9911796707
TMI Blog1993 (6) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... oods dealt in by the applicant allegedly are declared goods under section 14(iv) and (xv) of the Central Sales Tax Act, 1956. As such, the goods are exigible to sales tax on a single point. Wires are manufactured out of wire rods, which are manufactured out of billets. Billets are purchased by manufacturers from prime producers on paying sales tax at the rate of two per cent and they again charge sales tax at the rate of two per cent from purchasers like the applicant at the time of sale of wire rods. The applicant charges sales tax from his buyers on wires manufactured by him and pays such tax to the sales tax authorities. It is alleged that several Sales Tax Officers including respondents Nos. 1 and 3, advised him that wires manufactured by the applicant and wires and wire rods resold by him are exempt from sales tax, since there cannot be multi-point taxation. Up to four quarters ending June, 1986, assessments of applicant's business were completed. Returns up to March, 1990, were filed and taxes paid. Appeals against assessments for the period of four quarters ending June, 1984, and four quarters ending June, 1985, are pending. Applicant claims that he is least concerned with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to produce books of account, bank statements, orders, copies, statements of purchase and sales and relevant documents relating to purchases and sales effected during the period of 14 quarters from July 1, 1986 to December 31, 1989, for verification of returns. The notice is alleged to be illegal, void and without jurisdiction. Conditions precedent to the exercise of power under section 10(5) were non-existent, and not even stated in the notice. No such omnibus notice could be issued for as many as 14 quarters without reference to a particular return. On February 16, 1990, by a notice under section 14(1) of the 1941 Act respondent No. 1 asked the applicant to appear before him on February 21, 1990 and to produce and explain necessary books of account, bank statements, orders, copies and allied documents relating to purchases and sales during the period from July 1, 1983 to June 30, 1986. The notice is challenged on various grounds. On the same day respondent No. 3 also served a notice on the applicant under section 14(1) asking him to appear on February 21, 1990 at 11-30 a.m. along with books of account and documents mentioned in the notice. Allegedly, no notice under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired, although such list was given on May 24, 1990 and April 23, 1990. Allegedly, the sole object of the search and seizure operations was to bring the applicant down in the estimation of the local people and to subject the applicant to hatred and ridicule and also to ruin his business. The search was conducted in an arbitrary manner. It is claimed that the applicant complied with all the requisitions under section 14(1) or (2) and all the requirements under the provisions of law. Allegedly the search and seizure operations were conducted on extraneous considerations. The officers wanted the applicant to oblige them which was not possible for him to accede to, as the demand was not trivial. Delegation of the power to conduct search and seizure is challenged as arbitrary and mala fide. The officers who conducted the searches and seizures could not have any reason to suspect that the applicant was attempting to evade tax. No reasons were recorded for the purpose of exercising the power under section 14(3) and (4) and if there was any recording of any reason, it was not valid. It was only a roving and fishing investigation. The power under section 14(3) and (4) cannot be invoked, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the information to the Assistant Commissioner, and both of them decided that relevant books of account should be examined at the applicant's place of business. Although no intimation was ever given by the applicant to Commercial Tax Officer, Shibpur, as to the existence of a second place of business at 113B, Monohar Das Chowk, Calcutta, respondent No. 1 came to know of it. It was a legal obligation on the part of the applicant to inform the new address and to get it noted in the registration certificate. Therefore, a decision was taken to visit the two places of business and also the applicant's residence where he might have secreted his business documents. The visit was paid by a team of officers. After disclosing the purpose of the visit and their identity, they requested applicant's representative at the factory to produce books of account, records and documents. They were told that only the production register was available there, while the other books of account, etc., were kept at 113B, Monohar Das Chowk, Calcutta. The representative also failed to explain entries in the production register with reference to purchase bills, challans and other documents. This led to a sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt was prepared, being countersigned by Hirawat. According to respondents, there were only two searches, the first one was at the factory and the second was at the residence of the applicant. The seizure at 113B, Monohar Das Chowk, Calcutta, on February 14, 1990 did not require any search, as applicant's representative handed over the relevant documents on his own accord. Respondent No. 1 did not take part in the search conducted at the so-called city office at 113B, Monohar Das Chowk, Calcutta, but he was merely present at the request of the Commercial Tax Officer, Howrah Circle. Issuance of notice under section 10(5) of the 1941 Act is claimed to be competent, if the Commercial Tax Officer, has reasons to believe that the returns submitted by a dealer are not correct and complete. In this case, the Commercial Tax Officer, Shibpur Charge, was