(1) The petitioner is a partnership firm carrying on business at 137, Mysore Road, Bangalore, which is an assessee to sales tax under the Mysore Sales Tax Act., 1957. The respondent is the Assistant Commissioner of Commercial Taxes (Intelligence) at Bangalore.
(2) On 11-5-1965, the respondent in company with certain other officers of the Commercial Taxes Department entered the business premises of the petitioner and seized certain books of account after passing an order to that effect and also issuing a receipt or acknowledgement for the books seized. The order is produced as an annexure to the petition marked Ex. P-1.
(3) The petitioner prays that the order mentioned above may be quashed by the issue of an appropriate writ and that a direction may be issued for the return of the books seized, to him. The petitioner also prayed for an interim order for the return of books seized subject to an undertaking by him for their production whenever called upon to do so. On admitting the Writ Petition on 4-6-1965, this Court issued emergent notice to the respondent before emergent notice to the respondent before making any interim order. The respondent not having appeared on the day fixed for the return of the notice, this Court made an order on 21-6-1965 directing the respondent to deposit the books seized by him into this Court with the further direction that neither side should have any access to the books or inspection thereof, without an order of this Court. On being served with a copy of the said order, the respondent deposited, the books with the Court on 2nd July 1965. The said books have been placed under seal affixed in the presence of the IIIrd Deputy Registrar of this Court.
(4) The books in question were seized by the respondent in exercise of the power under sub-section (3) of Section 28 of the Mysore Sales Tax Act, 1957. Apart from certain contentions based on the peculiar facts of this case and a certain interpretation sought to be placed on the opening words of clause (a) of sub-section (3) of Section 28, the principal contention on behalf of the petitioner is that Section 28 of the Mysore Sales Tax, 1957, is void and unenforceable as its provisions are violative of the fundamental rights guaranteed under Articles 14 and 19(1)(f) and (g).
(5) Hence the first point for consideration is whether the said section 28 of the Mysore Sales Tax Act, 1957, is invalid as being violative of Articles 14 and 19(1)(f) and (g) of the Constitution.
(6) The section reads as follows:--
'28. Powers to order production of accounts and powers of entry, inspection and seizure.--
(1) Any officer employed by the State Government in this behalf may, for the purpose of this Act, require any dealer carrying on business in any kind of goods to produce before him the accounts and other documents, and to furnish any information relating to the stocks of goods of, or purchases, sales and deliveries of goods by the dealer and also any other information relating to his business.
(2) All accounts and registers maintained by dealers in the ordinary course of their business and documents relating to the stock of goods of, or purchases, sales and deliveries of goods by any dealer, the goods in their possession and their offices, shops, godowns, vessels or vehicles shall be open to inspection at all reasonable times by such officers as may be authorised in this behalf.
(3) (a) If any such officer has reason to suspect that any dealer is attempting to evade payment of any tax due from him under this Act, he may, for reasons to be recorded in writing, seize such accounts registers and documents of the dealer as he may consider necessary and shall give the dealer a receipt for the same. The accounts, registers and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any enquiry or proceeding under this Act:
Provided that such accounts, registers and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority. (b) (I) Any such officer shall have power to enter and search, for purposes referred to in sub-section (2) or clause (a), any office, shop, godown, vessel, receptacle, vehicle or any other place of business or any building or place where such officer has reason to believe that the dealer keeps, or is for the time being keeping, any accounts, registers or documents of his business:
Provided that non-residential accommodation (not being a place of business-cum-residence) shall be entered into and searched by such officer except on the authority of a search warrant issued by a magistrate having jurisdiction over that area, and all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure, 1898 (Central Act 5 of 1898), subject to the rules, if any made in this behalf. (ii) The power conferred by sub-clause (I) shall include the power to break open any box or receptacle in which any accounts, registers or other documents of the dealer may be kept or any place where the accounts are reasonable suspected to be kept or to break open the door of any premises where any such accounts, registers or documents may be kept or reasonably suspected to be kept.
Provided that the power to break open the door shall be exercised only after the owner or any other person in occupation of the premises if he is present therein fails or refused to open the door when called upon to do so.
(iii) The power conferred by sub-clause (I) shall also include the power to seal any box or receptacle, godowns or buildings where accounts are suspected to be kept or goods are stored, if the owner or any other person in occupation leaves the premises or refuses to open any box or receptacle, godwon or building or is not available, and then to break open such box, receptacle, godwon or building on the authority of a warrant issued by a magistrate having jurisdiction over that area.
(4) (a) Any officer authorised in this behalf by the State Government shall have power to seize any goods, the sale or purchase of which is liable to tax.
