2008 (4) TMI 687 - HC - VAT and Sales Tax

Seizure of goods in exercise of powers under section 74 Assam Value Added Tax Act, 2003 - Held that - In the present case, the seizure was, admittedly, made on February 6, 2008. A period of more than two months has already elapsed since then. It is also the respondents case that they have had been carrying on a process of verification for the purpose of determining as to what, if any, income of the petitioner-company has escaped assessment due to either incorrect accounting of the goods or due to incorrect maintenance of the account books. In either case, therefore, verification process or the enquiry, which was initiated, needs to be brought to an expeditious end, for, this process of verification or enquiry cannot be kept indefinitely pending. Ends of justice, therefore, demand that appropriate directions be issued to the respondents to deal with the matter in such a manner as would uphold the legislative intent embodied in section 74(5). With the above object in view, the respondents are hereby directed to complete, if they have not already completed, the process of verification or enquiry, within a period of one week from today, and, upon completion of such verification or enquiry, respondents shall permit the petitioner to obtain release of the seized goods in terms of the provisions contained in section 74(5) and other provisions relevant thereto or connected therewith.

Summary

Issues Involved:
1. Legality of the notice issued under section 74(1) of the Assam Value Added Tax Act, 2003.
2. Legality of the seizure of books of account, registers, and other documents.
3. Legality of the seizure of goods.
4. Availability and effect of alternative remedy under section 82 of the Act.
5. Whether the petitioners suppressed material facts.
6. Whether the writ petition is maintainable despite the availability of an alternative remedy.

Issue-wise Analysis:

1. Legality of the Notice Issued Under Section 74(1):
The court noted that the notice dated February 6, 2008, demanding the production of the cash book, register, etc., was not specifically contested by the petitioners. It was acknowledged that respondent No. 4 had the authority to demand such documents under section 74(1) of the Act. Therefore, the notice for production of documents was deemed to be within jurisdiction and legal.

2. Legality of the Seizure of Books of Account, Registers, and Other Documents:
The petitioners argued that the seizure under section 74(3)(a) was invalid as there was no material evidence suggesting tax evasion. The court examined the conditions under section 74(3)(a), which require the authority to have "reason to believe" that the dealer has evaded or is attempting to evade tax. The court found that the grounds for seizure indicated misclassification of goods, which justified the belief of tax evasion. Thus, the seizure of books of account and other documents was held to be within jurisdiction and lawful.

3. Legality of the Seizure of Goods:
The petitioners contended that the seizure of goods under section 74(5)(a)(ii) was illegal as the goods were accounted for in their records. The court noted that the seizure list indicated discrepancies between the stock of goods and the invoices produced, suggesting that the goods were not properly accounted for. Therefore, the conditions precedent for seizure under section 74(5)(a)(ii) were satisfied, making the seizure of goods lawful.

4. Availability and Effect of Alternative Remedy Under Section 82:
The respondents argued that the petitioners had an alternative remedy under section 82 for revision against the seizure, making the writ petition non-maintainable. The court emphasized that while alternative remedies exist, they do not create an absolute bar to the exercise of writ jurisdiction under article 226, especially when the state action is arbitrary or without authority of law.

5. Whether the Petitioners Suppressed Material Facts:
The respondents claimed that the petitioners failed to disclose the ongoing assessment proceedings. The court found no suppression of material facts as the petitioners' participation in verification proceedings did not preclude them from seeking writ jurisdiction. The court held that the writ petition did not suffer from suppression of material facts.

6. Whether the Writ Petition is Maintainable Despite the Availability of an Alternative Remedy:
The court reiterated that the existence of an alternative remedy does not bar the High Court from exercising its jurisdiction under article 226, especially when the conditions precedent for the exercise of power are not satisfied. The court cited several precedents to support this view and concluded that the writ petition was maintainable.

Conclusion:
The court found that the seizures of books of account, registers, and goods were within the authority of law and jurisdiction. However, it directed the respondents to complete the verification or enquiry process within one week and allow the petitioners to obtain the release of the seized goods as per the provisions of the Act. The writ petition was disposed of with these directions and no order as to costs.