justified in issuing the notice in view of the incriminating information in his possession. As regards notice under section 14(1), respondents claimed that the Commercial Tax Officer, was competent to issue such notice in the facts and circumstances of the case. It is denied that no such notice can be issued after resort has been made to seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his purchases and sales. The seized books of account and documents are to be retained till satisfactory completion of investigation. Search became necessary on two occasions, when applicant's representatives failed to make all necessary records, etc., available for inspection, and the visiting officers had reasons to believe that applicant was keeping records and accounts, etc., in those premises. The imputation made by the applicant touching the integrity of the officers has been denied and condemned. Respondents enclosed a list, marked "A" with the affidavit-in-opposition and stated that the list would show the extent of evasion of tax by the applicant. 7.. In his affidavit-in-reply the applicant stated that the affidavit-in-opposition was not affirmed by concerned persons and accordingly assertions of the applicant have not been duly controverted. The source from which the alleged information regarding huge purchases by the applicant from two dealers and regarding an additional place of business at 113B, Monohar Das Chowk, was received has not been disclosed. The additional place of business, it is claimed, was always within the knowledge of the tax authorities. D.N. Chakra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (Sales Tax) Act, 1941, is reproduced below for appreciation of the rival contentions of the parties: "14. Production and inspection of accounts and documents and search of premises.-(1) The Commissioner may, subject to such conditions as may be prescribed, require any person- (a) to produce before him and explain any accounts, registers or documents, (b) to furnish any information, relating to the stock of goods of, or purchases, sales or deliveries of goods by, the person or relating to any other matter, as may be deemed necessary for the purposes of this Act. (2)(a) All accounts, registers and documents relating to the stocks of goods of, or purchases, sales and deliveries of goods by, any dealer; and (b) all goods kept in any place of business of any dealer, shall at all reasonable times be open to inspection by the Commissioner. (3) If the Commissioner or any person appointed under sub-section (1) of section 3 to assist him, has reason to suspect that any dealer is attempting to evade payment of any tax under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer as may be necessary. (3A).......... (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be punishable with fine not exceeding five hundred rupees and when the offence is a continuing one, with a daily fine not exceeding twenty-five rupees during the continuance of the offence. 70A.(1) All searches and seizures under sections 14 and 14A shall, as far as possible, be made in accordance with the provisions of the Code of Criminal Procedure, 1973: Provided that.................. (1A) and (2)..................... 10.. Search and seizure operations have been challenged in this application under section 8 of the West Bengal Taxation Tribunal Act, 1987. Section 8 is the extraordinary jurisdiction of this Tribunal under which a person aggrieved by any order passed or action taken pertaining to any matter within the jurisdiction of this Tribunal, may make an application for the redressal of his grievance on any of the grounds referred to in section 8(3). Clause (c) of section 8(3) relates to a substantial question of law relating to the interpretation of the Constitution of India or the specified State Acts or Rules framed thereunder or of jurisdiction of any of the authorities under the said specified State Acts, as defined in section 2(k) of the said Act of 1987, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.B. Chopra v. Union of India AIR 1987 SC 357. In a recent decision in the case of Union of India v. Deep Chand Pandey AIR 1993 SC 382; [1993] 82 FJR 307 (SC) it was held by the Supreme Court that the expression-"all courts" in section 14 of the Administrative Tribunal Act, 1985, includes High Court and, therefore, the High Court could not entertain any writ petition regarding service matters of casual typists in Government departments. In that case the Madhya Pradesh High Court had entertained and allowed the writ petition, but the Supreme Court reversed the judgment. It will be seen, therefore, that the Supreme Court has clearly laid down that a Tribunal constituted under article 323A was a substitute of High Court and the latter's jurisdiction including those under articles 226 and 227 of the Constitution was totally excluded. The provisions of articles 323A and 323B and also those of the Administrative Tribunal Act, 1985 and the West Bengal Taxation Tribunal Act, 1987, are in pari materia. Therefore, the ratios of the aforesaid decisions are squarely applicable to article 323B and the Act of 1987, the provisions of which are very clear that this Tribunal, as the substitute of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, contended that in order to make a valid search, there should be a reason to suspect that the dealer is attempting to evade payment of tax. He contended that in every case, the "reason to believe" under sub-section (4) and "reason to suspect" under sub-section (3) are to be recorded in writing. 