(i) which are found in any office, shop, godown, vehicle, vessel or in any other place of business or in any building or place of the dealer; or
(ii) which such officer has reason to believe to belong to the dealer and are found in any office, shop, godown, vehicle, vessel, or any building or place, but not accounted for by the dealer in his accounts, registers and other documents maintained in the course of his business or in any other satisfactory manner.
(b) Any goods, seized under clause (a) shall be released on payment of a penalty not exceeding four times the tax on the sale or purchase of such goods as may be fixed by such officer.
(c) The goods so seized under clause (a) and not released under clause (b) may, on the report of such officer, be confiscated by the Deputy commissioner, provided that before taking action for the confiscation of goods under this sub-section the officer shall by notice give the person affected an opportunity of being heard and make an enquiry in the prescribed manner.
(5) It shall be open to the State Government to authorise different classes of officers for the purpose of taking action under sub-section (I), sub-section (2) and clause (a) of sub-section (4).'
(7) It will be seen that the provisions of the section fall naturally under four heads.
(8) The first sub-section confers on the authorities functioning under the Act the normal power ancillary to the power of adjudication exercised by the assessing authorities viz., the power to call for the production of account books and to furnish relevant information The power may be described as the power to take evidence in aid of the main function of adjudication or formulation of an opinion to determine the tax liability of the person concerned. Although ordinarily this power may be said to have direct bearing upon a pending also lends itself to the interpretation that the requisitioning of information relating to various details of the business carried on by the assessee may also be anticipatory in nature; even then, it cannot be said to be wholly unconnected with the ultimate power of assessing the tax liability of the person concerned.
(9) Sub-section (2) gives the further power of inspection. It is obviously related to the power under sub-section (I), the intention being that the assessing authorities should be enabled to verify the accuracy of Information furnished, to them or to gather information which might not have been in the first instance furnished to them by the assessee. It may also have some relation with the necessity of enforcing obedience to the provisions of Section 26 under which it is open to prescribe the mode or manner of maintaining accounts and records.
(10) Sub-section (3) arms the authorised officer with the power to seize accounts, registers and documents subject to certain conditions set out therein.
(11) Finally, sub-section (4) confers the further power to seize goods and confiscate them.
(12) So far as the powers conferred under sub-section (1) and (2) of the section are concerned, scarcely any argument is possible to invalidate the said provisions. They are powers which are manifestly ancillary to the main power of adjudication under the statute, viz., assessing the tax liability of assessees under the Act. According to the language of the first sub-section, the powers thereunder are expressly required to be exercised for the purpose of the Act, viz., the levy of tax on the purchase or sale of goods according to its provisions. The power under sub-section (2) is also a power in aid of the main purpose, that is to say, to see that the information secured or furnished is made verifiable by the appropriate assessing authorities so as to enable them to determine the correct liability of the person concerned for payment of tax and to prevent evasion thereof. The inspection according to the sub-sections, has to be carried out at reasonable times,--an expression which is sufficiently well understood.
(13) So far as these two sub-sections, are concerned, it is not possible to contend that they are to any extent violative of any of the fundamental rights of the petitioner or even to suggest that there is anything unreasonable about them.
(14) So far as the power of confiscation under sub-section (4) is concerned, there can be little doubt that the relevant provisions defining the nature and extend of power and indicating the manner of its exercise are not to any extend different from the power of confiscation under sub-sections (4), (5), and (6) of Section 28-A of the Act which have been struck down as unconstitutional by this Court in Venkatachalapathi v. Commercial Taxes Inspection (Intelligence), (1965) 16 S.T.C 894 (Mys). The line of reasoning discussed with reference thereto at pages 920 to 929 of the Report applies in our opinion, with equal force to the provisions of sub-section (4) of Section 28 of the Act with which we are now concerned. If anything, there is in subsection (4) of Section 28 the further infirmity of total lack of control over the action of the confiscation officer. No attempt has been made on behalf of the State to support the validity of this sub-section, and in our opinion rightly, in view of the clear decision of this Court mentioned above.
(15) Coming now to sub-section (3) of section 28 and to the validity of the power thereunder to seize accounts, registers and documents, the question is whether the said provision is violative of Article 14 or Articles 19(1) (f) and (g).
(16) The general principles of the law governing the examination of the constitutional validity of such a power have been discussed in detail by us in the Order just pronounced in Writ Petn. No. 2310 of 1966 (Mys.) dealing with the constitutionality of Section 132 of the Indian Income-tax Act, 1961. It is unnecessary therefore to discuss them over again in this order.
(17) It is enough to say that the power of search and seizure is an extra-ordinary overriding power of the Sate to be exercised in public interests and that the exercise of the same has to be regulated by a law which is valid and not violative of any of the fundamental rights guaranteed under the Constitution. From the point of view of Article 14 of the Constitution, the classification of persons with reference to whom the power is to be exercised should be on the basis of an intelligible criterion having a reasonable relationship with the object of the statutory provision. From the point of view of Article 19(1)(f) and (g), the restraint thereon brought about by the exercise of the power of search and seizure should be reasonable and justifiable as required in the interests of the general public.
