2018 (1) TMI 818 - HC - VAT and Sales Tax

Jurisdiction - power of of delegation of Special Commissioner to appoint officers - Form DVAT-50 - principles of sub-delegation - consequences for wrongful doings on the part of delegated officers Held that - Section 68 of the Act deals with the power of the Commissioner to delegate any of his powers under the Act to any Value Added Tax Authorities. Sub-section (2) is relevant, for it relates to delegation of power under Chapter-X, and states that the delegate shall carry and produce on demand evidence in the prescribed proforma while exercising the power. Sub-section (3) states that where the Commissioner has delegated power to a Value Added Tax authority, he may supervise, review and rectify any decision made or action taken by that authority. Object and purpose behind this provision has been elucidated and explained below. The power of delegation given under Section 68 is of importance, for the enactment i.e. the Act invariably uses the expression the Commissioner and does not define and prescribe functions and powers inter-se the Value Added Tax authorities. This is left to the Commissioner, who in exercise of power under Section 68 can delegate and prescribe functions, powers and jurisdiction to the Value Added Tax authorities. This power is exercised by means of notification(s) issued by the Commissioner - This authority of delegation of power and functions is vested with the Commissioner subject to restrictions and conditions as may be prescribed. These restrictions and conditions can be prescribed by Rules. Chapter-X, as noted above, deals with audit, investigation and enforcement and the chapter conferring powers requires that the delegate shall carry and produce on demand evidence in the prescribed form while exercising powers delegated to him by the Commissioner. The Commissioner has, by notification / order of empowerment dated 23rd March, 2016, conferred the said power upon Special Commissioner. Thus the Special Commissioners are authorized to issue an authorization in DVAT -50. The authorization in Form DVAT-50 would authorize the person named with their rank to conduct survey/investigation or search. Authorized officers should not be below the rank of Value Added Tax Officer for operations under Section 60(1) and (2) of the Act. There is a difference between issue of authorization and officers who are authorized to conduct survey/ investigation or search. The contention of the petitioner, if accepted, would warrant accepting the position that the Special Commissioner must himself undertake the search and seizure. The power to authorize survey/ investigation or search is different and distinct from the power exercised by the officers so authorized and who actually undertake the search and survey. - Decided against the assessee. Lapses and failures on the part of authorities - Held that - in the present case only inspection of records, i.e. books of accounts, etc. and the goods was undertaken under Section 59 and sub-section (1) to Section 60 of the Act. As per the respondents, this is not a case in which search and seizure operations were undertaken under sub-section (2) to Section 60. Having held so, we would observe that certain lapses and failures on the part of authorities are apparent. - If the contention and the pleas of the petitioner are rejected, they can be burdened with tax, interest and penalty. However, there is no provision in the Act under which the authorities can be burdened with any penalty or costs for the wrongs committed by them in violation of the provisions of the Act. - we are inclined to impose penalty in form of costs of ₹ 50,000/- on the respondents. - petition disposed off.

Issues Involved:
1. Violation of Section 68(2) read with Rule 65 of the Delhi Value Added Tax Rules, 2005 (Rules).
2. Violation of the order of the Commissioner dated 12th November, 2013.
3. Validity of the order of empowerment dated 23rd March, 2016.
4. Compliance with Section 100(4) and (5) of the Code of Criminal Procedure, 1973.
5. Seizure of various records without giving a receipt or preparing a panchnama.
6. Conduct of survey and seizure operations beyond reasonable hours.

Detailed Analysis:

1. Violation of Section 68(2) read with Rule 65 of the Delhi Value Added Tax Rules, 2005:
The petitioner argued that the officers conducting the search did not carry Form DVAT-50, as mandated by Section 68(2) read with Rule 65. The respondents countered that only an "Investigation" under Sections 59 and 60(1) was conducted based on authorization under DVAT-50 dated 27th May, 2016, issued by the Special Commissioner. The court found this contention to be a disputed fact but accepted the respondents' version due to the presence of Form DVAT-50 on record.

2. Violation of the Order of the Commissioner Dated 12th November, 2013:
The petitioner claimed that the operations were conducted by non-jurisdictional officers, contrary to the Commissioner’s order. The court noted that the empowerment order dated 23rd March, 2016, overrides the order dated 12th November, 2013, and allows the Special Commissioner to authorize officers for operations under Chapter X of the Act. However, the court observed that the authorization should comply with Rule 48, which mandates that officers conducting operations under Section 60(1) and (2) must not be below the rank of Value Added Tax Officer.

3. Validity of the Order of Empowerment Dated 23rd March, 2016:
The petitioner challenged the validity of the empowerment order, arguing that the Commissioner cannot delegate this power to the Special Commissioner. The court upheld the empowerment order, stating that the statute allows for such delegation. The court emphasized that the power to authorize survey/investigation or search is distinct from the power exercised by the officers conducting the search.

4. Compliance with Section 100(4) and (5) of the Code of Criminal Procedure, 1973:
The petitioner contended that no panchnama was prepared, and no independent witnesses were joined during the search and seizure operations, violating Section 100(4) and (5) of the Code. The respondents denied conducting a search and seizure under Section 60(2) and thus argued that Section 100 of the Code was not applicable. The court found that the respondents had indeed seized records without preparing a panchnama and without witnesses, which was impermissible under Sections 59 and 60(1) of the Act.

5. Seizure of Various Records Without Giving a Receipt or Preparing a Panchnama:
The petitioner alleged that records were seized without any receipt or panchnama. The respondents initially denied this but later admitted, based on CCTV footage, that records were taken from the premises. The court criticized the respondents for not preparing a panchnama and for not involving witnesses, which was beyond the scope of their powers under Sections 59 and 60(1).

6. Conduct of Survey and Seizure Operations Beyond Reasonable Hours:
The petitioner argued that the operations were conducted from 5.30 PM on 27th May, 2016, to 3.30 AM on 28th May, 2016, which was unreasonable. The court agreed, noting that the inspection should have been conducted at reasonable hours and not extended into the night.

Conclusion:
The court upheld the empowerment order dated 23rd March, 2016, but found several lapses in the conduct of the search and seizure operations. These included authorization of officers below the rank of Value Added Tax Officer, conducting operations beyond reasonable hours, and seizing records without proper documentation and witnesses. The court imposed a penalty of ?50,000 on the respondents, payable partly to the petitioner and partly to the Delhi State Legal Services Authority, to ensure such lapses do not recur. The writ petition was disposed of with these observations.

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