2013 (6) TMI 671 - HC - VAT and Sales Tax

Retention of documents - How long can the accounts, registers, records or other documents seized under the provisions of the Kerala Value Added Tax Act, 2003 be retained by the officer seizing them - held that - The documents in the instant case (numbering about 23) including purchase bills, stock register, retail invoices, etc., were seized from the business premises of the petitioner under exhibit P3 receipt dated November 10, 2011. The petitioner is a registered dealer under the Act engaged in the business of gold jewellery with the trade name Malabar Gold and the business premises was its branch at Pathanamthitta. The intelligence squad of the Department of Commercial Taxes also took physical stock of the jewellery available in the premises and prepared exhibit P2 shop inspection report on the same day. - more than 18 months (540 days) have now expired after the seizure of the documents and its retention by the Intelligence Officer without any demonstrable reason. It is however fairly conceded by Mr. V. V. Asokan, Advocate on behalf of the petitioner, that a notice dated March 7, 2013 under section 67(1) of the Act proposing to impose a penalty has been received. But the proceedings for the imposition of penalty under sections 67, 68, 69 and 70 of the Act are altogether different from prosecution covered by sections 71, 72 and 73 of the Act. I cannot therefore agree with the contention of Mr. Shaij Raj. T.K., Government Pleader on behalf of the respondents, that proceedings for penalty tantamount to proceedings for prosecution. - Decided in favour of assessee.

Summary

Issues:
1. Duration of retention of seized documents under the Kerala Value Added Tax Act, 2003.

Analysis:
The judgment by Justice V. Chitambaresh of the Kerala High Court delves into the issue of how long accounts, registers, records, or other documents seized under the Kerala Value Added Tax Act, 2003 can be retained. Section 44(6) of the Act stipulates that such seized documents cannot be retained beyond 180 days from the date of seizure without the permission of the next higher authority, unless they are required for prosecution under the Act. The officer seizing the documents must decide within the 180-day period whether prosecution is necessary and justify the retention of the documents. Without a definite decision on prosecution within this timeframe, the seized documents should be returned to the dealer. The judgment emphasizes the importance of not unduly keeping the dealer in suspense regarding the seized documents, highlighting the practical difficulties faced by the dealer in conducting day-to-day business without access to these essential records.

The judgment draws support from previous decisions interpreting similar provisions in the Kerala General Sales Tax Act, 1963. Notably, the judgment references three key decisions that underscore the necessity of promptly returning seized documents to the dealer if prosecution proceedings are not initiated within the specified timeframe. Justice P.A. Mohammed's observations in one of the decisions stress the dealer's right to access their seized documents for ongoing business operations and caution against prolonged retention without a decision on prosecution. The judgment reiterates the need for timely action by the authorities to avoid undue restrictions on the dealer's rights.

In the specific case before the court, approximately 23 documents, including purchase bills and stock registers, were seized from a gold jewelry business premises. The dealer, a registered entity under the Act, made repeated requests for the return of the documents well beyond the 180-day retention period. The Intelligence Officer responsible for retaining the documents failed to provide clear reasons for the prolonged retention, merely stating that they were needed for potential prosecution proceedings without substantiating this claim. The court noted the lack of details regarding any prosecution initiated within the stipulated timeframe and highlighted the absence of concrete information on the alleged prosecution proceedings mentioned in the counter-affidavit.

Ultimately, the court ruled in favor of the petitioner, directing the Intelligence Officer to return the seized documents promptly. The judgment emphasized the importance of adhering to the statutory timelines for retaining seized documents and underscored the dealer's right to access their records for legitimate business purposes. The court's decision to issue a writ of mandamus for the return of the documents within a specified timeframe reflects the imperative of upholding procedural fairness and preventing unjustified delays in the handling of seized materials.