2017 (11) TMI 1180 - HC - Central Excise

Search and seizure proceedings - Whether on the facts and in totality of the circumstances of the case and in law, the entire search & seizure proceeding was illegal and unauthorised for want of compliance of the mandatory provisions contained in section 82 of the Act of 1994? - Held that - the decision in the case of Supreme Court in case of R.M. Malkani vs. State of Maharashtra 1972 (9) TMI 150 - SUPREME COURT OF INDIA referred, where it was held that a document which was procured by improper or even by illegal means could not bar its admissibility provided its relevance and genuineness were proved. The matter is required to be remitted back to the first authority - appeal allowed by way of remand.

Summary

Issues:
1. Compliance of mandatory provisions in search & seizure proceedings under section 82 of the Act of 1994.
2. Addition of individual income/fees of partners in the income of the partnership firm.
3. Levy and recovery of service tax on a specific amount disregarding Rule 6(1) of the Service Tax Rules, 1994.
4. Disallowance of discount based on a misconception of law in relation to Rule 5(1) of the Service Tax Rules, 1994.
5. Justification of penalty under sections 76 & 78 of Act of 1994 for additions based on inferences and preponderance of probabilities.
6. Discrepancy between the views of Income Tax Authorities and CESTAT on the total income/gross receipts of the assessee firm.
7. Sustainment of additions in gross receipts by the AO based on inferences and implications, leading to the permissible levy and recovery of service tax.

Analysis:
1. The appellant challenged the Tribunal's judgment on the legality of the search & seizure process under section 82 of the Act of 1994. The court framed substantial questions of law regarding the legality of the search, individual income addition, service tax levy, discount disallowance, penalty justification, and discrepancies in views between authorities. The appellant argued for strict compliance with search procedures, citing relevant legal precedents.

2. The court referenced decisions emphasizing the need for specific authorization in search warrants and the consequences of illegal search and seizure. It discussed the admissibility of seized materials for assessing tax liabilities, even if obtained illegally. Legal precedents highlighted the importance of evidence relevance and genuineness over the method of procurement.

3. Ultimately, the court decided to remit the matter back to the first authority, quashing the orders of the Tribunal and CIT(A). It emphasized the need for proper consideration of applications to peruse books of accounts in accordance with the law before further proceedings. The appeal was disposed of, indicating a requirement for a fresh review of the case by the first authority.

This detailed analysis of the judgment provides insights into the legal issues raised, the arguments presented, and the court's decision to remit the matter for further review, ensuring compliance with legal procedures and precedents.