Kan Singh, J.
1. Petitioner Shri Nathulal Fatehpuria has moved this writ application under Article 226 of the Constitution questioning the legality of seizure of his account books and goods from his shop on 19-9-66 and has prayed for an appropriate writ, direction or order against the respondents. The case set up by the petitioner in his writ petition is briefly this.
2. Petitioner is carrying on the business of selling and supplying cloth, saris, both plain and embroidered garments with 'Salma', 'Sitara' or 'Gota' work done on them and other ready-made garments. The petitioner is registered as a dealer under the Rajasthan Sales Tax Act, 1954, hereinafter to be referred as the ''Act'. He proceeds to say that he maintains regular books of accounts and has been paying the sales-tax regularly. On 19-9-66, a party of officers numbering about 30, consisting of respondent No. 3, Shri Surendra Sharma, Special Officer, Anti-Evasion, Commercial Taxes Department, Jaipur and others came to his shop at about 4.00 p. m. According to the petitioner, this party had a pre-planned policy of collecting Government revenue by fair or foul means, and in pursuance thereof first of all these officers enquired from him whether he was paying sales-tax on Saris embroidered with 'Gota'. 'Salma' and 'Sitara', but when the petitioner replied that these goods were exempt from sales tax by virtue of Government Notification No. F(99) F and T/60 dt. 26-3-62 the respondents refused to accept this reply and demanded from him Rs 2,000 as composition money for the offence of evasion of Tax.
The petitioner, however, did not accede to this demand and, therefore, the party of the Government Officers asked the customers at the shop to go away and they put a guard around the shop and the entire record of the petitioner consisting of account books and other papers was ordered to be seized. Accordingly, the party of officers seized the record of the petitioner. Thereafter, certain lists were preparedby the respondent No. 3, and the petitioner was furnished with the list regarding seizure of the account books. After serving him with a notice Ex. P/5, the officers are further alleged to have seized the goods lying at the petitioner's shop such as. Saris, ready-made garments, both ordinary and those on which there was embroidery work of 'Salma' 'Sitara and Gota'. It is the petitioner's case that thereafter he was served with notices Ex. P/6 and Ex. P/7, and was told that as the clothes found at his shop were not entered in his account books he should pay four-times the tax recoverable from him, failing which the goods would be confiscated in accordance with Section 22(6) of the Act.
The petitioner felt aggrieved of this action of respondent No. 3 and his party and, therefore, he proceeds to say that he gave a telegraphic notice to respondent No. 3 to return the books and other papers seized from him as also the goods that were confiscated. As the respondents failed to give any relief to the petitioner he has come to this court. He has contended that the action of the officers was illegal for two reasons: (1) that the provisions of Section 22(3), (4) and (6) were violative of Articles 14, 19(1)(f) and (g) of the Constitution and therefore the officers could not have taken any action under the aforesaid provisions and (2) that there was non-compliance of the provisions of Section 22(3) of the Act inasmuch as in the notice Ex. P/5, respondent No. 3 had not mentioned any reason for his suspicion that the petitioner was attempting to evade sales tax under the Act and secondly no reasons have been recorded in writing for the seizure of the account books or the stock of garments and Saries lying at the petitioner's shop.
3. The writ petition has been opposed by the State of Rajasthan and other respondents. It is denied by them that the seizure of the account books or the goods was illegal on any of the grounds mentioned by the petitioner. It is submitted on their behalf that in the opening words of Ex P/5 it had been mentioned that it was on the basis of verbal written information that had come in the possession of respondent No. 3 that he thought that the petitioner was attempting to evade sales tax under the Act. This, according to the respondents, complied with the provisions of Section 22 (3) of the Act. As regards the not mentioning of reasons in writing, it is submitted by the respondents that whatever was mentioned in the earlier part of the notice should be taken to be the statement of reasons for the seizure as well. In the alternative it was contended that not recording of reasons in writing will not invalidate the seizure as according to the respondent, the statement of the petitioner was recorded before the seizure. A copy of that statement has been produced as Ex A/1 on the record and on its basis it is submitted that this statement furnished a sufficient basis for respondent. No. 3 to take actionagainst the petitioner under Section 22(3) of the Act by seizing the account books, as well as the goods.
Besides this it is submitted by the respondents that the petitioner has suppressed three material facts in his writ petition. In the first instance, the petitioner made no mention of the fact that his statement had been recorded by respondent No. 3, and secondly, he had omitted to say that a notice of enquiry in accordance with Rule 51-A of the Rajasthan Sales Tax Rules had been given to him. As regards the use of the word 'confiscation' in Ex. P/6 it was pointed out by the respondents that this word was used by mistake for the word 'seizure' and this mistake was rectified by issuing a notice to the petitioner on 26-9-66. A copy of the notice has been placed on the record and marked as Ex. A/2. About this notice also it is submitted by the respondents that the petitioner has not made any mention of it in his writ petition. It was also urged by the respondents that the petitioner had an alternative remedy of going in revision against the order of respondent No. 3 to the Board of Revenue under Section 14 of the Act and, therefore, we should not hear the petitioner in exercise of our extraordinary jurisdiction under Article 226 of the Constitution.
4. From the above narration the following main questions arise for our determination:
(1) Whether the provisions of Sub-sections (3), (4) and (6) of Section 22 of the Act are hit by Articles 14 or 19(1)(f) and (g) of the Constitution :
(2) Whether respondent No. 3 has complied with the provisions of Sub-sections (8) and (6) of Section 22 of the Act in seizing the account books and the goods of the petitioner and in proceeding to confiscate the goods?