12.. Mr. Pradip Ghosh, learned advocate for the respondents, submitted that section 14(1) providing for furnishing any relevant information, "as may be deemed necessary for the purposes of this Act" is the normal procedure in a normal case. But he submitted that the power under section 14(1) may be exercised, if necessary, even after the power to search and seize has been exercised in a particular case. As regards section 14(2), Mr. Ghosh contended that the power of inspection is independent of section 14(4). According to him, it implies a power to enter, because entry into a business place is essential for inspection. Regarding sub-section (3), Mr. Ghosh did not think that the power to seize necessarily implied the power to search. He submitted that seizure under sub-section (3) may take place either following a simple inspection under subsection (2), or following a search under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for affirming an affidavit of denial, because records are often the source of knowledge on the basis of which affidavits are affirmed. He drew our attention to the verification of the affidavit-in-opposition dated July 5, 1990. A considerable part of the affidavit was declared to be based on information derived from records. Mr. Ghosh produced the relevant records at the time of hearing and further contended that we might look into the same for the purpose of our satisfaction about the statements made in the affidavit. In this connection he referred to paragraphs 7 and 10 of the affidavit wherein it was stated that the relevant records and reports would be produced at the time of hearing. Mr. Bhattacharjee, appearing for the applicant, however, submitted that non-denial by the officers who took part in the searches and seizures by means of their own affidavits could not be cured by production of records. In this connection several reported decisions were referred to. Mr. Bhattacharjee relied on the case of Shiva Lal v. Income-tax Officer [1970] 77 ITR 999 (Cal) decided by T.K. Basu, J., of the Calcutta High Court. In that case the assessee under the Income-tax Act, 1922, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition affirmed by Rabindra Nath Biswas in the following manner: "Strong denial is offered to the allegation contended in paragraph 38 of the application. The petitioner's attempt to cast imputation upon the respondents, most of whom occupy the position of honour and dignity, deserves condemnation from all sane thinkers. The insinuation is devised in a bid to mitigate the severity of the offence as is manifest even on the first hand inspection of the seized records........" It may be noted that the applicant has not specified the officers of Howrah Circle involved in the alleged affair, nor has he specified the manner of demand, date and such other particulars. The allegation is, therefore, quite vague, as rightly submitted by Mr. Ghosh, appearing for the respondents. Moreover, the denial in the affidavit-in-opposition was given by R.N. Biswas, Commercial Tax Officer, Shibpur Charge, which is under the Howrah Circle. We are, therefore, of the opinion that the applicant has failed to establish the allegation, which has been duly denied by the respondents. 15. The next case on which Mr. Bhattacharjee relied is the case of Madhya Pradesh Industries Ltd. v. Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Mr. Ghosh, in the absence of those proceedings and documents it was held that the Income-tax Officer had no reason to form the necessary belief which was a condition precedent to the issuing of notice. Mr. Ghosh submitted that in the present case, the proceedings and records have been produced and made available for examination by this Tribunal so as to be satisfied whether the condition precedent to the search and seizure operations was present. It is true, the officers who took part in the operations were competent persons to aver about the necessary opinion or reason to believe or suspect formed. But the proceedings and records are also valuable materials from which it can be gathered whether the condition precedent was present. Production of relevant records and proceedings was, in our opinion, a satisfactory means of explaining before the court how the officers conducting searches and seizures formed their opinion or reason to believe or suspect within the meaning of section 14. Absence of affidavit by all those officers who took part does not, in our opinion, in the circumstances of this case, vitiate the operations on the ground that the condition precedent has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , powers and authority of this Tribunal. That being the correct position, applications filed before this Tribunal, except those under section 7 (reference) of the Act of 1987, are for all purposes mostly writ applications under article 226, while some are analogous to article 227 applications. Such applications are decided on the basis of affidavits filed by the parties and the records produced. But in the instant case, which is like a writ petition, the affidavit filed by R.N. Biswas is neither vague nor uninformative. Moreover, the respondents actually produced the relevant records and there was no attempt to withhold the same from the court. In such circumstances, the observation in AIR 1966 Cal 151 (New Central Jute Mills Co. Ltd.) does not help the applicant in any manner. 17.. On behalf of the applicant reliance was also placed on the cases of Partap Singh v. State of Punjab AIR 1964 SC 72, and Rowjee v. State of Andhra Pradesh AIR 1964 SC 962. In both the cases certain allegations of mala fides were made against the Chief Ministers of the respective States. In both the cases the Chief Ministers did not deny the allegations by personally filing affidavits. In the first ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phs 20 and 23 in particular does not, however, support the contention of Mr. Bhattacharjee. Specific denial has been given wherever necessary and circumstances have been disclosed for taking various actions or steps at various stages. From an analysis of the decisions relied on and arguments advanced by the learned counsel for the applicant, it is clear that the affidavit by R.N. Biswas does not suffer from weakness and affidavits by all the officers taking part in the searches and seizures are not indispensable. 