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Ajanta Metal Mart Vs. Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberCivil Order No. 8587(W) of 1984
Judge
Reported in[1987]64STC291(Cal)
AppellantAjanta Metal Mart
RespondentCommercial Tax Officer and ors.
Appellant AdvocateSanjoy Bhattacharyya and ;Chandrima Bhattacharyya, Advs.
Respondent AdvocateA.P. Chatterjee, Senior Standing Counsel and ;S.N. Dutta, Adv.
DispositionPetition dismissed
Cases ReferredCommissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver
Excerpt:
- .....to such conditions as may be prescribed, require any person- (a) to produce before him any accounts, registers or documents, (b) to furnish any information, relating to the stock of goods of, or purchases, sales or deliveries of goods by, the person or relating to any other matter, as may be deemed necessary for the purposes of this act. (2) (a) all accounts, registers and documents relating to the stocks of goods of, or purchases, sales and deliveries of goods by, any dealer ; and (b) all goods kept in any place of business of any dealer, shall at all reasonable times, be open to inspection by the commissioner. (3) if the commissioner or any person appointed under sub-section (1) of section 3 to assist him, has reason to suspect that any dealer is attempting to evade payment of.....
Judgment:

Suhas Chandra Sen, J.

1. The petitioner is a partnership firm and is a registered dealer under the provisions of the Bengal Finance (Sales Tax) Act, 1941 and the Central Sales Tax Act. On 24th March, 1983 the authorised officials of the sales tax department entered the office premises of the petitioner at No. 123/2, Acharya Prafulla Chandra Road, Calcutta-6. One Sri Mahendra Prosad Jaiswal, an employee of the petitioner was present at that time and he was requested to produce the books and documents relating to the business of the petitioner-firm. Sri Jaiswal produced only a book which appeared to be a rough sales register for the period 11th August, 1982 to 11th November, 1982. The cash book, ledger, bill register and other books of the business could not be produced. Sri Jaiswal was requested to produce the related books and documents. The request was not complied with. Thereupon the officials of the sales tax department searched the premises and found 178 account slips containing various transactions which no one present in the establishment could explain. It has been stated on affidavit, by Sri Swapan Chowdhury, an Inspector of Commercial Taxes, that he had reason to suspect that the petitioner was attempting to evade payment of sales tax under the Bengal Finance (Sales Tax) Act, 1941. The books and documents found in the business premises were seized. A seizure list was prepared and Sri Jaiswal put his signature on the said seizure list a copy of which was given to him. A separate report was prepared stating reasons for suspecting that the petitioner was evading sales tax. The report was also shown to Sri Jaiswal and his signature was obtained on the report. It has been stated in the affidavit by Sri Swapan Chowdhury that the report was prepared before the seizure of the documents and the preparation of the seizure list.

2. The first contention raised in this case by the petitioner is that the search was unlawful. It has been argued that since the search was unlawful, the seizure of the books and documents was also unlawful and the respondents must be directed to forthwith return the seized books and documents and the slips to the petitioner. It has been argued that Section 14(3) of the Bengal Finance (Sales Tax) Act, 1941, did not permit the Commissioner or any authorised official to search the business premises of the petitioner. The power of search is to be found in Section 14(4). But in order to apply the provisions of Sub-section (4) the Commissioner must have :

(1) Information from external source.

(2) Reason to believe on the basis of that information that the petitioner was keeping any accounts, register or document or record of his business or any stock of goods for sale in the place of business or warehouse which is going to be searched.

3. It has been emphasised that the power of search and seizure given in Section 14(4) is in aid of the power of inspection and seizure conferred by Sub-sections (2) and (3).

4. I am unable to uphold the contention raised by the petitioner. Section 14 provides, inter alia, as under :

14. Production and inspection of accounts and documents and search of premises.-(1) The Commissioner may, subject to such conditions as may be prescribed, require any person-

(a) to produce before him any accounts, registers or documents,

(b) to furnish any information, relating to the stock of goods of, or purchases, sales or deliveries of goods by, the person or relating to any other matter, as may be deemed necessary for the purposes of this Act.