5. Before, however, we proceed to address ourselves to these questions we will like to dispose of the preliminary objections sought to have been taken by the learned Deputy Government Advocate namely, that we should not hear the petitioner on account of his not availing the alternative remedy under Section 14 of the Act and for his having suppressed some material facts in his writ petition Now we may say at once that in the present case the petitioner has challenged the vires of Sub-sections (3), (4) and (6) of Section 22 of the Act and we are afraid the revisional authority may not have gone into that question about the vires of the Act. Therefore we are not at all impressed by this submission of the learned Deputy Govt. Advocate. As regards the so-called suppression of facts pointed out by the learned Deputy Government Advocate, we are not convinced that there has been any deliberate suppression of a material fact As regards the petitioner's not making any reference to his own statement Ex A/1 in his writ petition, we may observe that we have not been told as to when this statement wasrecorded i.e.. whether it was recorded before the seizure or sometime later.
Learned Deputy Government Advocate relied on the affidavit of the officer-in-charge of the case who has drawn the reply on behalf of the Government for showing that the statement was recorded before the respondent No. 3 had issued notice Ex. P/5. It is, however, noteworthy that the Officer-in-Charge of the case has no personal knowledge of the facts about which he had filed the affidavit. The verification thereon shows that he was swearing the fact on the basis of the official record. We therefore, asked the learned Deputy Government Advocate to point out if there was anything on the record on the basis of which the affidavit has been filed to show that the statement Ex. A/1 was, in fact, recorded before the respondent No. 3 proceeded to seize the goods, or he had drawn up notice Ex. P/5. He, however, could not place anything on the record before us as would go to show that the statement was in fact, recorded before the seizure of the account books or the goods. In these circumstances we do not attach any importance to the omission of the petitioner in making any reference to that statement.
The learned Deputy Government Advocate then submitted that the petitioner was intimated by notice Ex A/2 that in the notice Ex. P/6 the word 'confiscation' has been written by inadvertence and for that word the word 'seized' should be read. According to the learned Deputy Government Advocate, the writ petitioner should have also brought this fact to our notice. We have read the two notices and in our opinion, the existence or non-existence of notice Ex. A/2 is of no consequence. We fail to appreciate how the use of the word 'seize' in place of the word 'confiscate' 'in Ex. P/6 would change its character. For the seizure of any goods no notice is contemplated by the statute and the substitution of the word 'seizure' for the word 'confiscation' in Ex. P/6 will make it all the more unintelligible because in that case notice Ex. P/6 would read that if the taxes were not paid at four times the amount due then the officer shall be compelled to seize the goods under Section 22(6) of the Act.
We may mention at once that the seizure is contemplated only under Sub-section (3) and (6) of Section 22 and for that the law does not contemplate any formal enquiry and it is only when the officer proceeds to conficate the goods that according to the first proviso to Sub-section (6) of Section 22, the competent authority is required to give the person affected an opportunity of being heard and make an enquiry in the prescribed manner namely. Rule 51-A of the Rajasthan Sales Tax Rules, 1954. Then, finally, the learned Deputy Government Advocate urged that a notice about the enquiry under Rule 51-A had also been issued and the petitioner had suppressed even that fact. Theissuance of this notice, in our view, too will not have any bearing on the legality of the seizure which in the very nature of things precedes the proceedings relating to confiscation. Thus, we are not satisfied that the petitioner has suppressed any material facts in his writ petition.
6. We may now proceed to examine the questions that we have formulated above. It will be convenient to deal with the question about the vires of Section 22(3), (4) and (6) in the first instance. We propose to read the section which runs as under:
'Section 22. Power of entry, inspection of record and seizure of books of accounts of a dealer: -- (1) An Assessing Authority or any person authorised by the Commissioner in this behalf may, for the purpose of this Act, require any dealer to produce before him the accounts, registers and other documents: and to furnish any other information relating to his business.
(2) All accounts, registers and other documents pertaining to the business of a dealer, the goods in his possession and his office, shop, godown, factory, vessel or vehicle or any other place in which business is done or accounts are kept shall be open to inspection and examination of any such authority or person at all reasonable times.
(3) If any such authority or person has reason to suspect that any dealer is attempting to evade payment of any tax or other dues under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers or other 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 or for any enquiry or proceedings under this Act or for a prosecution.
(4) For the purpose of Sub-section (2) of Sub-section (3), any such authority or person, shall have power to enter and search at all reasonable times, any office, shop, godown, vessel, vehicle or any other place of business or any building or place where any such authority or person has reason to believe that the dealer keeps or is, for the time being keeping any goods accounts, registers or other documents pertaining to his business.
(5) The power conferred by Sub-section (4) shall include the power to break open any box or receptacle in which any goods, accounts, registers or documents of the dealer may be contained, or to break open the door of any premises where any such goods accounts, registers or documents may 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 refuses to open the door on being called upon to do so.
(6) Any such authority or person shall have power to seize and confiscate any goods which are found in any office, shop, godown vehicle, vessel or any other place of business or any building or place of a dealer but not accounted for by the dealer in his accounts, registers and other documents maintained in the course of his business:
Provided that before taking action for the confiscation of goods under this Sub-section, such authority or person shall give the person affected an opportunity of being heard and make an inquiry in the prescribed manner:
Provided further that that such authority or person shall give to the dealer an option to pay in lieu of confiscation, such amount, not exceeding four times the tax which would be due on such goods as may be determined by such authority or person. (7) Any such authority or person may require any person.