18.. Mr. Ghosh, learned counsel for the respondents, referred to the case of Jagu Singh v. M. Shaukat Ali [1954] 58 CWN 1066 (Cal) decided by Sinha, J. It was also a writ petition under article 226 of the Constitution. Following the decision in the case of State of Bombay v. Purushottam Jognaik [1958] SCA 893, the learned Judge held that it is not necessary that everything must be true to the personal knowledge of the deponent. Evidence based on information is admissible, provided the source is disclosed. But the court is entitled to have the best evidence placed before it. Where first hand evidence is available, it would be unsatisfactory to place the evidence of any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the copies is not challenged. Mr. Ghosh, appearing for the respondents, obviously relied on this case in support of his contention that by production of original records, respondents fulfilled their obligation in a writ application. It is pertinent to note that in prayers (c) and (d) in the main application, applicant himself wanted production of the records. But at the time of hearing when respondents actually produced the same, the learned counsel for the applicant resisted such production. 20.. Mr. Bhattacharjee and Mr. Ghosh, counsel for the parties, did not entertain difference of opinion to the extent that section 14(1) of the 1941 Act lays down a normal procedure in a normal case. In other words, section 14(1) is the mechanism to be applied in the ordinary circumstances. Mr. Ghosh rightly submitted that the limits and safeguards for exercise of the power under section 14(1) are stated in the expression-"as may be deemed necessary for the purposes of this Act". Therefore, the power cannot be exercised if not necessary, or for any purpose other than that of the Act. Thus, there is no scope for criticism that the power was unguided or uncontrolled. According to the pream ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of his typed note on this topic. Mr. Bhattacharjee contended that the said decision was erroneous. Mr. Ghosh, however, disagreed with these contentions. 21.. One of the two impugned notices dated February 16, 1990, was issued by R.N. Biswas, Commercial Tax Officer, Shibpur Charge, to appear on February 21, 1990, at 11 a.m. and to produce and explain books of account, etc., relating to the period from July 1, 1983 to June 30, 1986 and also to furnish statements of sales and purchases during the said period. The other notice was issued by G.C. Halder, Commercial Tax Officer, Howrah Circle, to appear on the same date (February 21, 1990) at about the same time (11.30 a.m.) with specific books of account, etc., relating to the same period. Mr. Bhattacharjee rightly criticised issuance of such two notices simultaneously. This peculiar problem, in our opinion, could have been solved by the applicant by appearing before one of the officers and by informing the other officer about it and by requesting extension of time. As regards grounds (m) and (n) in the main application, if all the books of account, etc., had been seized and if nothing relating to the relevant period was in the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... si-judicial proceedings. The line of demarcation between a quasi-judicial proceeding and an administrative proceeding is quite often indistinct. In every case the court will decide whether the purpose is one under the 1941 Act. The power is to be exercised, when necessary, for the purposes of this Act. So, if it is required to be exercised to give a dealer an opportunity to be heard, no objection can legitimately be taken to such exercise. 23.. We do not agree with Mr. Bhattacharjee, appearing for the applicant, that the decision of a Full Bench of the Orissa High Court in the case of Uttareswari Rice Mills v. Sales Tax Officer reported in [1971] 28 STC 168, was incorrect. The Orissa High Court was considering section 16(1) of the Orissa Sales Tax Act, 1947, which is analogous to section 14(1) of the Bengal Act of 1941. The Full Bench held that there was nothing in the language of the section to restrict its purpose to an assessment or reassessment proceeding. It went on to hold that the power under section 16(1) might be used for administrative purpose and should not be confined in its operation to a quasi-judicial proceeding. 24.. In course of their arguments Mr. Bhattacharje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (k) of paragraph 58 of the application the case of the applicant is that the notice dated February 16, 1990, issued under section 10(5) of the 1941 Act was without jurisdiction and void because no condition precedent to the exercise of power did actually exist, nor did the notice mention existence of any condition precedent. The notice is also challenged as an omnibus one in respect of 14 quarters without reference to a particular return. By that notice R.N. Biswas, Commercial Tax Officer, Shibpur Charge, directed the applicant to appear before him on February 21, 1990, at 11 a.m. and to produce books of account, etc., regarding sales and purchases during the period from July 1, 1986 to December 31, 1989 and also to furnish statements of sales and purchases. It was stated in the notice that the purpose was verification of returns furnished for the said period. On February 16, 1990, the date of the notice, section 10(5) stood in the following terms: "If the Commissioner- (a) discovers any error or omission in any return furnished by a dealer, or (b) has reasons to believe upon information or otherwise that the dealer has furnished incorrect statements of his turnover or inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visit. Similarly, the