2008 (9) TMI 915 - HC - VAT and Sales Tax

Retention of the seized documents beyond the period prescribed - Held that - When the Legislature has used the word approval in section 44(3) and the words prior approval finds mention in other provisions of the Sales Tax Act, i.e., section 28, it will not be correct on the part of the court to understand the approval contemplated by section 44(3) to be prior approval . The use of the expression prior approval of the Commissioner for retention of the seized books of accounts documents, etc., in the proviso to section 74(3)(b) of the Assam Value Added Tax Act, 2003, is a further pointer to the legislative intent. Thus it cannot be held that the approval granted by the Commissioner by his order dated February 11, 2003, though after expiry of 120 days, is invalid in law to make the retention of the seized documents by the respondent illegal. In so far as challenge to the notice dated November 8, 2002 is concerned, there is hardly any basis for the court to hold that the said notice as well as the proceedings contemplated are in any way contrary to the provisions of the Sales Tax Act. If the seized documents have been retained by the authority legally and lawfully, as has been already held by the court, the position emanating from such seized documents need not have been furnished to the petitioner along with the notice dated November 8, 2002. Any such action demanded by the petitioner would be to virtually nullify the seizure and retention of the documents belonging to the petitioner. The petitioner would be entitled to the said verification report as well as the seized documents only once he produced the books of accounts, as required to do by the notice dated November 8, 2002. W.P. dismissed.

Summary

Issues Involved:
1. Legality of the seizure of documents under Section 44(3) of the Assam General Sales Tax Act, 1993.
2. Retention of seized documents beyond the period prescribed by the proviso to Section 44(3) of the Sales Tax Act.
3. Validity of the notice dated November 8, 2001, requiring the petitioner to appear and produce relevant books of accounts.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Documents:
The petitioner, a sole proprietor of M/s. Eastern Drugs and Chemicals, challenged the seizure of documents under Section 44(3) of the Assam General Sales Tax Act, 1993. The petitioner argued that the seizure was not based on the requisite satisfaction of the seizing authority as mandated by the Act. The respondents countered that the inspection on July 31, 2001, led to the discovery of incriminating documents, which were seized under Section 44(3) of the Act due to insufficient explanation by the petitioner's employees. The court noted that the seizure followed an inspection under Section 44(1) and not a search operation, thus not requiring compliance with the Code of Criminal Procedure.

2. Retention of Seized Documents Beyond 120 Days:
The petitioner contended that retention of the seized documents beyond 120 days without recording reasons and obtaining the Commissioner's approval was illegal. The respondents submitted that the approval for retention beyond 120 days was granted by the Commissioner on February 11, 2002, after the expiry of 120 days. The court examined Section 44(3) of the Sales Tax Act and Section 132(8) of the Income-tax Act, noting the absence of a negative covenant in the Sales Tax Act. The court referenced the Supreme Court's interpretation in Life Insurance Corporation of India v. Escorts Ltd., emphasizing that subsequent approval could validate prior actions. The court concluded that the approval granted on February 11, 2002, though post-expiry of 120 days, was valid and did not render the retention illegal.

3. Validity of the Notice Dated November 8, 2001:
The petitioner challenged the notice requiring him to appear and produce relevant books of accounts. The respondents argued that the books should have been prepared before the seizure date (July 31, 2001) and returning the documents would allow the petitioner to rectify anomalies. The court found no basis to hold the notice and subsequent proceedings contrary to the Sales Tax Act. The preliminary verification report on tax evasion was based on the seized documents, which were lawfully retained. The court held that the petitioner was not entitled to the verification report or seized documents until he complied with the notice.

Conclusion:
The court dismissed the writ petition, finding it without merit and substance. The seizure and retention of documents were deemed lawful, and the notice dated November 8, 2001, was upheld. The interim order dated January 23, 2002, was vacated, and parties were directed to bear their own costs.