(a) who transports or holds in custody, for delivery to or on behalf of any dealer any goods, to give any information likely to be in his possession in respect of such goods or to permit inspection thereof, as the case may be:
(b) who maintains or has in his possession any accounts, books or documents relating to the business of a dealer, to produce such accounts, books or documents for inspection'
7. In order to appreciate the importance of these provisions we may briefly refer to the relevant provisions of the Act to find out its basis structure and the policy underlying it.
8. The Act was passed by the Rajasthan State Legislature in 1954. Section 2 defines the various terms used in the Act. Section 2(f) defines a 'dealer' to mean any person who carries on the business of buying, selling, supplying or distributing goods Sub-section (i) of Section 2 defines 'turnover' which means the aggregate of the amount of sale prices received or receivable by a dealer in respect of the sale or supply of goods in the carrying out of any contract (omitting the portions which are not material for our present purpose) Section 4 provides that no tax shall be payable under this Act on the sale of any of the exempted goods if certain conditions are satisfied. This section also empowers the State Government to exempt any goods or class of goods or any person or class of persons on such conditions as it may think fit by a notification in the official gazette, Section 6 requires that every dealer liable to pay tax under this Act shall get himself registered in the prescribed manner. Section 7 provides that every registered dealer shall furnish in the prescribed form the returns for the prescribed periods in respect of his turnover.
Section 3, which is the charging section, provides that subject to the provisions of this Act every dealer whose turnover in the previous year in respect of sales or suppliesof goods exceeds a certain limit shall be liable to pay tax under this Act on his taxable turnover. Then the Act provides for the various assessing authorities and lays down the manner of assessment. Section 7A provides that where a dealer does not submit the return, the assessing authority, after making such enquiry as it considers necessary and after giving the dealer a reasonable opportunity of being heard, assess thetax for that period to the best of his judgment. We may further notice that every return is required to be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the deposit of the full amount of tax due on the basis of return in the Government Treasury or bank concerned. It thus appears that a duty has been cast on the dealer to file a return of his turnover and to pay the tax which may be due from him on the basis of the return filed by him.
Section 19 provides that after the return is filed the assessing authority shall determine the tax due for any year. If the assessing authority, after such enquiry as he considers necessary, is satisfied that the returns furnished by a dealer are correct or complete he shall assess the tax on the basis thereof. On the other hand, if the assessing authority is not satisfied without requiring the presence of the person who made the returns or production of evidence that the returns are correct and complete, he shall serve on such person a notice requiring him on a date and place to be therein specified to appear in person, or produce or cause to be produced any evidence on which such person may rely in support of the returns. Then, after making such enquiry, the authority shall determine the tax. Then there are provisions regarding the payment and recovery of tax. Section 12 provides for assessment and re-assessment of tax that has escaped assessment for any reason. The Act then makes elaborate provisions for filing of appeals and revisions and also for making statement of cases to the High Court Then there is Section 16 which provides for certain offences, penalties and prosecutions.
Section 16 inter alia provides that any person who has failed to furnish within the time allowed, without a reasonable cause, the prescribed return or has without reasonable cause failed to pay the tax then in addition to the tax payable he is liable to certain penalties. Section 16A provides for investigation of offences. It is in this scheme of things that the Legislature has enacted Section 22. The opening words of Sub-section (1) clearly lay down that an Assessing Authority or any person authorised by the Commissioner in this behalf may require any dealer to reproduce before him the accounts, registers and other documents and to furnish any other information relating to his business for the purposes of the Act. What is noteworthy is that Sub-section (1)lays down that the competent authority or person authorised can require the accounts, registers and other documents for the purposes of this Act. In other words, it is for fulfilling the object of gathering the legitimate tax under the Act that Section 22 has been enacted.
Now prevention of evasion of tax is inextricably connected with the purpose of collecting the legitimate tax dues of the State. Sub-section (2) provides that for the purpose of getting at necessary accounts, registers and other documents pertaining to the business of a dealer the various places such as, office, shop, godown factory, vessel or vehicle or any other place in which business is done or accounts are kept shall be open to inspection and examination of any such authority or person at all reasonable times. It is in this context that Sub-section (3) occurs. It lays down that if any such authority or person which means such person or authority as is mentioned in Sub-section (1) of the Act has reason to suspect that any dealer is attempting to evade payment of any tax or other dues under this Act then he may proceed to take action under Sub-section (3) viz. seizure of account books. But when he decides to do so the requirement of the statute is that he has to record the reasons in writing. It is then only that he can seize such accounts, registers and other documents of the dealer as he may consider it necessary and shall give the dealer a receipt for the same.
It is further worthy of note that the accounts, registers and other documents are to be retained by the officer concerned only for so much time as may be necessary for their examination or for any inquiry or proceedings under this Act, or for a prosecution. Sub-section (4) provides that for the purpose of Sub-section (2) or Sub-section (3), any such authority or person, shall have power to enter and search at all reasonable times, any office shop godown, vessel, vehicle or any other place of business mentioned therein. Sub-section (4) is thus merely ancillary to Sub-sections (2) and (3) Similarly, Sub-section (5) is also ancillary to the aforementioned sub-sections. Then comes Sub-section (6) which provider that the authority concerned shall have power to seize and confiscate any goods which are found in any office, shop godown vehicle, vessel or any other place of business as the case is of any dealer which has not been accounted for by the dealer in his accounts registers and other documents maintained in the course of his business While laying down the power of seizure or confiscation in the enacting portion of Sub-section (6) the Legislature has appended two provisos thereto so far as the taking of action for confiscation the goods seized was concerned.
