KHANNA ELECTRIC STORES Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) THE petitioner by this writ petition has prayed that the first proviso to Section 22 (3) of the Rajasthan Sales Tax Act, 1954 may be declared ultra vires to the extent it empowers the respondent No. 2 to sanction the retention of the seized account-books and documents being ultra vires of Article 19 (1) (g) of the Constitution of India. He has also prayed that by an appropriate writ, order or direction the order dated 16. 12. 1987 (Annex. 7) may be quashed and the respondents may be directed to return the account-books and documents seized by the respondents. It is also prayed that the respondents may be restrained from recovering the demand in pursuance of Annexs. 13 and 14 and demand notices Annexs. 15 and 16 respectively.

(2.) THE petitioner is a partnership firm known and styled as M/s. Khanna Electric Stores, Sri Ganganagar located at Sri Ganganagar. It is constituted by 5 partners Sarva Shri Kasbmirilal, Sudarshan Kumar, Raghuveer, Jaswantlal and Smt. Rampyari. THE petitioner carries on the business of electric goods of all kinds. THE petitioner has a sister concern known and styled as M/s. Khanna Electric Corporation, a partnership firm constituted by 4 partners : Sarva Shri Raghuveer, Sudarshan Kumar, Jaswantlal and Smt. Rampyari and they are doing the business of electric goods at Sri Ganganagar and is located in the same premises. Shri N. R. Vyas, respondent No. 3 while posted as Assistant Commercial Taxes Officer, Ward No. 1 of Sri Ganganagar Circle, was the assessing authority in relation to the petitioner under the provisions of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as'the Act of 1954' ). After the transfer of respondent No. 3 as Assistant Commercial Taxes Officer, Anti-Evasion, Bikaner, he ceased to be the assessing authority of the petitioner under the provisions of the Act of 1954. THE respondent No. 3 while posted as Assistant Commercial Taxes Officer, Ward 1, Sri Ganganagar allegedly received information from the Inspectors Commercial Taxes, Sarva Shri K. D. Sharma and Sant Lal that the petitioner was indulging in tax evasion and on the basis of that information on 14. 8. 1986 raided the business premises of the petitioner accompanied by another Assistant Commercial Taxes Officer, Ward II and the above named two Inspectors. Shri Sudarshan Kumar partner of the petitioner firm was available at the shop. Respondent No. 3 enquired from Shri Sudarshan Kumar partner about the account-books of the petitioner firm and he told respondent No. 3 that the account-books were with the Muneem of the firm at his house. THE cash-memos and bills found at the shop were said to have been initialled by the respondent No. 3. Meanwhile Shri Raghuveet another partner of the petitioner firm appeared at the scene and enquiries were also made from him about the account-books of the petitioner. He also informed that the account-books were with the Muneem of the firm at his house. At this moment it is alleged that the Inspector, who was a member of the raiding party informed the respondent No. 3 that the Muneem Girdhari Lal was writing the account-books on the 'duchhati' an apartment in the shop. THE books of the petitioner firm and that of the sister concern M/s. Khanna Electric Corporation were found there which were seized by the respondent No. 3 as he noticed that there was evasion of sales tax. THE respondent No. 3 prepared a common seizure memo of the account-books and the documents found there and furnished a copy of the same to the petitioner. It is alleged that the act of the respondent No. 3 in effecting the seizure was illegal as he had not complied with the provisions required for search and seizure under the Code of Criminal Procedure for conducting the search and seizure as sub-sections (4) and (8) of Section 22 of the Act of 1954 require that those provisions have to be complied with. It is further submitted that since search and seizure was illegal and, therefore, under the first proviso to Section 22 (3) of the Act of 1954 the seizure of the account-books and documents and retaining the same beyond 3 months is bad likewise the further extention if any, granted by the Commissi oner is bad as well because no reasons have been recorded by the Commissioner and the order was not communicated to the petitioner. It is also submitted that the transfer of this case from the regular assessing authority of the petitioner i. e. Assistant Commercial Taxes Officer, Ward 1 Sri Ganganagar to the Assistant Commercial Taxes Officer, Anti Evasion, Bikaner respondent No. 3 under the provisions of Rule 52 (1) of the Rajasthan Sales Tax Rules, 1955 (referred to hereinafter as 'the Rules of 1955') is also bad as the same being in violation of the principles of natural justice, as the petitioner was not afforded a reasonable opportunity of being heard before transfering this case. In this back ground, the demand notices for the years 1985-86 and 1986-87 have been challenged by the petitioner by filing the present writ petition.

(3.) WE have considered the arguments of both the learned counsel in terms of sub-section (2) of Section 22 read with sub-section (4) and sub-section (8) of Section 22 of the Act of 1954. Sub-section (2) of section 22 says that it will be incumbent upon the dealer to keep his business premises, godown, factory, vessel or vehicle etc. open for inspection and examination of the authorities at all reasonable times. Therefore, the concerned authority can always survey and inspect the business premises of a trader and for such inspection and examination there is no prohibition. But sub-ssction (3) says that if an officer or authority has reason to suspect that any dealer is evading payment of tax then he may for reasons to be recorded in writing seize his account books, registers or other documents and shall give the receipt of these seizure. Sub-section (3) further says that such officer who seized those account-books, registers and other documents shall retain those account-books, registers and documents for their examination or for any enquiry or proceedings or for prosecution so long as they are necessary. But a proviso has been added which lays down that such account-books, registers and documents seized shall not be retained beyond a period of 3 mon:hs without a reasoned order passed by the Commissioner in this behalf. This period of 3 months has now by a subsequent amcndment has been extended to 6 months. Be that, as it may, the legislature has put a rider on the power of the authorities that they will not retain the account-books, registers or documents seized beyond a period of 3 months and if it is required beyond the period of 3 months, then the higher authority i. e. Commissioner, Commercial Taxes, Rajasthan can extend the period for retention after recording the reasons thereof. Sub-section (4) of Section 22 of the Act of 1954 lays down that for the purposes of sub-sections (2) and (3) the concerned authority shall have the 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 such authority has reason to believe that the dealer keeps account-books, registers or other documents pertaining to his business and also to search the body of any other person where it has reason to suspect that he may have to his personal possession any such goods, books of accounts, registers or documents. Sub-section (8) says that the provisions of the Code of Criminal Procedure relating to searches shall apply so far as to such searches done under sub-section (4) of Section 22 of the Act of 1954. That means that the provisions of the Code of Criminal Procedure will be applicable to the searches made/done under sub-section (4) of Section 22 of the Act of 1954. But it will not be applicable to the provisions of sub-section (2) of Section 22. Subsection (2) lays down that the authorities will have a right to enter into the business premises of the trader for survey and inspection at all reasonable times The moment they start search then that action will be covered by the provisions of sub-section (3) of Section 22 though initially it may be with an intention to enter the premises for survey and inspection. But the moment they apprehend that there is evidence of evasion of sales tax then from that stage onwards the enquiry turns into a search and the authorities will collect the incriminating documents, the moment that stage starts the provisions of sub-sec. (3) come into play then for such search/seizure the provisions of the Criminal Procedure Code will have to be complied with and search can proceed thereafter. Therefore, there is a distinction between survey and inspection on the one hand and search and seizure on the other hand. Sub-sec. (4) only enables the authorities to enter into the business premises and search at all reasonable times any office, shop, godown. vessel and 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 for the time being keeping any goods, account books, registers & other documents. Nonetheless the moment the authorities start making exhaustive enquiry and collecting the incriminating material that amounts to search and for that the provisions of the Code of Criminal Procedure have to be complied with.