2014 (8) TMI 409 - HC - VAT and Sales Tax

Sealing order made under Section 60(2) of the Delhi VAT Act, 2004 - Attachment of bank accounts - Despite the lapse of about two weeks, the respondents have not taken any action on the repeated representations for the removal of the seals from the premises - Held that - The power to carry out search of the premises, is conditional upon the existence of reasonable grounds to believe that any person or dealer is attempting to avoid or evade tax. This foundation of opinion would also have to exist whilst exercising the power under Section 60 (2) of the Act and, more particularly sub-clause (f), which empowers the Commissioner or his delegate to seal the premises. Continued sealing of the premises, as in the present case, is arbitrary as it impeaches the normal functioning of any business or commercial enterprise. In the circumstances of the case, the respondents should have visited the premises and taken into custody all the relevant material or books of account as were necessary in their opinion to complete their assessment. Not having done so, the respondent cannot use the power to seal the premises as an indefinite weapon to oppose and threaten an assessee. Respondents are hereby directed to open the seals of the premises within 48 hours. In case they wish to take into custody any books of accounts or other material, it is open for them to do so, in the light of the representation made by the petitioner on 16.05.2014. If any such documents are taken into custody, copies thereof shall be handed over to the petitioner; likewise, an inventory of such material shall be prepared in accordance with the rules.A further direction is issued to ensure that attachment of the petitioners bank accounts are lifted/rescinded, within the same period of 48 hours. - Decided in favour of assessee.

Summary

Issues:
1. Sealing order under Section 60(2) of the Delhi VAT Act, 2004.
2. Attachment of the petitioner's bank account.
3. Delay in responding to representations for de-sealing.
4. Use of power to seal premises in a routine manner.
5. Compliance with legal procedures in sealing premises.

Analysis:
1. The petitioner challenged the sealing order made under Section 60(2) of the Delhi VAT Act, 2004, and the subsequent attachment of its bank account. The Court noted that the petitioner had made representations for de-sealing, contending that the sealing action was oppressive and harsh. The Court emphasized that the power to seal premises should not be used casually and in a routine manner. Reference was made to a previous case where the Court had disapproved of such casual orders. The Court highlighted the necessity of reasonable grounds to believe that tax evasion was being attempted before exercising the power to seal premises. The continued sealing of the premises was deemed arbitrary and disruptive to normal business operations.

2. The Court directed the respondents to open the seals of the premises within 48 hours and take into custody any necessary documents for assessment purposes. If documents were seized, copies were to be provided to the petitioner, and an inventory was to be prepared as per rules. The Court emphasized that the power to seal premises should not be misused as a tool to intimidate or obstruct an assessee. Additionally, the attachment of the petitioner's bank accounts was ordered to be lifted within the same 48-hour period.

3. The Court addressed the delay in responding to the representations for de-sealing, noting that the petitioner had stated that the books of accounts were maintained on a computer and were produced but remained within the sealed premises. The Court criticized the inference drawn from the proprietor's inability to produce complete books of accounts, stating that it should not automatically lead to the assumption of non-existence of such records. The Court highlighted the need for a fair and thorough assessment process before resorting to sealing premises.

4. In conclusion, the Court granted relief to the petitioner by allowing the writ petition in the terms mentioned above. The judgment emphasized the importance of following due process, avoiding arbitrary actions, and ensuring that the power to seal premises is exercised judiciously and in accordance with the law.