The first proviso lays down that before proceeding to confiscate the goods the authority or person shall give the dealer affected an opportunity of being heard and it shallmake an inquiry in the prescribed manner. The second proviso then provides that the authority shall give the dealer an option to pay in lieu of confiscation, such amount, not exceeding four times the tax which would be due on such goods as may be determined by such authority or person. In the very nature of things a dealer concerned can exercise the choice only after the tax had bean determined by such authority and when it also determines as to what multiple of that, not exceeding four times is to be paid by the dealer in order to avoid the action of the confiscation of the goods. In other words, the act of actual confiscation of goods can come only when the authority concerned had done two things; (i) determination of the tax; and (ii) indicating as to how much the dealer is required to pay and that has not to exceed four times the tax. It is not necessary that the penalty should be four times the tax but it is only a maximum prescribed by the statute and the authority is required to determine how much penalty is to be paid.
9. Now, in order to see whether the provisions of Sub-sections (3), (4) and (6) of Section 22 of the Act infringe Article 19 of the Constitution or not, we have to consider whether these provisions impose reasonable restrictions on the exercise of the fundamental rights guaranteed under Article 19 of the Constitution to a citizen. The provisions have been enacted to enable the sales tax authorities to prevent the evasion of tax and, therefore, the purpose underlying these provisions is undoubtedly in the general public interest. The only question, therefore, is whether these provisions are reasonable. As pointed out by their Lordships of the Supreme Court in State of Madras v. V. G. Row, AIR 1952 SC 196 the test of reasonableness, has to be applied to each individual statute impugned and no abstract standard, or general pattern of reasonableness can be prescribed as may cover all cases. However, their Lordships indicated that in judging the question of reasonableness several factors have to be taken note of namely, (1) the nature of the right alleged to have been infringed, (2) the underlying purpose of the restrictions imposed, (3) the extent and urgency of the evil sought to be remedied thereby, (4) the disproportion of the imposition. (5) the prevailing conditions at the time and they should all enter into the judicial verdict. Let us now examine the provisions taking note of these factors.
10. It is true that as a result of seizure of his account books a dealer is certainly deprived of their use and to that extent there is infraction of his fundamental right, but at the same time it cannot be forgotten that the underlying purpose of seizing the account books is for the purposes of the Act namely, for the collection of the legitimate tax dues of the State and to prevent the evasion thereof. It is common knowledgethat the evil of tax evasion is rampant in the country and, therefore, it cannot be said that foolproof measures are necessary to prevent the evasion of taxes in the public interest. The question next is whether the restrictions sought to be imposed are, in any manner, disproportionate to the evil that is sought to be remedied. In this respect it is to be noted that the account books and documents so seized are to be retained by the officer only for so long as may be necessary for their examination or for any enquiry or proceedings under the Act or for a prosecution. Therefore, it will not be open to the concerning officer to retain the account books or documents seized by him indefinitely without his utilising them for the purposes of that examination or for any enquiry or proceeding one for a prosecution.
Learned counsel for the petitioner submitted that since no time limit has been prescribed for the retention of the account books, this provision is unreasonable, as thereby the dealer is subjected to a great deal of hardship It is true no time limit is prescribed by the statute for the retention of the account books, but in our view, in the very nature of things a particular period could not have been laid down as the necessity of one case may be quite different from that of another. But when the Legislature has clearly laid down that the account books or the documents could be retained only so long as they were required for certain specified purposes it cannot be said that the provision is, in any way, unduly harsh. In other words, we do not think the restriction contained in Sub-section (3) is disproportionate to the evil sought to be eliminated. Then Sub-section (3) in our view, provides for two other safeguards: in the first instance, it enjoins that if it is only when such competent authority or person has reason to suspect that any dealer is attempting to evade any tax or other dues that he can proceed under this provision.
The second requirement is that the authority has to record his reasons in writing before he proceeds to seize the accounts. The necessity of recording the reasons in writing, in our view, is calculated to eliminate arbitrariness on the part of the authority or officer concerned. While the reason for suspicion in the mind of the officer may not be capable of easy scrutiny the reasons that the officer has to record in writing are in our view, capable of a proper scrutiny. Apart from this Section 14 of the Act provides that the Board of Revenue may on an application for revision of an order call for the record of the proceedings in which the order complained of was passed and after examination of the record pass such order as it thinks fit It will therefore, be open to the revisional authority to scrutinise the reasons recorded by an authority or person under Sub-section (3) of Section 22 of the Act when the matter is taken before it in revision. This is again a checkprovided by the Legislature on the action that may be taken under this provision. We are, therefore, satisfied that the provisions of Sub-section (3) cannot be characterised to fee wanting in the quality of reason as may contravene Article 19(1)(f) or (g) of the Constitution.
11. Now, Sub-section (4) is only incidental to the provision of Sub-section (3) and, therefore, whatever we have said about Sub-section (3) is equally applicable to Sub-section (4) in so far as its vires are concerned.