operation on February 14, 1990, at the city office at 113B, Monohar Das Chowk was a visit and an inspection. While nothing was seized at the residence on February 9, 1990, there was some seizure at the factory and at 113B, Monohar Das Chowk on February 9, 1990. On February 14, 1990 there was some seizure at the so-called "city office" at 113B, Monohar Das Chowk. The contention of Mr. Bhattacharjee on behalf of the applicant is that all the operations on both the dates at all the places were searches and often followed by seizures. Mr. Ghosh, appearing for the respondents, maintained the stand of the respondents that there were only two searches, while the rest were mere inspections. He also argued that seizures followed searches as well as inspections. In this context, the import of sub-sections (2), (3) and (4) of section 14 engages our consideration. Section 14(2) casts an obligation on a dealer to keep all his accounts, registers and documents and also all goods kept in any place of business open to inspection at all reasonable times. Rule 69 should be read with section 14(2). When so read, it becomes clear that the inspecting officer should ordinarily g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly. The Supreme Court was of the opinion that the power of inspection, seizure and search under section 17 of the Bihar Act was not limited to a place of business declared by a dealer in his application for registration or otherwise and that the power could be exercised in respect of any and every place of business. In the present case the very case of the applicant himself is that the city office at 113B, Monohar Das Chowk is an additional place of business, claimed to have been brought to the notice of the authorities, although not in compliance of section 16(b) and rule 72(1). That being the position, the power of inspection under section 14(2) was exercisable in relation to the said city office. 28.. According to Mr. Bhattacharjee, for the applicant, the power under section 14(2) can never be exercised without the aid of section 14(4) for the purpose of entry into the premises and he further submitted that the power of inspection always implies a power of search. Mr. Bhattacharjee contended that before section 14(4) may be applied, the authority should have, upon information received, a reason to believe that the dealer has done or is doing something towards evasion of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "search" and "seizure", are of differents meanings and concepts and they are not interchangeable expressions. Nor is seizure always preceded by search. In this connection reference may be made to the case of Mangat Rai v. State of Madhya Pradesh [1970] 26 STC 1 (SC) in which it was held by the Supreme Court that "search" for inspection implies taking possession of account books for purpose of inspection and seizure means something different. It means that account books would be taken into possession outside the possession of the assessee. 30.. Properly analysed, section 14(4) of the 1941 Act lays down the following: (i) It permits entry and search into any place of business or warehouse of any dealer. (ii) It permits entry and search into any other place where the authority has, upon information received, reason to believe that the dealer keeps or is for the time being keeping any accounts, registers, etc., of his business or any stock of goods for sale. (iii) Such entry and search may be made for the purposes of section 14(2) or section 14(3). Thus, it is clear that section 14(4) has a restricted application only for the purposes of section 14(2) or section 14(3). It c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch at the residence of the applicant could be made. It appears from the recording quoted above that the team of officers who conducted this search at the residence visited the place on the direction of the Assistant Commissioner. Mr. Bhattacharjee was quite right in submitting that section 14(4) does not contemplate that an officer will receive some information and then entertain the necessary reason to believe regarding keeping of accounts, etc., and then he may delegate his power of search and entry to another officer subordinate to him. He contended that under section 14(4) the same officer who receives information and entertains the necessary reason to believe, may enter into any place other than a place of business or warehouse and search the same. In this respect we entirely agree with Mr. Bhattacharjee. No provision in the 1941 Act or the Rules thereunder has been brought to our notice by the respondents to show that the Assistant Commissioner who might have received some information and who might have entertained a reason to believe, was permitted in law to delegate the power of entry and search to his subordinate officers. In our view, the information must be received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta weigh bridge slips were seized on February 9, 1990. The reasons for this search and seizure were recorded as below: "Acting upon secret information, I, the undersigned along with Sarbasree G.C. Halder, Commercial Tax Officer, Howrah Circle, B.N. Goswami, ICT, Howrah Circle and D.K. Mitra, ICT/SB Charge, pay a surprise visit this day to the abovenoted dealer's factory located at the above address to ascertain the present activities of business and there I meet one Sri Manoj Baid who represents himself as the factory manager. On disclosing identity and purpose of visit, I request Sri Baid to produce the books of accounts, records and documents for inspection, on his plea he states that all the books of accounts, records and documents are being maintained at the city office located at 113B, Monohar Das Katra, N.S. Road, 3rd floor, Calcutta. He further informed that only production register and gate pass slip are being maintained in the