(2) (a) All accounts, registers and documents relating to the stocks of goods of, or purchases, sales and deliveries of goods by, any dealer ; and

(b) All goods kept in any place of business of any dealer,

shall at all reasonable times, be open to inspection by the Commissioner.

(3) If the Commissioner or any person appointed under Sub-section (1) of Section 3 to assist him, 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.

(3A) ...

(4) For the purposes of Sub-section (2) or Sub-section (3) the Commissioner or any person appointed under Sub-section (1) of Section 3 to assist him, may enter and search any place of business or warehouse of any dealer or any other place where the Commissioner or any person appointed under Sub-section (1) of Section 3 to assist him has, upon information received, reason to believe that the dealer keeps or is for the time being keeping any accounts or registers, documents or records of his business or any stock of goods for sale.

5. Sub-section (1) enables the Commissioner to require any dealer to produce before him any accounts, registers or documents or to furnish any information relating to the stock of goods or purchase and sale or delivery of goods. Sub-section (2) casts an obligation upon a dealer to keep:

(a) All accounts, registers and documents relating to the stock of goods or purchases, sales and deliveries of goods by any dealer and

(b) to keep all accounts, registers and documents and also the goods open to inspection by the Commissioner.

6. This Sub-section cannot be interpreted to mean that only such accounts or such goods that the dealer chooses to keep in his place of business will be open to inspection by the Commissioner. In this case, the authorised officials entered the business premises of the petitioner lawfully and wanted to see the accounts which were not produced. There is no explanation by the petitioner either before the authorised officials or in the court why accounts and registers relating to the stock of goods and purchase and sale and delivery of goods were not available for inspection at the time when the officials visited the business premses of the petitioner. It has to be borne in mind that the search took place on 24th March, 1983 and the only register that was produced was for the period from 11th August, 1982 to 11th November, 1982. It cannot be said on these materials that the authorised official could not search the business premises to find out whether accounts, registers or documents relating to the stock of goods or purchase, sales and delivery of goods were being withheld from inspection. The power to inspect given in Sub-section (3) cannot be limited only to inspection of such books as the dealer may choose to produce. That will make the power nugatory. The power must include inspection of other books and documents which are in the business premises but which were not being produced by the dealer. The Supreme Court in the case of Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 20 STC 453 (SC) pointed out that Section 41(2) of the Madras General Sales Tax Act in terms did not authorise search of the premises but merely provided for three things :

(i) All accounts, registers, records and other documents maintained by the dealer in course of his business shall be open to inspection at all reasonable times;

(ii) The goods in the possession of the dealer shall also be open to inspection ; and

(iii) The dealer's offices, shops, godowns, vessels or vehicles shall also be open to inspection.

7. It was pointed out by the Supreme Court at pages 460-461 :

Though therefore the word 'search' has not been used in Sub-section (2) these two powers of entering the offices, etc., for inspection and of inspecting every kind of account maintained by a dealer with respect to his business together amount to giving the officer concerned the powers to enter and search the offices, etc. and if he finds any account in the offices, shops, etc., to inspect them. Otherwise we can see no sense in the Legislature giving power to the empowered officer to enter the offices, etc, for the purpose of inspection as the officer concerned would only do so for the purpose of finding out all accounts, etc., maintained by the dealer and if necessary to inspect them for the purposes of the Act. We cannot therefore agree with the High Court that there is no power of search whatsoever in Sub-section (2) because the Sub-section in terms does not provide for search.