12. We may now turn to Sub-section (6), so far as the powers of seizure and confiscation of goods are concerned. Sub-section (6) clearly lays down that it is only the goods which had not been accounted for by a dealer in his accounts, registers and other documents maintained in the course of his business, that shall be liable to seizure or confiscation. Therefore, the power of seizure of goods is not, in our view, arbitrary, nor can we postulate that this provision is not reasonable. Now the fact that it is only such goods as have not been accounted for by the dealer in his accounts, registers and other documents maintained in the course of his business are liable to seizure or confiscation, shows that the power contained in this sub-section is, in no way arbitrary. Nor can we say that this seizure will have no rational connection with the underlying purpose of the Act namely, to recover the tax that may be due from the dealer. Where the goods have not been accounted for in the account-books that by itself may be a good reason to prompt an inquiry about the evasion of tax at the hands of the dealer.
Then the two provisos lay down as to what has to be done by the authority or officer thereafter. The mode of inquiry has been prescribed in Rule 51-A of the Rules and the first proviso lays down that the person affected shall be given an opportunity of being heard Then according to the second proviso when the tax is determined the authority has to say as to how much the dealer is required to pay and then a choice is to be given to the dealer to pay such amount not exceeding four times the tax in lieu of confiscation. When the authority would be acting under this sub-section it is expected to follow the principles of natural justice and will be arriving at a decision quasi judicially. We are, therefore, unable to hold that the restrictions imposed by Sub-section (6) are, in the circumstances, unreasonable and violate Article 19(1)(f) or (R) of the Constitution. We may in this connection refer to a case of the Supreme Court reported as M. P. Sharma v. Satiah Chandra, 1954 SCR 1077 = (AIR 1954 SC 300V In that case the provisions relating to the issuing of a search warrant under Section 96 (1) of the Code of Criminal Procedure came up for consideration.
It was argued that these provisions were ultra vires the Article 19(1)(f) of the Constitution. Their Lordships repelled this contention holding that the provision for the issuing of a search warrant under the first alternative of Section 96 (1) of the Code of Criminal Procedure does not offend Article 19(1)(f) of the Constitution, as in their Lordships' opinion, a search and seizure was only a temporary interference with the right to hold the property searched and the articles seized. Their Lordships further held that a statutory recognition in this behalf was a necessary and reasonable restriction and cannot per se be considered as unconstitutional. Having made a survey of analogous provisions under other Constitutions, such as, the Americaln Fourth Amendment, their Lordships further observed that power of search and seizure is, in any system of jurisprudence, an overriding power of the State for the protection of social security and that power is necessarily regulated by law.
13. Section 96 of the Code of Criminal Procedure which was examined by their Lordships uses the words 'reason to believe'. In the present case Section 22 (3) of the Act, however, uses the words 'reason to suspect', but on the aspect of the matter which we are at the moment considering viz., regard-ins the reasonableness of the restrictions the words 'reason to believe' occurring in Section 96, Cr. P. C. do not introduce any material change or contrast in the consideration of the matter. As to what is the connotation of the term 'reason to suspect' in contradistinction to the words 'reason to believe' will be discussed at a convenient place in our judgment. But we are satisfied that the seizure as such is only a temporary denial of the exercise of one rights in the property or the account books or in utilising them in the carrying on the one's business. Therefore, whatever their Lordships were pleased to say in relation to the provisions of Section 96 (1) of the Code of Criminal Procedure is helpful in considering the vires of Sub-section (3) of Section 22 of the Act. Shri Lodha placed reliance on Shri Ramkishan Srikishan v. Commissioner of Commercial Taxes, 1965-16 STC 708 (Mad), Senairam Doongarmal Agency v. K. E. Johnson, AIR 1964 Assam 1 and R. K. Abdul Wahab and Co. v. Assistant Commissioner of Commercial Taxes. Bangalore. (19671 1 Mys LJ 284: (AIR 1968 Mys 100).
14. In 1965-16 STC 708 (Mad) the vires of Section 41 (4) of the Madras General Sales Tax Act, 1959, was challenged on two grounds firstly, that the provisions were beyond the legislative competence of the State and secondly on the around that the power of seizure and confiscation of goods were violative of Article 19(1)(f) and (g), an these powers were drastic and serious In the opinion of the learned Judges, exigencies of tax collection did not justify such a general, unrestricted and direct investiture of the power of search on even the minor officials of the various departments, not confined to the tax authorities alone, withouta fairly higher official above them, having to examine in each case whether the interests of the State demand or the circumstances of tax collection require that the power of search should be exercised in particular and specific cases. In that case there were certain general directions issued for seizure. In the Rajas-than Act Section 22 on the other hand, provides that the power under this section can be exercised only by an assessing authority or any person authorised by the Commissioner in this behalf.
Therefore, it cannot be said that the statute has placed this power in the hands of minor officers as was the case under the Madras General Sales Tax Act. Sub-section (1) of Section 22 as already noticed provides that the power is exercisable either by the assessing authority, or by an officer authorised by the Commissioner and this power is further exercisable in relation to any particular dealer. Apart from this when M. P. Sharma's case, 1954 SCR 1077: (AIR 1954 SC 300), already referred by us, was brought to the notice of the learned Judges, they distinguished it by observing that power of search under Section 96 of the Code of Criminal Procedure is exercisable by a Court. It is true. Section 96 of the Code empowers a Court to issue a search warrant, but with all respects, we may venture to say that this was not the basis of their Lordships' observation. Their Lordships were considering the question of the reasonableness of the restrictions in a wider context and they had observed that seizure involved only a temporary deprivation of one's property and it was in the light of this consideration their Lordships came to the conclusion that no violation of Article 19(1)(f) was involved in that case. We are, therefore, not persuaded to accept the view propounded in the Madras case, 1965-16 STC 708 (Mad).
