1994 (6) TMI 204 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of inspection and search of business premises.
2. Validity of seizure and retention of documents.
3. Requirement and communication of decision for prosecution.
4. Reasonableness of restrictions imposed under Section 28(6) of the Kerala General Sales Tax Act, 1963.

Issue-wise Detailed Analysis:

1. Validity of Inspection and Search of Business Premises:
The inspection and search of the business premises of M/s. Supreme Hardwares and M/s. A.J. Traders were conducted by officers of the sales tax department under Section 28 of the Kerala General Sales Tax Act, 1963. The search was carried out on December 17, 1993, and documents were seized in the presence of witnesses. The court upheld the legality of the search and seizure, noting that such actions are incidental or ancillary powers of legislation under entry 54 of List II of the Seventh Schedule, intended to check evasion of tax.

2. Validity of Seizure and Retention of Documents:
The court examined whether the documents seized on December 17, 1993, should be returned to the petitioners. Section 28(6) of the Act stipulates that seized documents should not be retained beyond thirty days unless required for prosecution or with permission from the next higher authority. Rule 34(9) of the Kerala General Sales Tax Rules, 1963, mandates the return of seized documents within thirty days unless permission is obtained to retain them for sixty days. The court found that the retention of documents beyond thirty days without initiating prosecution or obtaining necessary permissions is unauthorized and amounts to an unreasonable restriction on the petitioners' right to carry on their business.

3. Requirement and Communication of Decision for Prosecution:
The court emphasized that a decision to prosecute must be taken within thirty days from the date of seizure. This decision must be communicated to the dealer expeditiously, although not necessarily within the thirty-day period. The court referenced the Supreme Court's decision in Commissioner of Income-tax v. Oriental Rubber Works, which held that non-communication of the decision would invalidate further retention of the documents. The court applied this principle, stating that communication of the decision is a reasonable safeguard against executive arbitrariness.

4. Reasonableness of Restrictions Imposed Under Section 28(6):
The court evaluated the reasonableness of the restrictions imposed by Section 28(6) and Rule 34(9). It held that while seizure and retention of documents are reasonable restrictions in the interest of the general public, continued retention without a decision to prosecute or the necessary permissions is unreasonable. The court stated that such restrictions must strike a proper balance between the freedom guaranteed under Article 19(1)(g) of the Constitution and social control permitted by clause (6) of Article 19. The court concluded that the provisions of Section 28(6) and Rule 34(9) contain sufficient safeguards to prevent arbitrary actions by the officers.

Conclusion:
The court declared the continued retention of the documents beyond thirty days without a decision to prosecute or necessary permissions as unauthorized and unreasonable. The respondents were directed to return all seized documents to the petitioners within two weeks, allowing the respondents to take necessary extracts under Rule 34(10). The writ petitions were disposed of accordingly, with no order as to costs.