RAMKISHAN SRIKISHAN JHAVER Vs. COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) THESE petitions under Article 226 of the Constitution concern the scope validity of the powers of search and seizure of account books and other records and of confiscation of goods seized or imposition of penalties in lieu thereof under the provisions of the Madras General Sales Tax Act, 1959. They involve the construction and interpretation of section 41, the legislative competency of some of its provisions and their constitutional vires.

(2.) AT about 5 p.m. on 19th August, 1964, certain officers of the Commercial Taxes Department, Intelligence Wing, under the personal direction and supervision of the Deputy Commissioner of Commercial Taxes (Intelligence), Madras, raided the premises of Zenith Lamps and Electricals, Ltd., Madhavaram, inspected, searched and seized therefrom in the presence, among others, of one of the managing directors Mr. B. D. Mimani, a small leather suit-case with a khaki cover and certain records found on the top of the suit-case. The Deputy Commissioner, as he says in his counter-affidavit, had specific information that some secret account books relating to the various businesses in which one Sri Goenka was interested, were removed from his house in such a suit-case and hidden in the business premises of Zenith Lamps and Electricals Ltd. When he went in mufti and watched the place, he found a black Ambassador car leaving from that place and going to 366, Tiruvottiyur High Road. He contacted Mr. P. S. Marappan, Commercial Tax Officer (Intelligence) and directed him to get a warrant for search of the premises, 366, Tiruvottiyur High Road which he did from the Chief Presidency Magistrate, on the 19th itself. 366, Tiruvottiyur High Road is the residence of Mr. Ramkishan Srikishan Jhaver. The Deputy Commissioner also learnt from Mr. P. S. Marappan that his confidential enquiries revealed that Mr. Jhaver maintained some of his accounts and records of his business in his residence. The Deputy Commissioner, therefore, arranged for a simultaneous inspection of both the places at 4-45 p.m. sharp. Mr. P. S. Marappan went with four of his officers to the residence of Mr. Jhaver, while the Deputy Commissioner went with Commercial Tax Officers, Mr. Thambusami, Mr. Murugan, and Mr. Samraj, Joint Commercial Tax Officer, thirteen other officers and a few peons to the office and factory of Zenith Lamps and Electricals Ltd. The Deputy Commissioner wanted to get at the records in the suit-case to verify whether there was any attempt to evade payment of taxes due to the department, and also wanted to make a general inspection of the place of business of the company. He, therefore, directed one of the Commercial Tax Officers to inspect the factory and godowns, another to inspect the office, and the Joint Commercial Tax Officer to keep a watch over the outlying rooms and he himself went around supervising the entire inspections. On their entry into the premises, they introduced themselves to Mr. Mimani and told him that they had come there for inspection. Mr. Mimani, one Mr. Sharma, an employee of the company, one Mr. Vinayak Kishore, the accountant there, showed the records and stocks to the various officers, who secured, under an inventory, certain records like production statements pertaining to the business for detailed check with the regular accounts of the business. The Deputy Commissioner, who was making a general supervision, entered the office hall of the premises with a certain Joint Commercial Tax Officer-II and found another Commercial Tax Officer-II demanding Mr. Mimani and others to open the room at the nearest end but they refused to do so. This room was in fact a partition by brick walls of the hall and was open at the top. From the strength of their protest, the Deputy Commissioner felt that the room must contain the suspected suit-case. He directed an Assistant Commercial Tax Officer Mr. Radhakrishnan to get a ladder and look into the room which he did. He came out with a suit-case and a bundle of papers. The Commercial Tax Officer-II received them and passed them on to the Joint Commercial Tax Officer-II. Mr. Mimani immediately intervened, laid a hand on the box and began to shout refusing them permission to see the box. The Commercial Tax Officer Mr. Murugan told Mr. Mimani that the department had specific information that the box had accounts meant to evade taxes and so, they were seized. Mr. Mimani refused to release his hold and dragged the box to a table nearby. Just then Mr. Sharma re-entered the room with about thirty Gurkhas and others armed with lathis, lead pipe etc., and started beating the officers. One person aimed a blow at the Deputy Commissioner with a lead pipe which