15. We may next turn to Senairam Doongarmal's case, AIR 1964 Assam 1. This case does not relate to the sales tax Law. The learned Judges were dealing with the vires of Section 37 (2) of the Income-tax Act which provides for search and seizure. There was a difference of opinion though the majority view in that case was that search and seizure under Section 37 (2) was an excessive power and consequently ultra vires. But the learned Chief Justice who struck the dissenting note had held that having regard to the scheme of the Act and the internal evidence in Section 37 (2) itself, it cannot be said that the power conferred on the Income-tax authorities was uncanalised and that there was no guidance and it was thus arbitrary. The learned Chief Justice went on to observe that assuming that an assessee had a fundamental right under Article 19(1)(f) and (g), inasmuch as the account books which were seized, were his property and further, the seizure affected his rights to carry on business, and the power granted to the Income-tax Officer to seize the account books was a restriction on the said fundamental right yet such a restriction cannot be regarded as unreasonable, as according to the learned Chief Justice, the deprivation of the assessee of their account books, if at all, was only temporary. In our view, the observations of the learned Chief Justice accord with what their Lordships of the Supreme Court observed in M. P. Sharma's case, 1954 SCR 1077: (AIR 1954 SC 300) This case too is not of much help to the learned counsel for the petitioner.
16. Lastly, we may refer to the Mysore case, (1967) 1 Mys. LJ 284 = (AIR 1968 Mys 100). The validity of Section 28 of the Mysore Sales Tax Act was challenged before the High Court. The learned Judges observed that the provisions relating to the confiscation were unconstitutional because there was total lack of control over the action of the confiscation officer. In the opinion of the learned Judges mere suspicion of the officer was too slender a basis for exercise of so drastic a power. This learned Judges emphasised that there was an infirmity in Sub-section (4) of Section 28 as there was lack of control over the action of the confiscation officer. Section 28 of the Mysore Sales Tax Act has been reproduced in the judgment. As we have pointed out, reasonableness of a provision has to be judged in the light of the several factors to which we have already referred and for judging whether the power is so drastic, we cannot lose sight of the degree of evil that is sought to be eliminated. We have also pointed out that in the Rajasthan Sales Tax Act the Revenue Board has been constituted as the revisional authority. Therefore, it cannot be said that there is no power above the confiscation officer to scrutinise or examine the correctness or legality of his action. This case is, therefore, clearly distinguishable.
17. Shri A. B. Mehta, learned Deputy Government Advocate, invited our attention to two cases namely, K. S. Papanna v. Deputy Commercial Tax Officer. Guntakal (1968) 19 STC 506 (AP) and M. P. Kannan v. State of Kerala, (1966) 17 STC 543 = (AIR 1966 Ker 143) (FB) a Full Bench case of the Kerala High Court.
18. It was observed in the Andhra Pradesh case, (1968) 19 STC 506 (AP) that the power to seize and confiscate goods is only by way of punishment or penalty which is intended to operate as the most effective deterrent against tax evaders and it is, therefore, ancillary or incidental to the power to levy tax on the sale of goods. As regards the procedure provided for seizure and confiscation, the learned Judges pointed out that the statutory provision did not impose any unreasonable restrictions or confer any unreasonable or unguided power in the hands of the officers of the department and, therefore, the provisions did not infringe Articles 14 and 19(1)(f) and (g) of the Constitution, as in the opinion of the learned Judges the rules provided for an elaborateprocedure including the opportunity of hearing to the assessee before confiscation order is passed. The learned Judges also added that the fact that the officers in charge of the duty of seizure and confiscation are likely to abuse their powers is not a ground for invalidating the statute. As we have already pointed out, several factors have to be taken note of for deciding the reasonableness of a particular provision and there is no manner of doubt that the provisions regarding seizure of account books or goods or those relating to confisation of the goods are calculated to prevent tax evasion. The power cannot be said to be unreasonable as certain safeguards which we have already discussed above, have been provided in the statute.
19. In the Kerala case, 1966-17 TC 543 = (AIR 1966 Ker 143) (FB), also the provisions relating to search and seizure came to be examined The learned Judges referred to the Supreme Court case, AIR 1952 SC 196 and pointed out that several factors, as pointed out in that case, have to be kept in view before arriving at a judicial verdict about the validity or invalidity of a statute under examination. After examining the provisions of the General Sales Tax Act of Kerala, the learned Judges held that the provisions relating to the imposition of penalties were not unreasonable. The Madras case, (1965) 16 STC 708 (Mad) was also noticed and the learned Judges had distinguished it on the ground that there was no question of the minor officers of various departments other than the Taxes department being empowered to undertake searches or to make seizures.
20. We are, therefore, satisfied that the provisions of Section 22 (3), (4) & (6) do not violate Article 19(1)(f) or (g) of the Constitution.
