1996 (10) TMI 462 - AT - VAT and Sales Tax

Issues Involved:
1. Legality of simultaneous search and seizures at the applicant's business and residence.
2. Compliance with Section 66 of the West Bengal Sales Tax Act, 1994.
3. Compliance with Rule 207(1) of the West Bengal Sales Tax Rules, 1995 and Section 100(4) of the Criminal Procedure Code, 1973.
4. Validity of the entry and search at the applicant's business and residence.
5. Requirement of recording reasons prior to search and seizure.
6. Requirement of independent and local witnesses for the search and seizure.
7. Communication of seizure reports and recorded reasons to the applicant.

Issue-wise Detailed Analysis:

1. Legality of Simultaneous Search and Seizures:
The applicant challenged the legality of simultaneous searches and seizures at his business and residence on December 11, 1995. The respondents acted under the West Bengal Sales Tax Act, 1994, and the West Bengal Sales Tax Rules, 1995. The applicant alleged that the searches were indiscriminate and that personal papers were seized without examination.

2. Compliance with Section 66 of the West Bengal Sales Tax Act, 1994:
The applicant argued that no report was drawn prior to the seizures, violating Section 66 of the 1994 Act, which requires recording reasons to suspect tax evasion. The Tribunal found that sufficient reasons for suspecting tax evasion were recorded prior to the seizures at both the business and residence. The respondents had acted lawfully as the reports were drawn before the seizures, and the applicant's inability to explain discrepancies justified the suspicion.

3. Compliance with Rule 207(1) of the West Bengal Sales Tax Rules, 1995 and Section 100(4) of the Criminal Procedure Code, 1973:
The applicant contended that the searches and seizures did not comply with Rule 207(1) and Section 100(4) of the Criminal Procedure Code, which require two or more independent and respectable witnesses. The Tribunal held that the provisions were not mandatory and that one witness was sufficient. The witnesses, though employees of the applicant, were considered independent and of the locality for the purpose of the seizure.

4. Validity of the Entry and Search at the Applicant's Business and Residence:
The Tribunal distinguished between the provisions for inspection, seizure, entry, and search under Sections 65, 66, and 67 of the 1994 Act. The entry and search at the business premises were found valid as the power to enter and search was unfettered under Section 67(1)(a). However, the entry and search at the residence were invalid as there was no prior reason to believe, based on information, that the applicant was keeping business records there.

5. Requirement of Recording Reasons Prior to Search and Seizure:
The Tribunal emphasized that reasons for suspecting tax evasion must be recorded in writing prior to seizure under Section 66. In the case of the residence, no such reasons were recorded before the search, making the entry and search invalid. The report drawn after the search could not legitimize the search.

6. Requirement of Independent and Local Witnesses for the Search and Seizure:
The Tribunal found that the presence of only one witness in each case, who were employees of the applicant, did not vitiate the validity of the seizures. The witnesses were considered independent and of the locality for the purpose of the seizure, even though they did not reside in the same locality.

7. Communication of Seizure Reports and Recorded Reasons to the Applicant:
The applicant argued that the seizures were invalid as the recorded reasons were not communicated to him. The Tribunal held that there was no statutory requirement to communicate the recorded reasons or provide a copy of the seizure report. The seizure was effective as soon as the reasons were recorded in writing and a seizure receipt was granted.

Separate Judgments:
The Tribunal delivered a majority judgment, with the Technical Member's draft judgment partially dissenting. The majority upheld the validity of the seizure at the business premises but declared the search and seizure at the residence invalid. The Technical Member, however, found both seizures valid. The final order dismissed the application, vacated interim orders, and did not award costs.

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