2017 (3) TMI 1652 - HC - VAT and Sales Tax

Sealing of Business Premises - non-production of concerned books of account for verification - Section 52(1)(f) of the KVAT Act - Held that - Section 52(1)(f) clearly reveals that a specific power to seal is being granted to the officer authorised by the Commissioner. The said power can be exercised only when the owner or the person-in-charge of the business or any other person-incharge of the business or any other person-in-occupation either leaves the premises or is not available or fails or refuses to open any box or receptacle, godown or building or any part of the godown or building when called upon to do so - The said power cannot be extended ad infinitum to be exercised in the circumstances not prescribed by law. Admittedly, in the present case, at the time of inspection, the petitioner was not only present, but also had cooperated with the inspection. Thus, his presence cannot be denied. Moreover, the Revenue cannot claim that he had refused to open any part of the building, or prevented the CTO to inspect the site. Hence, none of the circumstances mentioned in section 52(1) (f) of the KVAT Act, is satisfied in the present case. Therefore, the CTO was not justified in directing that the premises should be sealed forthwith. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to legality of sealing order by Commercial Tax Officer under KVAT Act, 2003 - Violation of prescribed circumstances for sealing - Ultra vires jurisdiction - Colorable exercise of power - Violation of right to livelihood under Article 21 of the Constitution of India.

Analysis:
The petitioner challenged the sealing order issued by the Commercial Tax Officer (CTO) under the Karnataka Value Added Tax Act, 2003, directing the sealing of the business premises of M/s. Suhail Timber and Plywood. The petitioner contended that the CTO's action was ultra vires as it did not meet the prescribed circumstances for sealing under Section 52(1)(f) of the KVAT Act. The petitioner argued that despite being present and cooperating during the inspection, the CTO sealed the premises without valid grounds, thus violating the law and exercising power colorably.

The petitioner's counsel emphasized that the power to seal a business premise can only be exercised when specific conditions are met as per the KVAT Act. The counsel argued that the CTO's decision to seal the premises lacked legal basis as the petitioner had not left the premises, refused to open any part of the building, or hindered the inspection in any way. This failure to adhere to the statutory requirements rendered the sealing order invalid and beyond the jurisdiction of the CTO.

Furthermore, the petitioner's right to livelihood, protected under Article 21 of the Constitution of India, was highlighted as being infringed by the sealing order. The counsel contended that denying the right to livelihood without following due process violated the law and the constitutional rights of the petitioner. The petitioner's counsel asserted that the impugned order not only contravened the statutory provisions but also violated the fundamental rights guaranteed by the Constitution.

In response, the Revenue's counsel justified the CTO's decision to seal the premises by alleging potential unauthorized selling of timber and non-compliance with reporting requirements. However, the court found the justifications insufficient to warrant the sealing of the premises, especially considering the petitioner's cooperation during the inspection. The court emphasized that the power to seal must be exercised strictly within the confines of the law and cannot be extended beyond the prescribed circumstances.

Ultimately, the High Court allowed the writ petition, setting aside the sealing order dated March 2, 2017. The court directed the immediate unsealing of the business premises owned by the petitioner, emphasizing that the Revenue authorities have the necessary powers to ensure compliance with document production without the need for a court order.