21. We may now deal with the question whether these provisions are hit by Article 14 of the Constitution. Now the opening words of Section 22 lay down that the assessing authority or any person authorised by the Commissioner may. for the purpose of this Act, require any dealer to produce before him the accounts, registers and other documents and to furnish any other information relating to his business. It is, therefore, evident that the powers under this section including those under Sub-sections (3) and (4) and (6) are to be exercised for the purposes of the Act which are undoubtedly, according to the preamble of the Act, to levy a tax on the sale or purchase of goods in the State of Rajasthan. Thus the exercise of powers is to be guided by the policy of collecting tax and preventing evasion thereof. Then, as we have already notified, Sub-section (3) requires the authority or person taking action to record his reasons in writing when he actually proceeds to seize the account books or other documents. Then he could act only when he has reason to suspect that any dealer is attempting to evade any payment of tax.
Thus two safeguards have been provided by the statute when the officer has to take action under Sub-section (3). Sub-section (4), as we have already observed, is incidental to Sub-section (3). So far as Sub-section (6) is concerned, the action can be taken in the matter of seizure or confiscation of goods only when the goods are not accounted for in the accounts registers and other documents maintained by the dealer in the course of his business. Moreover, so far as the question of confiscation of goods is concerned, the two provisos further lay down that the person concerned has to be afforded an opportunity of being heard and the enquiry has to be made according to the rules. That being so we are unable to hold that the powers given by Sub-sections(3), (4) and (6) are uncanalised or so arbitrary or unguided as to be hit by Article 14 of the Constitution. We therefore, repel the contention of the learned counsel for the petitioner that the provisions of Section 22 (3),(4) and (6) of the Act are ultra vires the Constitution for reason put forth by him.
22. Turning now to the second question, we may point out that an assessing authority or any person duly authorised by the Commissioner may require any dealer to produce before him the accounts, registers and other documents and under Sub-section (2) of Section 22 such authority has the power to inspect and examine such accounts, registers or other documents at all reasonable times. The inspection contemplated therein is obviously when the documents still continue to be in the possession of the dealer. Sub-section (3) of Section 22 contemplates their seizure only for certain specified purposes namely, for the proper examination of such documents for any enquiry or proceeding under the Act or for a prosecution. As we have already pointed out, two safeguards or conditions have been provided in this Sub-section (1) that the authority or person going to proceed under this sub-section should have reason to suspect that any dealer is attempting to evade payment of any tax or dues under this Act; and (2) for seizure reasons have to be recorded in writing. This Court had occasion to explain the connotation of the farm 'reason to believe' occurring in Section 12 of the Act in National Clinic v. Assistant Commercial Taxes Officer, Sri Ganganagar, 1966 Ral LW 257, to which one of us was a party and pointed out that the existence of a reason that is required to be there shows that it should not be just a suspicion based on mere gossip or rumour as it were.
It was also pointed out that reason is the justification of an act or belief and for this Chamber's Twentieth Century Dictionary Revised Edition page 919, was referred to Now, the reason to believe does imply a greater degree of certainty regarding a state of thing than what is comprehended by the expression 'reason to suspect' Mind starts believing when it reaches some degreeof conviction regarding a state of things, but in the position of ''reason to suspect' the mind is not made up with that much degree of certainty about the state of things as in the case of 'reason to believe''. All the same, mind should be alive to the clear possibility of the state of things out of several possibilities when it is in the position of 'reason to suspect'. In the National Clinic case, 1966 Raj LW 257 we also pointed out that reason to believe should be that of an honest and reasonable person and such belief should be based on reasonable grounds. In the present case the suspicion should also be that of a reasonable and an honest person and the suspicion should be based on reasonable grounds. For example, if a certain person were merely to have a good dream and then to think that there is a reason to suspect then he cannot be said to act as a reasonable and an honest person who would act on reasonable grounds.
23. Now the second requirement, as observed above, is that reasons have to be recorded in writing. This recording of reasons, in our opinion, is not an empty formality, but has been provided to eliminate arbitrariness on the part of the officer as we have already observed in the earlier part of our judgment and further it is designed to enable the revisional authority to scrutinise the reasons for act of seizure.
24. Now we may consider the notices impugned before us in the light of what we have just said.
25. Notice Ex. P/5 runs as under:-
'GOVERNMENT OF RAJASTHAN.
Commercial Taxes Department.
Whereas verbal/written information has come in my possession that M/s. Nathulal Fatehpuria, Khand Manak-Chowk. Jaipur R. C. N. 81/8071 is attempting to evade Sales Tax Act, 1954
I, Surendra Sharma, Special Officer-anti-Evasion, Jaipur, hereby seize the following account books in exercise of powers conferred upon me under Section 22 of the Rajasthan Sales Tax Act, 1954. This seizure is being done in presence of Shri Nathulal proprietor of the business.
Commercial Taxes Department
26. The opening words of the notice do indicate that the officer had some information in his possession that the dealer was attempting to evade sales-tax Then the averments of the petitioner himself in para. 3 of the writ petition show that respondent No. 3 enquired from him if he was paving sales-tax on 'saris', but the petitioner claimed exemption thereon It further appears that the petitioner cited a notification, hut that position was not accepted and the officer said that the petitioner was evading tax and, therefore, he should pay Rs. 2,000 as composition money. Thus, in our view, the preliminary condition that the officer had reason to suspect that the dealer was attempting to evade sales-tax was satisfied, but, to our mind, the notice does not fulfil the second condition viz., of recording of reasons. The reasons have to be for the purposes of seizure. In other words, it should be indicated whether seizure was necessitated for the purposes of examination or for any enquiry or proceeding under the Act or for a prosecution. Learned Deputy Government Advocate has tried to impress on us that the fact that the officer had put down in writing that he had information that the dealer was attempting to evade sales-tax should be taken to be the recording of reasons.
