2015 (7) TMI 636 - HC - Service Tax

Forced Recovery of service tax - Search & seizure - Seizure of certain very important business documents - whether the Court should set aside the summons issued in course of the search and seizure being wholly without jurisdiction and in excess of the power prescribed under Section 82 of the Finance Act, 1994 - Held that - The scrutiny of the Writ Court in a challenge to an action for search and seizure is very microscopic and limited and is not meant for roving scrutiny on the satisfaction on reason to believe upon looking the various documents and the information. If the satisfaction has been placed before the Court which may remotely suggest that the same may form the reason to believe , the Writ Court should not embark its journey further to find out whether it amounts to an evasion of the service tax or not. It is an authority before whom the proceeding is pending to take a decision on merit. - According to the petitioner, two cheques covering ₹ 2,00,00,000/- were taken at the time of search and seizure by using force which is impermissible and beyond the authority, power and competence of the authority concerned. Since the petitioner have stated that the authorized representative was compelled to sign on the said letter and issued two cheques covering the said amount, this Court cannot decide whether the same was taken forcibly or was issued voluntarily. Furthermore, a sum of ₹ 1,00,00,000/- has already been deposited with the respondent authorities through RTGS and in terms of the interim order passed on 12th August, 2013, this Court extended the time for deposit for further sum of ₹ 1,00,00,000 - letter dated 7th June, 2013 issued by the authorized representative of the petitioner-company records the handing over of the two cheques after admitting the service tax liability. Even in the letter dated 27th June, 2013, the petitioner did not raise any objection against the collection of the said amount rather it admitted to have issued such cheques and further recorded that a sum of ₹ 1,00,00,000/- has already been paid as a part payment of service tax on 17th June, 2013 and prayed for the installments to liquidate the balance liabilities. - Decided against assessee.

Issues Involved:
1. Legality of the search and seizure conducted on 7th June, 2013.
2. Validity of the summons issued during the search and seizure.
3. Alleged forcible collection of cheques worth Rs. 2,00,00,000/-.
4. Whether there was "reason to believe" for conducting the search and seizure.
5. Authority of the respondents to collect amounts during the raid.

Detailed Analysis:

Legality of the Search and Seizure:
The petitioner challenged the search and seizure conducted on 7th June, 2013, arguing it was in excess of the power prescribed under Section 82 of the Finance Act. The petitioner contended that the search was conducted without "reason to believe," a requirement under the law. The respondent countered that there was sufficient material indicating service tax evasion, justifying the search. The Court noted that the petitioner did not initially argue the lack of "reason to believe" in the writ petition, raising it only during arguments. The Court emphasized that "reason to believe" must be based on good faith and relevant materials, not on mere suspicion. The Court found that the respondents had sufficient grounds for the search, given the concealment of operations from another premises and the non-disclosure of the business address in the registration certificate.

Validity of the Summons:
The petitioner also challenged the summons issued during the search and seizure. The Court observed that the summons were issued on the spot, indicating deliberate concealment of information by the petitioner. The Court held that the issuance of summons was justified and not illegal.

Alleged Forcible Collection of Cheques:
The petitioner claimed that two cheques worth Rs. 2,00,00,000/- were forcibly taken during the search and seizure. The respondent argued that the cheques were handed over voluntarily, as evidenced by a letter dated 7th June, 2013, from the petitioner's authorized representative. The Court noted that the petitioner did not raise any objection to the collection of cheques in a subsequent letter dated 27th June, 2013, where they even admitted to issuing the cheques and requested installment payments for the remaining liability. The Court concluded that it could not determine whether the cheques were taken forcibly or voluntarily, as it involved disputed questions of fact requiring a full-fledged trial.

"Reason to Believe" for Conducting the Search and Seizure:
The petitioner argued that the search and seizure were conducted without "reason to believe," a legal requirement. The Court examined various judgments interpreting "reason to believe," including Durga Prasad v. H.R. Gomes, S. Narayanappa v. CIT, and Sheo Nath Singh v. Appellate Asstt. CIT. The Court concluded that "reason to believe" must be based on good faith and relevant materials, not mere suspicion. The respondents provided sufficient grounds for their belief, including the concealment of operations and non-disclosure of the business address. The Court found no merit in the petitioner's argument, as the writ petition did not initially raise this issue.

Authority to Collect Amounts During the Raid:
The petitioner relied on the judgment in Naresh Kumar & Co. v. Union of India, arguing that the authorities had no power to collect amounts during the raid. The Court distinguished this case, noting that the petitioner did not raise any immediate objection to the collection of cheques and even admitted to issuing them in subsequent correspondence. The Court found that the authorities acted within their power, given the petitioner's admission of service tax liability.

Conclusion:
The Court dismissed the writ petition, finding no merit in the petitioner's arguments. The search and seizure were conducted with sufficient grounds, the summons were valid, and the collection of cheques was not proven to be forcible. The Court emphasized that "reason to believe" must be based on good faith and relevant materials, which the respondents had demonstrated. The petitioner's reliance on Naresh Kumar & Co. was found to be inapplicable, as the petitioner did not raise any immediate objection to the collection of cheques. The Court concluded that the relief claimed in the writ petition could not be granted.

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