2019 (11) TMI 1586 - HC - VAT and Sales Tax

Review of order - alleged unauthorised audit conducted at the petitioners' business - usage of illegally seized documents - Search proceedings - HELD THAT - In the case of The Joint Commercial Tax Officer, Central Intelligence Wing, Board of Revenue (C.T.) Madras vs. Purushotham Rungta, 1976 (2) TMI 171 - MADRAS HIGH COURT a Division Bench of this Court considered the usage of illegally seized documents ordering them to be returned and permitting photostat copies to be retained in a sealed cover pending further directions. Referring to the provisions of the Evidence Act, the Court states that there is nothing contained therein which inhibits the use of illegally seized documents. The prohibition sought for cannot be granted - Petition dismissed.

Summary

Issues:
- Challenge to audit conducted by Commercial Tax Officer
- Validity of assessment/re-assessment based on unauthorized audit
- Application of legal principles in using materials obtained through illegal audit
- Jurisdiction of assessing authority in framing assessment based on such materials
- Use of illegally seized documents in assessment process
- Authority to issue show-cause notice and jurisdiction of the officer
- Time-barred show-cause notice

Analysis:

1. The petitioner sought a writ of prohibition against the Commercial Tax Officer from formulating any proposal for assessment/re-assessment based on an alleged unauthorized audit. The audit was deemed illegal and contrary to the provisions of the Tamil Nadu Value Added Tax Act 2006. Reference was made to a Division Bench decision upholding the quashing of an audit due to bad authorization approval, leading to orders based on such approval being considered bad in law. However, both parties agreed that the Assessing Authority's powers remain unfettered even if the audit was invalid.

2. Legal principles were cited from the Supreme Court and Delhi High Court regarding the use of materials obtained through illegal means in assessments. The Supreme Court's stance was that material seized, even if in contravention of the law, could still be used subject to legal provisions. The Delhi High Court emphasized that the admissibility of documents in assessments is based on relevance, not the manner of procurement. The judgment highlighted that in India, unlike the US, the rule of inadmissibility of illegally sourced material does not apply.

3. The issue of jurisdiction arose concerning the authority to issue a show-cause notice and the jurisdiction of the officer. The court clarified that the rank of the official issuing the notice as a Principal Commissioner under the Central Excise Act, 1944, is sufficient authority. The argument of lack of authority or jurisdiction was dismissed. Regarding the time-barred show-cause notice, the court deemed it premature for examination and left it to the concerned authority to decide based on facts, considering it a mixed question of fact and law.

4. The judgment also addressed the usage of illegally seized documents in assessments. A Division Bench decision allowed photostat copies of illegally seized documents to be retained for assessment purposes, emphasizing that the admissibility of such documents depends on relevance, not the legality of their seizure. The court referred to the provisions of the Evidence Act and previous cases to support the permissibility of using such documents in assessments.

5. In conclusion, the court dismissed the writ petition seeking prohibition based on established legal principles discussed in the judgment. The petitioner was granted liberty to challenge any assessment orders passed by the Revenue in accordance with the law. No costs were awarded, and connected miscellaneous petitions were closed.