he dodged. Mr. Mimani beat the officers on their wrists and got hold of the box and gave it to someone in the crowd who took it and ran away. Mr. Samraj and Mr. Francis, Assistant Commercial Tax Officer, followed them. Most of the persons who were assaulting the officers, followed them. The Deputy Commissioner too ran after them, but Mr. Sharma closed the door by which they came and left. So the Deputy Commissioner turned and ran outside shouting for jeep, got into it and went to the place where the man had run away with the box. There was a crowd of employees blocking the path. The Deputy Commissioner directed the jeep driver Sitaraman to run into the crowd, in a threatening way, as he wanted to reach Mr. Samraj whose life was in danger. AT that time Mr. Samraj got hold of the box and passed it to Mr. Francis who, in turn passed it on to the Deputy Commissioner who took it, ran the jeep into the crowd of employees, who started throwing stones at him, and dashed to the police station. There he filed a complaint and sent a few constables and a Sub-Inspector to the spot. The police arrested the persons there and brought them along with the records to the police station. When the Commissioner of Commercial Taxes arrived, on his direction, an inventory of the records contained in the suit-case was prepared in his presence and in the presence of the accountant of the firm. AT that time, the Commercial Tax Officer-II (Intelligence) recorded the reasons for seizure of the records and then made out a list of the records in the suit-case. These are the facts as mentioned by Mr. Narasimhan, Deputy Commissioner, in one of his counter-affidavits.But not all those facts are common ground. Some of them as to what exactly happened inside the premises before and at the seizure of the suit-case and other records, have been stated somewhat differently by Mr. Mimani in his affidavit. According to him, when he asked the Deputy Commissioner if he wanted to see any accounts or records of the company, he answered that he was not interested in seeing the records and wanted to have a search of the entire premises. When the Deputy Commissioner was conducting a search in Mr. Mimani's room, an officer of the department walked in and informed him that a suit-case was found in one of the rooms and that Mr. Sharma was claiming that it belonged to another person and could not be removed. The Deputy Commissioner and Mr. Mimani walked to that place. The Deputy Commissioner ordered the box to be removed. Mr. Mimani objected and said that the box did not belong to the company and did not contain any records of the company and that it belonged to Mr. R. S. Jhaver, and should not, therefore, be removed. Mr. Mimani offered to send for Mr. Jhaver to come to the premises and open the box for inspection but Mr. Narasimhan would not wait. He ordered one of his officers to search Mr. Mimani's person in spite of his objection. Mr. Mimani was man-handled and pushed down by the officers and he sustained injuries on his knee-cap. When the watchman and the staff saw their managing director being assaulted, they fried to help him. But at this stage, the men of the raiding party assaulted Mr. Mimani's men resulting in injuries to some of them. During this scuffle, the Commercial Tax Officers removed the box to a jeep and took it away. As the box was removed forcibly and even telephone contact with the police was made impossible, Mr. Mimani says, he decided to go to the Madhavaram Police Station along with Mr. Jhaver to complain about the high-handedness of the officials. When they started the car, they were prevented by some of the officials blocking up the passage. They left the car and walked out through another entrance to the police station. On their way they were forcibly put into a jeep and taken to a police station where they were taken into custody and released on bail the next day. That is, according to Mr. Mimani, what had happened.We are not, in these petitions, concerned with the actual details of the raid and of the tussle there. But we have referred to the facts as mentioned by the Deputy Commissioner or by Mr. Mimani to show that the Intelligence Wing of the Commercial Taxes Department searched the premises of Zenith Lamps and Electricals Ltd., found out the leather suit-case, forcibly removed it in spite of objection and physical resistance, and took it away with certain other records and that this raid was carried out as the Deputy Commissioner, as he claimed, had specific information that the suit-case contained secret account books relating to the various businesses in which one Mr. Goenka was interested and was hidden in the business premises of Zenith Lamps and Electricals, Ltd., before its being airlifted to Bombay.