factory. Being not satisfied I proceed to search the office of the factory under section 14(4) of the Bengal Finance (Sales Tax) Act, 1941 and find out two stock-cum-production registers written by wood pencil and a file containing weighing bridg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated except in the context of carrying out the purposes of the Act. It cannot be either whimsical or aimless. In that event it will tend to be arbitrary or a roving or fishing enquiry. There must be some reason for which a search for the purpose of inspection under section 14(2) is required. Mr. Bhattacharjee contended on the basis of the case of R.S. Jhaver [1967] 20 STC 453 (SC) that like the Madras Act considered by the Supreme Court in that case, in the Bengal Act also the power of inspection includes and implies the power of search in the sense that an inspection and a search go hand in hand. He further argued that for that reason, inspection cannot be done without the aid of section 14(4). According to him, no entry can be made even to a place of business for the purpose of inspection without the aid of section 14(4) and any entry involves a search. In fact, Mr. Bhattacharjee does not see any distinction between the power under section 14(2) and the power of entry and search under section 14(4). Similarly, according to him, a seizure under section 14(3) should necessarily follow a search. He did not agree with Mr. Ghosh, learned counsel for the respondents, that a seizure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry and search. That being so, the case of R.S. Jhaver [1967] 20 STC 453 (SC) is distinguishable to a certain extent. In our opinion, inspection under section 14(2) of the 1941 (Bengal) Act neither implies a search, nor amounts to search, because a search for the purpose of section 14(2) is clearly laid down in section 14(4). In the scheme of things of section 14 of the 1941 Act, it is clear that seizure under section 14(3) may follow either a search or an inspection. Mr. Bhattacharjee relied on the decision of a Division Bench of the Calcutta High Court in the case of State of West Bengal v. Oriental Rubber Works reported in [1977] 39 STC 333. He drew our attention to the following passage from the said judgment: "..........Here, in the present case, we are concerned with sub-section (3) inasmuch as, admittedly, the search and the seizure was not made for any purpose specified in sub-section (2). Therefore, before the authority competent to make a search under sub-section (4) goes to conduct a search, he must necessarily hold a bona fide suspicion that the person whose premises is to be searched is a dealer who is evading or attempting to evade payment of taxes and he must also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Sometimes search may be necessary for inspection, but not always. It has been clearly laid down in section 14(4) as to for what purposes the powers of entry and search can be used. In other words, like search, entry can be made for the purposes of inspection and seizure under section 14(2) or 14(3). Since Mr. Ghosh did not agree that section 14(4) limits the application of the power of entry and search to the aforesaid purposes only, the question arises whether entry and search can be made for any other purpose. We have held that inspection under section 14(2) implies the power of entry into the premises. For such entry to any place of business under section 14(2), no assistance of section 14(4) is necessary. A dealer, by virtue of his becoming a dealer, belongs to a class different from that of a non-dealer citizen. By opting to become a dealer, he has subjected himself to the discipline of the legitimate or reasonable restrictions (to his rights), as contained in the 1941 Act. A Commercial Tax Officer cannot enter into the premises of an ordinary citizen for inspection of his books, but can enter a dealer's premises for that purpose. A Government servant is similarly amenab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch has to be tested by a court in the light of the facts and circumstances of that case. We, therefore, hold that a search under section 14(4) must be preceded by a genuine necessity to implement the provisions of the 1941 Act. Such necessity may vary from one case to another. Having regard to such wide variable factors, a court should search for the real cause for conducting a search. If the cause is an ordinary prudent person's thinking as to the genuine necessity for the purposes of the 1941 Act, then the court will not proceed further and will not give its opinion whether the necessity or the reason was sufficient or not. These are the broad principles, which, in our opinion, should govern any search under section 14(4). 36.. Now, let us see whether the search conducted on February 9, 1990, at the factory, a declared place of business of the applicant, was valid or not. Annexure page 76 of the present application is the receipt of seizure at the factory at Santragachi on February 9, 1990. It simply states the language of section 14(3) to the effect that there was reason to suspect that the dealer was attempting to evade payment of tax and the documents seized were necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to inspection under section 14(2). According to Mr. Bhattacharjee, the operation on February 9, 1990, was not a mere inspection but a search. Having regard to the circumstances of the case, we are unable to hold that it was a search, and not an inspection simpliciter under section 14(2). An inspection is done for the purposes of the Act and such purposes obviously comprehend many things including detection and prevention of evasion of tax. Mr. Bhattacharjee complained that the order of the Assistant Commissioner in pursuance of which the alleged inspection was made has not been produced. The reference to that order was, however, made