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Oriental Rubber Works Vs. A.K. Sinha and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberC.R. No. 1727 (W) of 1973
Judge
Reported in[1974]34STC30(Cal)
AppellantOriental Rubber Works
RespondentA.K. Sinha and ors.
Appellant AdvocateA.P. Chatterjee and ;Sanjoy Bhattacharya, Advs.
Respondent AdvocateGanen Roy, Adv.
Cases ReferredNew Central Jute Mills Co. Ltd. v. Dwijendramal Bramachari and Ors.
Excerpt:
- .....1 to 7 as well as the notice dated 11th june, 1973, issued by respondent no. 8 and detaining the books and documents beyond 21 days, moved this application under article 226 of the constitution and obtained the present rule.3. mr. chatterjee, appearing in support of the rule, contended that under section 14(3) of the bengal finance (sales tax) act, 1941, the commissioner is required to record reasons in writing of his suspicion that any dealer is attempting to evade payment of any tax under the act. in the instant case, before the search and seizure was made, no such reasons had been recorded. even if the power of search and seizure under section 14(3) of the act has been delegated to the inspector under rule 71, the inspector who has to make the search and seizure has himself to form.....
Judgment:

Amiya Kumar Mookerji, J.

1. The petitioner is a partnership-firm and carries on the business in the manufacturing of and dealing in rubber goods and waterproofing. Its principal place of business is at 171A, Mahatma Gandhi Road. The petitioner is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941, and also under the Central Sales Tax Act, 1956. On 4th June, 1973, the office premises of the petitioner at 171A, Mahatma Gandhi Road, was raided by respondents Nos. 1 to 4 who described themselves as Inspectors of Commercial Taxes. All the books of account, documents, registers and receipts, etc., were seized by the said respondents. Similar search was made at the factory premises of the petitioner at Kathalia, Howrah, by respondents Nos. 5 to 7 and all valuable documents, files, papers and vouchers, current cash books and registers were removed by the said respondents. It is alleged that the said search was conducted in an arbitrary manner. After the said search was conducted, the authorised Advocate of the petitioner visited the Assistant Commissioner of Commercial Taxes (Central Section) and requested him to release the books seized since it was becoming impossible on the part of the petitioner to maintain its books of account in accordance with law. The Assistant Commissioner of Commercial Taxes, however, refused to release the books. Thereafter on 11th June, 1973, a notice under Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941, was served upon the petitioner by respondent No. 8, Commercial Tax Officer

2. (Central Section), by which the petitioner was directed to produce all books of account since the inception of the business. On 26th June, 1973, the petitioner wrote a letter to the Commercial Tax Officer (Central Section) wherein the petitioner requested to withdraw the aforesaid notice on the ground that it was unjustified and against the provisions of law to ask the petitioner to produce books of account since the inception of its business. The petitioner being aggrieved by the said search and seizure made by respondents Nos. 1 to 7 as well as the notice dated 11th June, 1973, issued by respondent No. 8 and detaining the books and documents beyond 21 days, moved this application under Article 226 of the Constitution and obtained the present rule.

3. Mr. Chatterjee, appearing in support of the rule, contended that under Section 14(3) of the Bengal Finance (Sales Tax) Act, 1941, the Commissioner is required to record reasons in writing of his suspicion that any dealer is attempting to evade payment of any tax under the Act. In the instant case, before the search and seizure was made, no such reasons had been recorded. Even if the power of search and seizure under Section 14(3) of the Act has been delegated to the Inspector under Rule 71, the Inspector who has to make the search and seizure has himself to form an opinion as to whether the conditions for the exercise of the powers under Section 14(3) do exist. In the instant case, Mr. Chatterjee submitted that the persons who have conducted the search are 7 in number. So the reasons to suspect could not be jointly in the minds of the said 7 Inspectors who joined together to make the search.

Sub-section (3) of Section 14 reads as follows:

If the Commissioner has reason to suspect that any dealer is attempting to evade payment of any tax under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer as may be necessary....

4. Under Section 15 of the Act, the Commissioner of Commercial Taxes may delegate his power. The powers under Section 14 have been delegated to the Assistant Commissioner, Commercial Tax Officer and Inspectors under that section read with Rule 71 of the Bengal Sales Tax Rules, 1941. In the instant case, no recorded reasons either of the Commissioner or the Inspector have been produced before me.

