforesaid settled law it is apparent that in the present case letter of authorisation was not shown to the officers/employees of the petitioner. Independent witnesses were not called during the search and seizure and the respondents took over the boxes, without issuing any receipt, from the premises of petitioner, which vitiates the entire search and seizure conducted by the respondents. The aforesaid provisions have been made to safeguard the interest of persons who are affected by such search and seizure. It was obligatory on the part of the officer about to execute the search warrant to call on two or more respectable inhabitants of the locality where the search was to be con....