in the contemporaneous recording of the circumstances under which the visit, the inspection and the seizure were paid or made. That recording was countersigned by B. Hirawat, the applicant's accountant, who admittedly looked after his tax problems. As the Assistant Commissioner's order and its background were stated in the affidavit-in-opposition, in support of which original records were produced at the time of hearing, Mr. Bhattacharjee's grievance of non-production of the order is without substance. A xerox copy of the recording of the proceedings l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may be) can rarely be a ground for holding the operation invalid. In any case, it is perfectly lawful for a number of officers to accompany an officer asked to perform a duty of this nature. The crucial question is whether the required pre-condition had really existed. In the instant case, the circumstances disclosed in the affidavit-inopposition and the xerox copy of the recorded proceeding (the original record, having been produced for examination, if desired) clearly establish the existence of the pre-condition of seizure under section 14(3), namely, that there was reason to suspect that the dealer was attempting to evade tax. We are convinced that there was no search on February 14, 1990, but merely an inspection in course of which the documents had been produced before the inspecting officer. But during inspection certain things could not be verified with reference to other documents which were not produced. To judge sufficiency of the reason to suspect is hardly the court's duty. The inspection was, according to the recorded proceeding, held "as per order" of the Assistant Commissioner. The affidavitin-opposition has narrated the background. We do not see any wrong in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that those provisions were followed as far as possible. In our view, the provisions of the Code of Criminal Procedure are only applicable mutatis mutandis and it is not possible to strictly apply the same to the searches and seizures under section 14 of the 1941 Act. In this connection We follow the decision in the case of R.S. Jhaver [1967] 20 STC 453 (SC). In the instant case, we do not see any reason to hold that the search at the factory on February 9, 1990 and the seizures on February 9, 1990 and February 14, 1990, were in contravention of rule 70A. 40.. Mr. Bhattacharjee, learned counsel for the applicant, relied on some other cases which are discussed below: In the case of Bishnu Krishan Shrestha v. Union of India [1987] 168 ITR 815 (Cal) the learned Judge followed the case of Dr. Partap Singh [1985] 155 ITR 166 (SC); AIR 1985 SC 989, and held in connection with search under section 37 of the Foreign Exchange Regulation Act, 1973, that the condition precedent, i.e., "reason to believe" that relevant documents are secreted in the place of search must be held bona fide and by the concerned officer. He further held that no search can be conducted on direction by a supe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seth Brothers [1969] 74 ITR 836 (SC) was relating to section 132 of the Income-tax Act, 1961. It was held that if an action is maliciously taken or the power under the section is used for a collateral purpose or if the conditions for the exercise of power are not satisfied, it is liable to be struck down by the court. But where the power is exercised bona fide, in furtherance of the statutory duties of the tax officer, any error of judgment will not vitiate the exercise of power. In the case of J.D. Casting and Forging (Private) Ltd. [1992] 87 STC 474; [1992] 25 STA 276, this Tribunal held following Pooran Mal's case [1974] 93 ITR 505 (SC) and Partap Singh's case [1985] 155 ITR 166 (SC); AIR 1985 SC 989 that illegality of search does not vitiate the evidence collected during illegal search. In [1971] 79 ITR 603 (SC) (Chhugamal Rajpal v. S.P. Chaliha) it was held that in the facts of that case there was no compliance of section 151(2) of the Incometax Act, 1961, for issuing notice under section 148. From the judgment in the case of Ramchhoddas Karsondas [1959] 36 ITR 569 (SC) at 576, Mr. Bhattacharjee for the applicant drew our attention to the observation that "an argument ab incon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 STC 333. Mr. Bhattacharjee for the applicant contended that the said decision was rendered by the High Court when it was exercising jurisdiction in the matter and when this Tribunal had not been set up in terms of article 323B of the Constitution. In this context, Mr. Ghosh relied on the case of State of Bihar v. Abdul Majid AIR 1954 SC 245 in which it was held that the Supreme Court of India was in no way bound by the decisions of the Federal Court of India or the Privy Council. Mr. Ghosh contended that on analogous principles this Tribunal, being a co-ordinate forum of the High Court and being vested with exclusive jurisdiction in the specified matters, is free to disagree with the High Court's decision. He also relied on the decision in Srinivas v. Narayan AIR 1954 SC 379 where it was held that the Supreme Court can declare Privy Council ruling as not sound. In fact, we have differed from the High Court's views in certain issues in some other cases. We are inclined to agree with Mr. Ghosh that this Tribunal can disagree with a decision of the High Court of Calcutta on a question within its exclusive jurisdiction. In the present case, we have indicated our views on section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Calcutta High Court's decision in the case of New Central Jute Mills AIR 1976 Cal 178 as overruled by Pooran Mal's case [1974] 93 ITR 505 (SC). Mr. Ghosh referred to the decision in P.L. Lakhanpal's case AIR 1967 SC 908, on the point that the condition precedent to detention under rule 3(1)(b) of the Defence of India Rules, 1962, was a subjective satisfaction. He also relied on the case of Pukhraj v. D.R. Kohli AIR 1962 SC 1559, where it was held that the court does not sit in appeal over decision of an officer as to the reasonable belief that goods are smuggled. It can consider whether there is ground which prima facie justifies the reasonable belief. 