2013 (2) TMI 160 - HC - Service Tax

Search warrant - search and seizure - violation of the laws relating to the payment of service tax - assessee contested against jurisdiction of Coimbatore commissionerate for issuing warrant - Held that - The authority concerned, who issues the warrant for search and seizure, ought to have the necessary materials before him to have a reason to believe that an order for search and seizure is warranted. However, it is clear that if certain materials are available before the authority concerned to arrive at his conclusion, then it is not for this Court to examine as to whether there were sufficient materials or grounds to arrive at such a conclusion. Further, this court cannot go into the question as to whether the materials available before the authority concerned were adequate to prompt him to believe that a search was necessary. There is no doubt that the satisfaction of the authority concerned is a subjective satisfaction. Therefore, this Court could only see whether the satisfaction of the authority is due to mala fide reasons or based on extraneous factors or mere rumours. If there are some materials available for a reasonable and prudent man to believe that a search is warranted, then it is not for this Court to delve deeper into the subtle and complex intricacies involved in the process of the formation of the opinion in the mind of the authority concerned. However, in the present case before this Court, the respondents have been in a position to show that certain transactions relating to the services rendered by the petitioner companies have taken place within the jurisdiction of the Coimbatore Commissionerate. It is found that the acceptance of certain contractual obligations, billing, accounting and other such processes had further place within the jurisdiction of the Coimbatore Commissionerate. Based on the bona fide belief that certain transactions were being made through the offices of the petitioner companies at Coimbatore, the first respondent had issued to the impugned warrants to search the premises in question. Especially, when the petitioners have not been in a position to show that the respondents had acted in a mala fide manner, this Court is not inclined to accept the contention raised on behalf of the petitioners that the search and seizure operations, conducted by the authorities, of the Coimbatore Commissionerate are arbitrary, illegal and void. Based on the specific directions issued to the respondents, they had placed before this Court the original records, based on which the first respondent had a reason to believe that there was a necessity to issue a warrant to search the premises in question. On a perusal of the said records this Court is inclined to hold that the opinion formed by the first respondent that there was a necessity to issue a warrant of search, in respect of the official premises of the petitioner companies and the residential premises of one of its directors cannot be held to be arbitrary and void, as prayed for by the petitioners, in the present writ petitions. Thus as the petitioners have not been in a position to show that the authority concerned had issued the warrant of search, arbitrarily, without following the procedures established by law or with a mala fide motive this Court is of the considered view that the contentions raised on behalf of the petitioners cannot be countenanced - writ petitions are liable to be dismissed - the petitioners are entitled to the copies of the documents and records seized from the premises in question before further proceedings are initiated against them, by the respondents, pursuant to the search conducted on 1.3.2002.

Issues Involved:
1. Jurisdiction of the Coimbatore Commissionerate to issue search warrants.
2. Validity and legality of the search and seizure operations conducted.
3. Compliance with procedural requirements under Section 82 of the Finance Act, 1994.
4. Allegation of service tax evasion by the petitioners.
5. Entitlement to the return of seized documents and materials.
6. Validity of the payment of Rs. 2 crores during the search.

Detailed Analysis:

1. Jurisdiction of the Coimbatore Commissionerate to Issue Search Warrants:
The petitioners contended that the Coimbatore Commissionerate lacked jurisdiction as they did not render any taxable services within its territory. However, the court found that the petitioners conducted business activities from the premises in Coimbatore, including accounting, banking, and billing. The court held that the mere absence of service tax registration in Coimbatore does not negate the jurisdiction of the Coimbatore Commissionerate. The court emphasized that the jurisdiction is not solely determined by the place of service but also by the location of the office from where business transactions are managed.

2. Validity and Legality of the Search and Seizure Operations Conducted:
The petitioners argued that the searches were arbitrary and illegal due to lack of jurisdiction and procedural lapses. The court noted that the first respondent had sufficient materials and reasons to believe that documents relevant to the investigation were secreted in the premises. The court held that the first respondent was justified in issuing the search warrants under Section 82 of the Finance Act, 1994, and that the searches conducted were legal and valid.

3. Compliance with Procedural Requirements Under Section 82 of the Finance Act, 1994:
The petitioners claimed that the search warrants were issued without proper authorization and that the searches were conducted without following due procedures. The court found that the first respondent, being a higher authority, had the power to issue search warrants and that there was no specific prohibition against such action. The court also noted that there is no mandatory requirement to provide copies of search warrants to the petitioners before conducting the search.

4. Allegation of Service Tax Evasion by the Petitioners:
The respondents alleged large-scale service tax evasion by the petitioners, amounting to several crores of rupees. The court observed that there were materials available to the respondents indicating tax evasion, and the belief that documents were secreted in the premises was based on credible information. The court held that the search and seizure were justified and necessary for the investigation of the alleged tax evasion.

5. Entitlement to the Return of Seized Documents and Materials:
The petitioners demanded the return of seized documents and materials, arguing that the searches were illegal. The court dismissed this claim, stating that the searches were conducted legally and that the seized materials were necessary for the investigation. However, the court directed that the petitioners be provided with copies of the seized documents and records before further proceedings are initiated.

6. Validity of the Payment of Rs. 2 Crores During the Search:
The petitioners claimed that the payment of Rs. 2 crores during the search was made under coercion. The court found that the payment was made voluntarily, corroborated by the statements made by the petitioners' representatives. The court held that the payment was valid and not made under duress.

Conclusion:
The court dismissed the writ petitions, upholding the legality and validity of the search and seizure operations conducted by the Coimbatore Commissionerate. The court found that the first respondent had the necessary jurisdiction and sufficient materials to issue the search warrants. The petitioners were directed to be provided with copies of the seized documents and records before further proceedings. The court emphasized the importance of investigating large-scale tax evasion and upheld the actions taken by the respondents in this regard.

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