(3.) MR. Vasudeva Sharma, a cashier of Zenith Lamps and Electricals Ltd., has alleged that while the search was going on in the office of the company, some of the raiding party had also entered his residence which was about 100 yards away from the office, started ransacking the papers in his house, opened two boxes and removed books, papers and memoranda. According to him, these books, papers and memoranda had nothing to do either with the company or with anybody else, but belonged to him. The Deputy Commissioner however says that the books, records and memoranda were seized by the Commercial Tax Officer-II from the premises of Zenith Lamps and Electricals Ltd., on 19th August, 1964, for reasons duly recorded by him.In the above circumstances, MR. Jhaver has filed W.P. No. 1321 of 1964 asking for mandamus to direct the Commissioner of Commercial Taxes and the Deputy Commissioner of Commercial Taxes, the two respondents, to produce the documents seized by them on 19th August, 1964, as per the list filed by them in this Court and the photographic negatives prepared and all photo copies thereof and translations and notes therefrom and in case the same or any of them be with any other court or person, direct the same to be brought into this Court and handed over to him. He also asked for an injunction restraining the respondents from disclosing the information therein and making any use thereof. MR. Jhaver claims that the suit-case and its contents noted in D.7 slip belonged to him and was kept in a room locked by him in the premises of the company and that in spite of their telling the raiding party of the fact that the box did not contain any papers and records belonging to the company, it was forcibly removed by the officers and taken away by them. He submits that the search and seizure of the box and its contents are illegal and that he is entitled to the return of them. MR. Jhaver has also filed W.P. No. 1456 of 1964 asking to call for the records connected with the search warrant and quash the search warrant issued to MR. Marappan, who is the 3rd respondent in this petition, by the 4th respondent, the Chief Presidency Magistrate, on 19th August, 1964. His grounds are that the warrant was obtained on fraudulent misrepresentation by the Deputy Commissioner, the 2nd respondent, through MR. Marappan for the ulterior purpose of tracing the box of one MR. Goenka containing secret accounts of his many businesses, that the Madras General Sales Tax Act does not give a power to search but only a power of inspection, that the proviso to section 41(2) for search of a residential building goes beyond the main provision relating to inspection, that when there is no provision for search of even business premises, there cannot be a search of a private residence and that if the proviso is construed as conferring a power of search, it offends Article 19(1) of the Constitution. He also adds that under section 41(2) inspection can only be of the accounts maintained by a dealer for the purposes of checking up his conduct as a dealer in relation to the tax department and does not give a power of general search of any premises for offences alleged to have been committed by others. MR. Vasudeva Sharma in his W.P. No. 1553 of 1964 prays for calling for the production of the documents seized with reference to him as per the list filed by the department along with the photographic negatives and copies thereof including their translations and directing the same to be handed over to him while forbidding the respondents from disclosing the information therein or making any use thereof. In the counter-affidavit of the Deputy Commissioner, MR. Narasimhan, filed in this petition, it is stated on behalf of the three respondents that they have no objection to the return of the documents, in which the petitioner is interested, by the Sub-Divisional Magistrate, Poonamallee, to Zenith Lamps and Electricals Ltd., from whose possession the Commercial Tax Officer-II recovered them. It may be mentioned that in connection with the alleged seizure at the raid in the premises of the company, and on a police complaint, twenty persons connected with the company including MR. B. D. Mimani had been charged before the Sub-Divisional Magistrate, Poonamallee, with alleged commission of offences under sections 143, 147, 149, 332, 333, 363 and 395 read with 397, Indian Penal Code, and section 45(3) of the Madras General Sales Tax Act, 1959. After an enquiry in P.R.C. No. 2 of 1964 on his file, the Sub-Divisional Magistrate, by an order dated 21st December. 