45.. A grievance was made on behalf of the applicant that a sum of Rs. 11,00,449 was deposited towards tax for four quarters ending June, 1984 and such deposit was made upon a demand from the respondents. The argument is that the respondents had no legal authority to make such demand prior to assessment and therefore the respondents should be reprimanded and directed to refund the amount with interest at the rate of 24 per cent. At another place in the main application it was stated that a notice dated June 4, 1990 (annexed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is quashed. The Commercial Tax Officer will, however, be at liberty to issue a fresh notice under section 10(5) of the 1941 Act in accordance with law. The impugned notices dated February 16, 1990, issued by the Commercial Tax Officer, Howrah Circle and Commercial Tax Officer, Shibpur Charge under section 14(1) of the 1941 Act may be pursued by them in accordance with law, keeping in view the observations made in this judgment. The sum of Rs. 11,00,449 deposited by the applicant will be adjusted towards assessed dues in accordance with assessment orders for periods ending March, 1990. If, however, the whole or any part of the amount cannot be so adjusted, the unadjustable amount should be refunded to the applicant within a period of four weeks from the date of the last assessment up to the period ending March, 1990. No order is made for costs. P.C. BANERJI (Technical Member).-I agree. S.P. DAS GHOSH (Chairman).-I have perused the judgment prepared by Honourable Mr. L.N. Ray, Judicial Member. I agree with all the findings and conclusions arrived at by my learned brother. I, however, want to record my own reading of the provisions of section 14(4) of the Bengal Finance (Sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, any dealer; and (b) All goods kept in any place of business of any dealer, shall at all reasonable times, be open to inspection by the Commissioner. (3) If the Commissioner has reason to suspect that any dealer is attempting to evade payment of any tax under this Act, he may, for reasons to be recorded in writing seize such accounts, registers or documents of the dealer as may be necessary, and shall grant a receipt for the same, and shall retain the same only for so long as may be necessary for examination thereof or for a prosecution. (4) For the purposes of sub-section (2) or sub-section (3) the Commissioner may enter and search any place of business of any dealer or any other place where the Commissioner has upon information received, reason to believe that the dealer keeps or is for the time being keeping any accounts, registers or documents of his business." 51.. At present section 14(4) of the Act runs as follows after several amendments: "14(4) For the purposes of sub-section (2) or sub-section (3) the Commissioner or any person appointed under sub-section (1) of section 3 to assist him, may enter and search any place of business or warehouse of any dealer or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to make a search, he must necessarily hold a bona fide suspicion that the person whose premises is to be searched is a dealer who is evading or attempting to evade payment of taxes and he must also form an opinion that for the purpose of detection or prevention of such evasion of payment of taxes, it will be necessary to seize material accounts, registers and documents from him. Once he arrives at this mental state, he goes to search the premises where, on his information, he believes the accounts, registers and documents are kept". In the unreported Division Bench decision in the case of Ajanta Metal Mart (Appeal No. 17 of 1987 decided on 27th August, 1990 Calcutta High Court) it has been decided by the Division Bench that though *Reported in [1987] 64 STC 291 (Cal). section 41(2) of the Madras General Sales Tax Act, 1959, is not verbatim similar to section 14(2) of our Act, the power of search is implicit in sub-section (2) of section 14 of our Act of 1941, as otherwise the power of inspection will be of little consequence. A scrutiny of the provisions of section 14(4) of our Act of 1941 on and from July 1, 1941 to November 5, 1950, goes to show that the power of search is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was keeping accounts, registers and documents or records of his business in his disclosed place of business. As such, the expression, "reason to believe", mentioned in the latter part of section 14(4) of the Act, cannot have any connection with inspection under section 14(2) of the Act in any disclosed place of business of the dealer. It is only in respect of undisclosed place of business of a dealer that the Commissioner or the concerned officer should have, upon information received, reason to believe that the dealer keeps or is for the time being keeping any accounts, registers, documents or records of his business or any stock of goods for sale. It can thus be seen that the expression, "reason to believe", relates to the expression "or any other place" and not to the expression, "any place of business" of any dealer. After coming across such accounts, registers, documents or records in the undisclosed place of business of a dealer, if the Commissioner or the concerned officer has reason to suspect that the dealer is attempting to evade payment of any tax under the Act, he may, for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer as m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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