8. In that case, it was emphasised by the Supreme Court that Section 41(1) of the Madras Act required a dealer to produce its accounts, etc. and to furnish other information relating to his business. The legislature was, however, cognizance of the fact that a dealer may not produce all accounts or furnish all information even though required to do so under Sub-section (1). Therefore, Sub-section (2) provided that all accounts, etc., of the dealer would be open to inspection. The Supreme Court also observed at page 461 :

Similarly, the officer has been given the power to inspect the goods in the possession of the dealer. He has also the power to enter the dealer's offices, etc., for the purpose of such inspection. Combining these two powers together it follows on the same reasoning that the officer has the power to search for the goods also and to inspect them if found in the offices of the dealer.

9. Having regard to the principles laid down by the Supreme Court and also bearing in mind the scope of Sub-sections (2) and (3) of Section 14, I am of the view that the power to inspect accounts, registers and documents and also goods in any place of business of any dealer must include not only power to inspect such accounts, registers and documents and goods as are offered for inspection by the dealer but also other accounts, registers, documents and goods which should be in the place of business but is not offered for inspection by the dealer. The necessary implication of power to inspect in Sub-section (2) is to search and inspect, if necessary. Otherwise, this power will become meaningless. It is well-settled that the duty of the Court is to give effect to the intention of the legislature and the intention is to be gathered from the language employed having regard to the context in which it is employed. Section 14(1) confers right upon the Commissioner to require any dealer to produce all relevant accounts, registers and documents relating to purchase and sale of goods and to furnish any information relating thereto. In aid of this power, Section 14(2) gives a further right to the Commissioner to inspect at all reasonable times all accounts, registers and documents relating to the stock of goods or purchase, sale and delivery of goods and also all goods kept in any place of business of any dealer. Sub-section (3) gives the Commissioner the right to seize the goods if he has reason to suspect that any dealer is attempting to evade payment of any tax under this Act. It has to be noted that the Commissioner is empowered to enter and inspect the books of accounts and other documents and the goods at all reasonable times in any place of business of any dealer. No special authorsation to enter and search is needed for this purpose. The language employed in Sub-section (2) is that the related documents and goods 'shall at all reasonable times be open to inspection by the Commissioner'. That means that all accounts, registers and documents and all goods 'kept in any place of business of any dealer' shall be open to inspection. I fail to see why only those accounts and documents and those goods which were actually produced before the Commissioner will be open to inspection and the other goods which are not produced but are kept in a drawer or any other secret place of business of the dealer should not be open to inspection by the Commissioner. The phrase 'open to inspection' cannot be given a limited interpretation having regard to the context of the Act. This means that all accounts, registers and documents and all goods kept in any place of business of any dealer will be open to inspection by the Commissioner whether produced by the dealer or not. If the dealer does not produce the accounts, registers and documents and other goods kept in the place of business before the Commissioner, it should be open to the Commissioner to find out those accounts, registers and documents and goods. In my opinion, power to search is inherent in the right to inspect all accounts, registers and documents and all goods kept in any place of business in Section 14(2). If after inspection the Commissioner has reason to suspect that a dealer is attempting to evade payment of tax, he may seize such accounts, registers and documents as may be necessary after recording his reasons to suspect.

