2016 (8) TMI 301 - HC - VAT and Sales Tax

Business of transportation of goods of dealers survey sealing of premises - seizure production of documents application for de-sealing of premises re-sealing - writ-petition. - It was pointed out that the Petitioner is a transporter and not a dealer. The Petitioner stated that the goods lying at its premises are value added tax (VAT) paid goods and traceable to bona fide dealers registered under the DVAT Act. Regarding the issue of sealing - Held that - Mere non-production of documents or books of accounts cannot justify the sealing of the premises under Section 60 (2) of the DVAT Act. Hence, the sealing of the premises of the Petitioner on 2nd July 2016 was illegal. Regarding the issue of re-sealing Held that - The premises appear to have been re-sealed only because the DT&T needed the Petitioner to produce relevant documents without specifying what relevant documents were required. This was not a valid reason for re-sealing the premises. In any event, the reasons for re- sealing, consistent with the requirements of Section 60 (2) of the DVAT Act, had to be found in the form of a note in the file by the Commissioner or his authorised delegate. There is no such note. Hence, the re-sealing was illegal. There has been a wilful violation of the statutory provisions by the officers concerned. They have acted not only in ignorance of the law but in violation of the statutory requirements disciplinary action against officers after opportunity of personal hearing should be taken rights of petitioner reserved respondent to pay petitioner damage charges writ petition disposed off decided in favor of assesse.

Issues Involved:
1. Legality of the initial sealing of the Petitioner’s premises on 2nd July 2016.
2. Legality of the re-sealing of the Petitioner’s premises on 11th July 2016.
3. Compliance with the statutory requirements under Sections 59 and 60 of the DVAT Act.
4. Responsibility and conduct of the officials involved in the sealing actions.
5. Remedies and costs awarded to the Petitioner.

Issue-wise Detailed Analysis:

1. Legality of the Initial Sealing of the Petitioner’s Premises on 2nd July 2016:
The Petitioner, a transporter, had its premises sealed by the Assistant Commissioner (AC) on 2nd July 2016. The court found that the sealing was conducted without issuing a prior notice under Section 59 of the DVAT Act, which mandates the production of records. The AC candidly admitted that no such notice was issued before the sealing. Consequently, the sealing notice under Section 60 of the DVAT Act was deemed "plainly illegal, arbitrary and without the authority of law." The court emphasized that Section 60 requires the Commissioner to have "reasonable grounds to believe" that tax evasion or concealment is occurring, which was not demonstrated in this case.

2. Legality of the Re-sealing of the Petitioner’s Premises on 11th July 2016:
The premises were de-sealed for a few hours on 11th July 2016, during which an inventory was taken, and documents were seized. However, the premises were re-sealed the same day. The court found that the re-sealing was also illegal as it was based on the same flawed order dated 2nd July 2016. The court noted that the re-sealing was not justified by any new note or evidence as required under Section 60(2) of the DVAT Act, making the action "wholly without the authority of law."

3. Compliance with the Statutory Requirements under Sections 59 and 60 of the DVAT Act:
The court highlighted that the actions taken under Sections 59 and 60 of the DVAT Act must be based on concrete information and reasonable grounds. The court referred to previous judgments, including Shree Ashtvinayak Gems & Stone Pvt. Ltd. v. Commissioner, Trade and Taxes, Delhi, which stressed that the powers under Section 60 should not be mechanically exercised. The court reiterated that mere non-production of documents does not justify sealing under Section 60(2) and that each coercive action must be preceded by a proper justification recorded in the file.

4. Responsibility and Conduct of the Officials Involved in the Sealing Actions:
The court criticized the officials, particularly Mr. P.R. Meena, Spl. Commissioner, for issuing a blanket order authorizing sealing without distinguishing between an inspection under Section 60(1) and sealing under Section 60(2). The court directed the Commissioner, VAT, to call for explanations from Mr. Meena and the team of officers involved, and to consider disciplinary action for dereliction of duty and violation of the law. The Commissioner, VAT, was instructed to file an affidavit of compliance within four weeks.

5. Remedies and Costs Awarded to the Petitioner:
The court directed the immediate de-sealing of the Petitioner’s premises and ordered the return of the seized documents. The court awarded costs of ?20,000 to the Petitioner, to be paid by the Respondent within two weeks. The court also reserved the Petitioner’s right to seek further remedies for the loss, hardship, and prejudice suffered due to the illegal actions.

Conclusion:
The court found both the initial sealing on 2nd July 2016 and the re-sealing on 11th July 2016 to be illegal. The actions were taken without proper authorization and in violation of the statutory requirements under the DVAT Act. The court ordered the de-sealing of the premises, the return of seized documents, and awarded costs to the Petitioner. The officials involved were directed to provide explanations, and the Commissioner, VAT, was tasked with considering disciplinary actions.

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