1965 (2) TMI 86 - HC - VAT and Sales Tax

Issues Involved:
1. Scope and validity of powers of search and seizure under the Madras General Sales Tax Act, 1959.
2. Legislative competency and constitutional validity of Section 41 of the Act.
3. Legality of the search and seizure conducted on 19th August 1964.
4. Validity of the search warrant issued by the Chief Presidency Magistrate.
5. Reasonableness of restrictions under Articles 19(1) and 31(1) of the Constitution.
6. Legality of the orders of confiscation and penalties imposed.

Detailed Analysis:

1. Scope and Validity of Powers of Search and Seizure:
The petitions questioned the scope and validity of the powers of search and seizure under the Madras General Sales Tax Act, 1959, particularly Section 41. The court examined whether Section 41(2) included a power of search and if it did, whether it was with or without a warrant. The main part of Section 41(2) was found to relate to inspection, not search. The court concluded that the term "inspection" did not include the power of search, which involves probing for hidden or concealed items.

2. Legislative Competency and Constitutional Validity:
The court considered whether the powers under Section 41 were within the legislative competency under Entry 54, List II, of the Seventh Schedule to the Constitution. It was held that while preventive and penalty provisions to check evasion are incidental and necessary, a power to search goods in business premises or residential accommodation is not ancillary to the power to tax on the sale of goods. The court found that Section 41(4) providing for the seizure and confiscation of goods was not within the ambit of Entry 54 and was invalid.

3. Legality of the Search and Seizure Conducted on 19th August 1964:
The search and seizure conducted on 19th August 1964, were challenged on the grounds of legality and the manner in which they were conducted. The court noted discrepancies in the facts presented by the Deputy Commissioner and Mr. Mimani. The court did not find it necessary to resolve these discrepancies as the search and seizure were invalidated based on the interpretation of Section 41.

4. Validity of the Search Warrant Issued by the Chief Presidency Magistrate:
The petitioner argued that the search warrant was obtained on fraudulent misrepresentation. The court found that the search warrant was issued for an ulterior purpose, namely to trace a suitcase belonging to Mr. Goenka, which was not related to the petitioner's business as a sales tax assessee. The court quashed the search warrant on these grounds.

5. Reasonableness of Restrictions under Articles 19(1) and 31(1) of the Constitution:
The court examined whether the power of search and seizure under Section 41 constituted a reasonable restriction on the petitioners' rights under Articles 19(1)(f) and (g). It was held that the broad and unrestricted power vested in various officers without sufficient safeguards was not a reasonable restriction. The court found that the provisions of Section 41(2) to (4) were unconstitutional as they offended Articles 19(1)(f) and (g).

6. Legality of the Orders of Confiscation and Penalties Imposed:
The court reviewed the orders of confiscation and penalties imposed on the petitioner, J. Hazarimal & Co., and found that the petitioner was not given a proper and reasonable opportunity to prove that the goods seized were properly accounted for. The court noted that the first respondent mainly proceeded on the basis of purchase vouchers and did not scrutinize the account books produced by the petitioner. The orders of confiscation and penalties were thus invalidated.

Conclusion:
The petitions were allowed, and the documents, things, and goods seized were ordered to be returned to the respective petitioners. The court found that the powers of search and seizure under Section 41 of the Madras General Sales Tax Act, 1959, were invalid and unconstitutional. The search warrant issued by the Chief Presidency Magistrate was quashed, and the orders of confiscation and penalties were set aside.

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