5. Mr. Roy, appearing on behalf of the respondents, contends that it is not necessary for the Inspectors to record their reasons before the search and seizure. My attention was drawn to the annexure X to affidavit-in-opposition filed on behalf of respondents Nos. 8 to 11 affirmed by Bimal Kanti Das Gupta, respondent No. 8, wherein it is stated that as per orders of Mr. B. Das Gupta, Commercial Tax Officer, Central Section, the factory premises of the petitioner was searched. According to Mr. Roy, before the seizure was made on the spot, reasons had been recorded in writing by the Inspectors who conducted the search.

6. In my view, the condition precedent for exercising jurisdiction under Sub-section (3) of Section 14 is to form a suspicion that a dealer is attempting to evade payment of any tax under the Act and, thereafter, reasons are to be recorded in writing before any seizure of accounts, registers or documents, as may be necessary, can be made. Suspicion is nothing but a belief in the existence of wrong on inadequate proof. Recording of reasons is absolutely necessary, otherwise the powers conferred upon the Commissioner under Sub-section (3) of Section 14 would become arbitrary. The Commissioner can pick and choose, and even without any suspicion, the powers under Section 14(3) can be exercised. The result would be that the citizen's fundamental rights guaranteed under Articles 14 and 19(1)(f) and (g) of the Constitution would be jeopardised. It is true that sufficiency of the reasons recorded by the Commissioner cannot be investigated by the court, but the court can examine the materials whether an honest and reasonable person can base his reasonable belief upon such materials. Therefore, as no reasons have been recorded before the search and seizure, in my view, the search and seizure conducted by respondents Nos. 1 to 7 are without jurisdiction and must be set aside.

7. Mr. Chatterjee next contended that respondent No. 8 has acted beyond his authority, power and/or jurisdiction in calling upon the petitioner to produce the books of account since the inception of the petitioner's business and acted particularly mala fide in threatening the petitioner that, in the event of its failure to comply with the said notice, law would take its own course. In support of his contentions Mr. Chatterjee relied upon a decision of this Court, New Central Jute Mills Co. Ltd. v. Dwijendramal Bramachari and Ors. [1973] 90 I.T.R. 467.

8. The case referred to by Mr. Chatterjee is a case under Section 131 of the Income-tax Act, 1961. The Income-tax Officer issued summons under Section 131 of the Act to the Registrar of Companies, to produce books of account of the petitioner-company, which had been seized by the Inspectors investigating the affairs of the petitioner-company and which were in the custody of the Registrar of Companies. It is held that under Section 131 of the Act officers mentioned therein have no larger power than a civil court trying suit to direct production, discovery and inspection of documents under Section 30 and Order 11 of the Civil Procedure Code. The civil court cannot direct the production of any documents unless it considers the said documents as relevant. In the instant case, it was difficult to accept the position that the Income-tax Officer considered the said documents relevant for two reasons. Firstly, the Income-tax Officer did not have and could not have had any knowledge about the contents of the documents, secondly, the omnibus nature of the order passed also indicated non-application of mind. Accordingly, summons issued under Section 131 of the Act was quashed and set aside on the ground that there was no application of mind by the Income-tax Officer and, as such, the impugned summons was beyond his power under Section 131 of the Income-tax Act, 1961.

9. Under Sub-section (1) of Section 14, the Commissioner may, subject to such conditions as may be prescribed, require any dealer (a) to produce before him any accounts or documents, (b) to furnish any information relating to the stocks of goods of, or purchase, sales or deliveries of goods by, the dealer or relating to any other matter, as may be deemed necessary for the purposes of this Act. So under that provision of Sub-section (1) of Section 14 the Inspector must state which of the documents are necessary for the purpose of the Act.

10. The omnibus nature of the notice dated 11th June, 1973, issued under Section 14(1) of the Act indicated that the Commercial Tax Officer, Central Section, did not at all apply his mind and asked the petitioner to produce books of account since the inception of the petitioner's firm. Accordingly, I hold that the impugned notice is beyond the powers under Section 14(1) of the Act.

11. Mr. Roy, appearing on behalf of the respondents, however, in his usual fairness conceded that the said omnibus notice under Section 14(1) of the Act cannot be supported.

12. In the result this rule is made absolute. Respondents Nos. 1 to 7 are directed by a writ of mandamus to return within seven days from date the seized documents of the petitioner as per seizure list. The impugned notice dated 11th June, 1973, issued under Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941, by respondent No. 8 is also quashed. The respondents, however, will have liberty to start fresh proceedings against the petitioner in accordance with law. There will be no order as to costs.


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