(18) It is also pointed out by us in the said Order that the criterion for classification for the purpose of Article 14 is generally, if not invariably, defined or indicated by setting out as essential prerequisites to the exercise of the power the circumstances in which and the persons in respect of whom the power is to be exercised, and that the actual exercise of the power is controlled by clearly defined safeguards intended to exclude the possibility of arbitrary exercise of the power leading to unconstitutional discrimination.
(19) Viewed in that light, the first point to be noticed with reference to sub-section (3) of the impugned section 28 is the total lack of any indication on the basis of which one could clearly recognise the criterion adopted for classifying persons against whom this extra-ordinary power is to be exercised. All that the sub-section states is that the officer who is exercising the power of inspection under sub-section (2) should have reason to suspect that a dealer is attempting to evade payment of tax. Apart from the fact that mere suspicion is too slender a basis for the books of account, registers, documents, etc., the ways in which assessees may attempt multifarious, most of which may have nothing to do with the books of account or registers or documents or may be wholly incapable of proof on the basis of the books of account, registers or documents and incapable of prevention by their seizure. In the context of the sub-section, one has to proceed on the basis that the seizing of the accounts registers or documents is a mode indicated by the law of preventing evasion; if so, a generalised suspicion of the type mentioned in the sub-section which may or may not have any bearing whatever on the question whether or not the books or any action of the assessee in relating to the books is likely to lead to evasion of tax, can hardly be said to furnish a criterion for classification having a reasonable relationship with the object of the law.
(20) Secondly, the accounts, registers and documents, the seizure of which the sub-section authorises, are described to be such as he may consider necessary. The sub-section does not indicate how and in what manner and for what purpose they are necessary. The period of retention is also said to be so long as may be necessary for their examination and for any enquiry or proceeding under this Act. This also does not indicate the point for examination or the manner in which the books may be useful or relevant for an enquiry or proceeding under the Act, or what such enquiry or proceeding is, to which the sub-section makes a reference.
(21) Thirdly, the officer who might seize books or documents may be any officer empowered by the State Government. The section, which leaves it to the State Government to invest any officer with these powers, does not specify the rank or the position occupied by the officer to be selected. It has no doubt been stated before us that the Government have authorised only the assessing authorities including, of course, the assessing officer of the lowest grade or at any rate, only officers of the Commercial Tax Department. But, that by itself will be of little or no value for two reasons: Firstly, the section itself being devoid of any guidance regarding the circumstances in which and the person against whom the power of seizure may be exercised, even the most high-ranking officer, will not be in a position to guide his action properly or correctly and if, as indicated, he has to act only upon suspicion, the possibility of his acting in an arbitrary way or in a way which is clearly discriminatory in contravention of Article 14 is always there. Secondly, the sub-section does not provide for any pervious authorisation by a superior officer on an objective examination of the facts placed before him, no does it provide for any check over of correction of the action of a subordinate by a superior officer. The need for a warrant from the Magistrate is limited to cases where entry into non-residential accommodation or breaking open of boxes, receptacles, godowns, and buildings in the absence of the owner is intended or considered necessary.
(22) On the whole, the power conferred is unguided and uncontrolled and is fraught with the manifest danger of arbitrary exercise thereof in disregard of the fundamental right guaranteed under Article 14 of the Constitution.
(23) Hardly anything more is necessary to make out that the restrictions, which the exercise of such power necessarily imposes on the fundamental rights under Article 19(1)(f) and (g), are unreasonable.
(24) It has no doubt been argued before us by the learned Government Pleader that there is a great safeguard provided in the sub-section in so far as it requires the seizing officer to record in writing his reasons therefor. But this is of little value because the law does not tell the officer for what reasons and under what circumstances he can exercise the power of seizure. it should therefore be regarded as an illusory safeguard,--if at all it can be regarded as a safeguard,--and wholly ineffective from the point of view of the protection of the fundamental rights.
(25) We have therefore no hesitation in holing that sub-section (3) of the impugned Section 28 is unconstitutional.
(26) In this view, it is unnecessary to examine the facts of the case or the relevance or otherwise of the reasons said to have been recorded by the respondent before seizing the books of account belonging to the petitioner.
(27) In the result, we allow this Writ Petition and make an order declaring that sub-section (3) and (4) of Section 28 of the Mysore Sales Tax Act, 1957, are unconstitutional, void and therefore unenforceable, and quash the impugned order of the 1st respondent dated 11-5-1965. We make a further direction that the books of account deposited by the respondent in this Court be returned to the petitioner.
(28) We make no order as to costs.
(29) Petition allowed.