2011 (3) TMI 1510 - HC - VAT and Sales Tax

Whether the seizure made under section 44(3) of the AGST Act doesn t fulfil the requirement of section 44(3) of the AGST Act? Held that - In this case, the seizure order merely reproduces the language of subsection (3) of section 44 of the AGST Act, but does not record any objective reason for ordering the seizure. The necessity of recording reason is impor tant as in that event, another authority can scrutinize as to whether the reasons are based on objective consideration. But in the present case reasons are conspicuous by their absence and supplementary reason(s) sought to be projected by the learned counsel for the Revenue, can t satisfy the legal requirement of recording reason(s), prior to making of the seizure. Thus it is held that the seizure made under section 44(3) of the AGST Act doesn t fulfil the requirement of section 44(3) of the AGST Act and accordingly the impugned action can t be sustained and the same are quashed. The consequential assessment made on the basis of the said seizure is also interfered with. Appeal allowed.

Summary

Issues:
Challenge to notice under section 44(1) of the Assam General Sales Tax Act, 1993 and seizure list under sub-section (3) of section 44 of the AGST Act.

Analysis:
The petitioners contested a notice dated May 15, 2004, issued by the Inspector of Taxes under section 44(1) of the Assam General Sales Tax Act, 1993, and a seizure list of the same date under sub-section (3) of section 44 of the AGST Act. The petitioners, involved in the manufacture and sale of tyres, contended that the transactions in question were exempt from sales tax under the Assam General Sales Tax Act or the Central Sales Tax Act, as the supplies were made to a foreign country. The petitioners argued that the seizure power exercised was illegal and lacked jurisdiction as the seizure notice did not contain any recorded reasons for suspicion, as required by section 44(3) of the AGST Act.

The Revenue authorities, without filing a counter-affidavit, justified the seizure by stating that they suspected tax evasion and that the dealer failed to provide evidence of the destination of the tyre consignment in a foreign country. They argued that the transactions were believed to be inter-State sales, justifying the State sales tax authorities' actions. Additionally, they highlighted a notification delegating the Commissioner's power under section 44 of the AGST Act to the Inspector of Tax attached to the Bureau of Investigation (Economic Offences), Guwahati, to justify the seizure.

The court emphasized that for a seizure under section 44(3) of the AGST Act, the officer must have reasons to suspect tax evasion and must record such reasons in writing before seizing any accounts, registers, or documents. Referring to a previous judgment, the court reiterated that objective reasons must be recorded before seizure, as mere reproduction of statutory provisions is insufficient. The court cited a Supreme Court decision, emphasizing the importance of recording reasons before seizing accounts. Consequently, the court held that the seizure in question did not meet the legal requirement of section 44(3) of the AGST Act and quashed the action along with the consequential assessment based on the seizure.

In conclusion, the court allowed the petition without imposing any costs, ruling that the seizure made under section 44(3) of the AGST Act did not comply with the statutory requirements, leading to the quashing of the action and interference with the consequential assessment.