1964, framed certain charges under certain sections under the Indian Penal Code against the accused before him and committed them to stand their trial before the Court of Sessions, Chingleput Division. In this enquiry, it appears that not only the suit-case but also the records seized from the premises of the company at the raid have been marked as material objects. In view of this, the petitioners have asked for the production of the books and records from the Court of the Sub-Divisional Magistrate before this Court.J. Hazarimal & Co., Madras, is the petitioner in W.P. Nos. 1495 and 1496 of 1964. It is a partnership firm which deals in electrical goods and which has been registered under the Madras General Sales Tax Act with its place of business at No. 126, Nainiappa Naicken Street, Madras. On 18th September, 1964, the Special Deputy Commercial Tax Officer (Intelligence) V, Madras, along with certain other officers of the Commercial Taxes Department searched the business premises and also the residence of the managing partner, one Ganmal K. Shah at No. 17, Luckmudoss Street, Madras, and the main godown at No. 18, Ponnappa Chetty, as well as the subsidiary godown at No. 6, General Muthiah Mudali Street. The search of the residence was carried out under a search warrant issued by a competent Magistrate. From the residence of the managing partner were, under an inventory, seized electrical goods such as electric fans, bulbs, toaster, tube lights, table lamps etc., and a hurricane lantern, the approximate value of which was said to be Rs. 1, 04, 543. Also were seized from No. 6, General Muthiah Mudali Street, electrical goods, such as junction boxes, Suraj main switches, insulated cables, etc., approximately valued at Rs. 4, 000. The Special Deputy Commercial Tax Officer (Intelligence) V, and the Special Assistant Commercial Tax Officer-11, Madras City, issued separate notices of penalty in lieu of confiscation to the petitioners on 22nd September, 1964. The notices stated that, in the opinion of the officers, the petitioners had violated the conditions prescribed under rule 38(1) of the Madras General Sales Tax Rules, 1959, and the goods were therefore liable to confiscation. The officers, by these notices, informed the petitioner that before ordering confiscation they were willing under the powers conferred on them by law, to give him the option to pay in lieu of confiscation a sum of Rs. 12, 541 in one case and another sum of Rs. 4, 080 in the other, as penalty and that the goods would be released on payment of the amounts. If the petitioner failed to pay the amounts, the goods, as was stated in the notices, were liable to be disposed of according to law. In answer to these notices, the petitioner filed objections which were all overruled by the two officers holding that the goods were unaccounted stock liable to confiscation under section 41 of the Act, and renewed the option contained in the notices to pay the penalties before a specified time in lieu of confiscation. Their orders dated 22nd September, 1964, wound up by stating that if the penalties were not paid, the goods would be disposed of according to law. They also issued notices, in Form 53 under the Rules, to the petitioner on the same day. J. Hazarimal & Co., by its petitions prays for calling for the connected records and quashing the said orders of the Commercial Tax Officers. It asks for the relief on the ground that the decision of the two officers was arbitrary, that notwithstanding the fact that the petitioner has produced its account books to show that the stock of goods was properly accounted for, the impugned orders were passed without scrutinising them and merely on the basis that the values of some of the items of the goods seized were not to be found in the purchase vouchers, and that, in the absence of such values, the inventory of the stock as on 31st March, 1964, was not complete. The respondents have filed counter-affidavits denying these grounds.MR. V. K. Thiruvenkatachariar for the petitioners argues that there is no power of search under the Madras General Sales Tax Act, 1959, but if there is, it is invalid so that the seizures from search in these cases are illegal, and makes his submission under three heads : (1) construction of section 41 by itself and in the light of the other provisions of the Act, (2) if the section is construed as empowering search, its legislative competency with reference to the topic of tax on sale of goods, and (3) if the power exists, it offends Articles 19(1) and 31(1) and (5) of the Constitution. They will be dealt with in that order.