10. In the case before us, the authorised official's went into the business premises of the dealer on 24th March, 1983 but could not find any relevant current books and documents. The only account book which was produced was for the period from 11th August, 1982 to 11th November, 1982. It has been recorded that 'no cash book, ledger, bill register, etc., were produced before us by him. We however, came across an account book written for the period from 11th August, 1982 to 11th November, 1982 which, prima facie, appeared to be a rough sale register. We asked Sri Jaiswal to corroborate the entries of that register by means of producing related documents, etc., which he failed to do. We, therefore, have reasons to believe that the dealer is evading payment of sales tax.' In the context of these facts 'power to inspect all accounts, registers and documents relating to the stock of goods or purchases, sales and deliveries of goods by any dealer' will be meaningless if the Sub-section (2) is construed to mean that the power to inspection must be confined to such accounts, registers and documents as is actually produced by the dealer for inspection. Section 14(4) in express terms enables the Commissioner or any authorised official to enter and search any place of business or warehouse of any dealer or any other place where he has reason to believe that the dealer keeps or is for the time being keeping any accounts, registers, documents or records of his business or any stock of goods for sale. It is to be seen that the right of entry is specifically given under Sub-section (4) and the right is not confined to any place of business and/or warehouse but extends to any other place where the books of account, documents and registers are kept or where any stock of goods for sale is stored. The contention of the assessee is that the Commissioner or an authorised official can only enter and search a business place of the dealer only if he has prior information about evasion of tax and not otherwise. If this contention is to be accepted, then in a case where the Commissioner goes to a place of business to inspect the books of account and other documents and is unable to do so because the books are not produced, the Commissioner or the authorised official is powerless to take any further steps in the matter. I am entirely unable to accept this argument. The wording of the section does not warrant such construction and the construction as suggested by the advocate on behalf of the dealer will render the section otiose and meaningless. The law requires the dealer to maintain the books of accounts, registers and other documents in the place of business of the dealer and the documents must be kept available for inspection at all reasonable times by the Commissioner or an authorised official. Non-production of books of accounts of the business for inspection in violation of the statutes can only mean that the assessee is unwilling to produce those books of accounts for some reason of his own. In the absence of any explanation for such non-production, it will be reasonable to conclude that the dealer is unwilling to produce its business for inspection so that full particulars of purchase and sale may not be found out by the Commissioner. It has been recorded by the authorised official that he had reasons to believe that the dealer was evading payment of taxes. In the facts of this case it cannot be held that there was no material for the formation of such belief. In this context, it should also be borne in mind that the impugned search and seizure took place on 24th March, 1983 and the writ petition was moved on 2nd July, 1984. No explanation has been given for the delay. It has been stated on behalf of the petitioner, however, that he has been compelled to file this writ petition because of the unwillingness of the respondents to issue declaration forms in accordance with law and this has seriously prejudiced his business. On this aspect of the matter it has been stated on affidavit by Debaprosad Mukherjee, Assistant Commissioner of Commercial Taxes, North Circle, respondent No. 2, that he had ordered for furnishing of security under Section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941. He has stated that cases of evasions of taxes made by the petitioner have come to light and on a moderate estimate it has been detected that in course of a year the petitioner has suppressed sales of rupees more than a crore. In another year it has been detected on moderate estimate that the petitioner has suppressed sales of more than rupees three crores. Taking a very lenient view and considering the suppression for the first year's evasion in respect of 10 months only has been taken into account and a sum of Rs. 5,00,000 has been demanded as security. This security was demanded after giving a notice for showing cause as to why a sum of Rs. 20 lacs should not be demanded as security under Section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner's representative was heard and its written submission was duly considered.

11. It has further been stated by the Assistant Commissioner of Commercial Taxes that after recording good and sufficient reason, a security of Rs. 5 lacs was demanded from the petitioner No. 1, a registered dealer, after giving it an opportunity of being heard. The allegations against the petitioner were raised by the bureau of investigation and the petitioner was given all particulars for controverting the allegations and an order was passed only after giving a hearing to the petitioner. It has also been alleged that the petitioner No. 1 could make an application for revision if it was not satisfied with the order of security.

12. In my opinion, the contention of the Appellate Assistant Commissioner must be upheld in the facts of this case. It cannot be said that the demand of security in the facts of this case was entirely unlawful. Moreover, it is essentially a question of fact. It has not been stated why the petitioner has not adopted the statutory remedy. It is not a case of inherent lack of jurisdiction. It is only the respondents who could have passed order regarding the declaration forms. If the order is a conditional order ; the order may be erroneous but is not without jurisdiction. The assessee has not given any explanation in the affidavit-in-reply why it has not availed of the statutory remedy.

13. The writ petition, therefore, fails and is dismissed. The interim order is vacated.

14. There will be no order as to costs.


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