2019 (5) TMI 655 - HC - Central Excise

Validity of Search proceedings - search under Central Excise post GST u/s 12F of the Act of 1944 read with Section 18 of the Act of 1944 and Section 174(2)(e) of the Act of 2017 - admission of HAWALA transaction through Whatsapp messages during search - search conducted by Directorate General of Goods and Service Tax Intelligence in the premises of the petitioner at Jaipur on 27.08.2017 - Reason to believe present or not - HELD THAT - We are not inclined to uphold the contention that the respondents did not have sufficient material to form requisite reason to believe as envisaged under Section 12F read with Section 18 of the Act of 1944 and Section 100 (4)(5) Cr.P.C. to conduct the search in question. We are also not inclined to countenance the submission that since the Act of 2017 came into force w.e.f. 01.07.2017, proceedings of search could not have been carried out at Jaipur premises of the petitioner-company and that the said proceedings would not be saved by virtue of Section 174 of the Act of 2017. We hold so because the proceedings of search and seizure carried out in the premises of the petitioner at J-6, 2nd Floor, Himmat Nagar, Tonk Road, Jaipur, Rajasthan were in continuation of the proceedings already initiated prior to enforcement of the Act of 2017, which is evident from the fact that the respondents had already on receipt of intelligence conducted simultaneous search operations at various places at Bastar, Indore and Jaipur on 30.01.2017 after following the due procedure under Section 12F read with Section 18 of the Act of 1944. Relevance of the documents seized by the respondents - HELD THAT - The documents seized by the respondents, most of which were original title deeds/sale deeds of the immovable properties, is concerned, it is found that certain incriminating material was found from drawer of the table in the cabin of Mr. Natwar Lal Sharda, Managing Director of the petitioner-company, which shows that he is the real owner of the unregistered factory and actual beneficiary of the business in Village Belinga, District Bastar, Chhattisgarh - Merely because some of the files that were seized by the search team contained original sale/title deeds of the immovable properties and the same were eventually returned back would not be sufficient to vitiate the entire action of the respondents because the material suggests that the officials of the respondents in doing so acted bona fide - Mere use of the word, resumed in place of seized at certain places in the panchnama would not in any manner invalidate the action of the respondents in ultimately seizing certain documents in the course of investigation. An error committed by the Officer in seizing the documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search. If prima facie there are grounds to justify the belief of the officer in conducting search, this Court would have no reason not to accept such belief, although it may or may not have entertained such belief. Petition dismissed.

Issues Involved:
1. Legality of the search conducted by DGGSTI at the petitioner’s premises.
2. Return of the documents seized during the search.
3. Jurisdiction of officers under the Central Excise Act, 1944 post-GST implementation.
4. Validity of the search authorization and adherence to procedural requirements.
5. Relationship between the petitioner and Mr. Natwar Lal Sharda.
6. Relevance and handling of the seized documents.
7. Malafide intent and arbitrariness of the search action.

Detailed Analysis:

1. Legality of the Search Conducted by DGGSTI:
The petitioner argued that the search conducted on 27.08.2017 was arbitrary, malicious, and illegal, claiming it violated the Central Excise Act, 1944, and was conducted without jurisdiction. The respondents countered that the search was based on intelligence indicating evasion of central excise duty by an unregistered factory linked to Mr. Natwar Lal Sharda, a director in the petitioner company. The court held that the search was justified, as the respondents had sufficient material to form a "reason to believe" under Section 12F read with Section 18 of the Act of 1944 and Section 100(4)(5) Cr.P.C.

2. Return of the Documents Seized:
The petitioner sought the return of all documents, including original sale/title deeds seized during the search. The court noted that all documents had been returned to the petitioner as per the court's order dated 26.09.2018, and thus, this issue did not survive for further consideration.

3. Jurisdiction of Officers Under the Central Excise Act, 1944 Post-GST Implementation:
The petitioner contended that the officers appointed under the Central Goods and Services Tax Act, 2017 (Act of 2017) could not exercise powers under the Act of 1944 post-GST implementation. The court rejected this argument, stating that the search and seizure were part of ongoing proceedings initiated before the enforcement of the Act of 2017, thus falling within the scope of Section 174 of the Act of 2017.

4. Validity of the Search Authorization and Procedural Requirements:
The petitioner argued that the search authorization was invalid due to procedural lapses, such as not sealing the documents and not recording the number of pages. The court held that minor procedural irregularities do not vitiate the search, provided the officers acted bona fide. The use of the term "resumed" instead of "seized" in the panchnama did not invalidate the search.

5. Relationship Between the Petitioner and Mr. Natwar Lal Sharda:
The court acknowledged the close connection between the petitioner company and Mr. Natwar Lal Sharda, noting that he was a director in the petitioner company and related to the director who filed the petition. The court observed that Mr. Natwar Lal Sharda was involved in multiple companies operating from the same premises, justifying the search.

6. Relevance and Handling of the Seized Documents:
The petitioner argued that the seized documents, including original sale/title deeds, were irrelevant to the investigation. The court found that certain incriminating materials were discovered, indicating Mr. Natwar Lal Sharda's involvement in the alleged illegal activities. The court held that the seizure of documents, even if some were later found irrelevant, did not invalidate the search.

7. Malafide Intent and Arbitrariness of the Search Action:
The petitioner alleged that the search was conducted with malafide intent and was arbitrary. The court, relying on precedents, held that the belief of the officers conducting the search could not be scrutinized under a "legal microscope" and that the officers acted bona fide. The court dismissed the writ petition, finding no merit in the allegations of malafide intent and arbitrariness.

Conclusion:
The writ petition was dismissed, and the court held that the search conducted by the DGGSTI was justified and within jurisdiction. The procedural lapses did not invalidate the search, and the seized documents were relevant to the ongoing investigation. The review petitions were disposed of as the main writ petition was dismissed.

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