We are unable to agree. The statute has laid down two distinct conditions and the fulfilment of one will not necessarily mean the fulfilment of the other as well. Of course, one may conceive of an exceptional case where the fulfilment of one condition may ipso facto fulfil the other condition as well. For example, where the officer were to say that the information received by him was that the dealer was evading sales-tax and was keeping a double set of account books, then in such a case the recording of the information itself may furnish a reason for the seizure as well, but in the present case we are not told as to what the nature of the information was and therefore, we cannot hold that merely because the officer has recorded that he had information that the dealer was attempting to evade sales-tax amounted to the recording of reasons as contemplated by Sub-section (3) of Section 22 of the Act It further appears that quite a large number of documents have been seized and it was, therefore, all the more necessary for the officer to have indicated as to what was the necessity for seizure of many documents and account books. Notice Ex P/15 is, therefore, bad.
27. We may next turn to what was done by the officer after issuing of notice Ex. P/5. It appears from notice Ex. P/6 that the accounts were examined and that showed that the goods that were present at the shop were not found entered in those books of accounts. The officer, therefore issued the notice under Section 22 (6) calling upon the dealer to pay the tax, otherwise the officer would be compelled to confiscate the goods. The dealer was asked to pay four times the tax in order to avert confiscation. Notice Ex. P/6 is in the following terms:--
vkt fnukad 19&9&66 dks tcvkids fglkc fdrkc dh tkap dh xb rks ik;k x;k fd cl xksVs ds dke dh lkfM;ka oygaxs o Cykt vkfn dj&;ksX; eky dh vkidh nqdku es ekstwn gS mudk tek [kpsZvkidh cfg;k es ugha gS A
vkidks lwfpr fd;k tkrk gS fd] blfcuk ntZ fd;s gq, dj ;ksX; eky dk dkuwu ds fglkc ds VWDl ;w ,l 22 6 tek djokfnft;s vU;Fkk eq>s etcwj gksdj bl ekydks tCr dku&Qh;&dsV; djukiMsxk A bl fcuk ntZ fd;s gq, eky dk pkSxuk VWDl dkuwu d fglkc ls vkidks tekdjkuk pkfg;s] ftlls eky tCr u fd;k tk; A
28. Now this notice does not indicatewhat tax was to be paid. As we have already discussed, a dealer could be called upon to pay tax or any multiple of it, not exceeding four times as penalty only after the tax was determined. This has obviously not been done. It was bordering on absurdity to call upon the dealer to pay four times the tax without letting him know the question of the tax. It was as absurd as telling a person 'to pay four X' without indicating What X was. About this notice the learned Deputy Government Advocate has said that the term 'confiscation' was used by mistake and it was sought to be rectified by substituting the term ''seizure' for it. We have already pointed out that this makes the notice all the more unintelligible. Indeed seizure has already taken place and there was no question for giving a notice for seizure. Notice Ex. P/6 was followed by notice Ex. P/7, which was attain issued on the same day As we have pointed above, the officer had not indicated what tax was payable and, therefore, there was no warrant for calling upon the dealer to pay four times of that amount, This notice runs as under:--
vkidks lwfpr fd;k x;k fd tks dj ;ksX;eky vkidh cfg;ksa esa ntZ ugha gS A mldk pkSxuk VWDl ;w A ,l 22 6 es tekdjok fnft, ftlls ml ekydh tCrh u dh tk;] ijUrq lwpuk nsus ds ckn] vkSj dbZ ckjtckuh Hkh vkidks dgus ds i'pkr ok;ns VWDl ;w A ,l 22 6 tek djokus ds fy;srS;kj ugha gq, vkSj u gh vkius dksbZ tokc gh lwpuk dk fn;k A
bl fy;s eS etcwj gkdj tCrh eky dhdk;Zokgh ;w A ,l 22 6 dj jgk gwa vkSj vkidks bl nwljs uksfVl }kjk lwfpr djjgk gwa A
29. It curiously recites that the dealer was asked several times to pay the amount and as he was not prepared to do that, the officer was proceeding under Section 22 (6) of the Act against the dealer. The tenor of this notice leaves no doubt in our mind that the whole thing was being done in hot haste and the officers did not really care to ascertain what the extent of the evasion was, but they tried to make a show of complying with the provisions of law and in this attempt they had miserably failed All these three notices have, therefore, to be quashed. In view of the invalidity of all the three notices namely, Ex. P/5, Ex P/6and Ex. P/7, we are unable to uphold the validity of the seizure of the goods as well. We may observe that on the stay application of the petitioner we had ordered the return of the account books to the petitioner and it is common ground between the parties that the account books were returned on 24-7-67. It is, therefore, not necessary now to give any fresh direction to the respondents for the return of the account books.
30. We may, however, make it clear that it will be open to the respondents to take any fresh proceedings against the petitioner that they may be entitled to take according to law.
31. The result is that we allow thiswrit petition and quash the notices Ex. P/5,Ex. P/6 and Ex. P/7 and hereby direct therespondents to return the goods seized bythem from the Petitioner on 19-9-06. ThePetitioner shall get the costs of this petitionfrom the respondents.