9911796707
TMI Blog1996 (5) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... force from May 1, 1994 (hereinafter referred to as "the 1994 Act"). Applicant is not a "stockist" as defined in 1994 Act, as he does not manufacture, make or process the said goods and as he also does not bring the same into West Bengal from any place outside the State for the purposes mentioned in the definition of "stockist" given in section 2(i) of 1994 Act. According to him, ITC being a manufacturer is a stockist, and VST which brings the goods manufactured by M/s. VST Industries Ltd., of Hyderabad into West Bengal is also a stockist. VST is liable to pay luxury tax under 1994 Act for the said "luxuries" sold to the applicant. Despite the fact that the applicant was not a "stockist", respondents 1 to 4 conducted illegal and unauthorised searches and seizures of books of account and documents on February 8, 1995 at Giridharilal s place of business, godown and residence (the last at Malancha Road, Kharagpur). At the residence, the searching party demanded from him books of account and documents of his business. The applicant told them that current records were kept at the registered place of business. They, however, took out two old stock registers from a rack. Nirmal Kumari Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the stock that was sold out at late hours on February 7, 1995. 4.. Subsequently, Giridharilal received a notice dated February 21, 1995, issued by the Assistant Commissioner under section 12(1) of 1994 Act asking him to produce on March 7, 1995 the documents and books of account for the period commencing from May 1, 1994. It is alleged to be an omnibus notice issued by colourable exercise of the power under section 12(1). It is stated in paragraph 17 of the application in RN-58 of 1995 that the applicant had applied on May 31, 1994 for a licence under the 1994 Act intending to import cigarettes and tobacco, but no licence had been granted, and hence no importation was made. 5.. As already stated, Nirmal Kumari, the wife of Giridharilal, is the applicant in RN-59 of 1995. She claims to be the proprietor of M/s. Atul Traders of Baripada, Orissa, dealing in the same classes of goods purchased from ITC and VST, and her business has nothing to do with West Bengal. Sushil Kumar Goel is her brother who is the owner of the godown at 88/88A, Janata Market, Kharagpur. She claims that in course of search and seizure on February 8, 1995 the documents and books of account of her busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tosh Kumar Saha without address. A bound register was found to contain particulars of cash memos from September 15, 1994 to February 6, 1995 with the last entry regarding Cash Memo No. 5531 dated February 6, 1995 for Rs. 33,45,960 in the name of Santosh Kumar Saha. Under section 6 of 1994 Act, only a "stockist" being liable to obtain a licence, applicant Giridharilal Agarwal applied for a licence, but no order thereon was communicated to him. Steps were taken against him under section 12(3) of 1994 Act, as there was reason to believe that he was acting as a "stockist" and as there was reason to suspect that he was attempting to evade luxury tax. In spite of opportunity given, he failed to explain the difference in stock, the position of cash and fund flow and genuineness of the business of M/s. Atul Traders, the business records of which were recovered from his custody. Allegations of threat and coercion in course of search and seizure are all denied. "In fact, Atul Trader is conduit or in other words it is a firm set up by the petitioner for circumventing the provisions of West Bengal Luxury Tax Act and to escape from its penal consequences". The on-going investigation was likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those are kept at Kharagpur itself. 8.. The applicant in RN-58 of 1995 filed an affidavit-in-reply and also a supplementary reply. Allegations made in the affidavit-in-opposition and the supplementary opposition are denied therein. It is said that in this line of business there are "very few instances" where cash memoranda bear addresses of the parties to whom cigarettes are sold. Conditions precedent to the exercise of powers under section 12(3) of 1994 Act were allegedly not complied with. It is denied that records of the business of M/s. Atul Traders were found in the custody of applicant Giridharilal. That is claimed to be a business of his wife in Orissa. The alleged facts ascertained after the seizure are said to have no bearing on the validity of the seizure which is challenged. 9.. In RN-59 of 1995 relating to applicant Nirmal Kumari Agarwal, respondents 1 to 6 have used an affidavit-in-opposition as well as a supplementary affidavit in almost the same terms as in those filed in RN-58 of 1995. Similarly, Nirmal Kumari Agarwal has used an affidavit-in-reply and a supplementary reply mainly denying the allegations contained in the opposition and the supplementary opposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er matter, as may be deemed necessary for the purposes of this Act. (2) All accounts, registers and documents and luxuries kept in any place of business of a stockist shall, at all reasonable times, be open to inspection by the prescribed authority. (3) If the prescribed authority, or any person appointed under sub-section (1) of section 3 to assist it, has reasons to suspect that any stockist is attempting to evade payment of luxury tax, it or he may enter into and search any place of business and, for reasons to be recorded in writing, seize such accounts, registers or documents of the stockist as may be necessary, for determination of liability to pay luxury tax by such stockist or for assessment of such tax or for determination of interest or for any other purposes as may be required by or under this Act." 13.. The prerequisite of a search, according to section 12(3), is that the authority should have "reasons to suspect" that any stockist is attempting to evade payment of luxury tax and the further precondition of a seizure is to record the reasons for seizure in writing. Moreover, the purpose of search and seizure under section 12(3) is to determine liability to pay lux ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at appearing from records and accounts concerning the same. Therefore, the use of the words "any stockist" before the words "is attempting to evade" in section 12(3)"cannot be interpreted in the sense that there should necessarily be a prior determination that the person whose place of business is subjected to search and seizure is a stockist. Such a determination may, in our opinion, be made in course of the search and seizure or even thereafter. If this interpretation is not adopted, namely, if the contention of Mrs. Chandrima Bhattacharya, learned advocate for the applicant, is accepted, section 12(3) will become meaningless in many deserving cases of search and seizure. The provision is clearly meant to prevent or detect cases of attempted evasion of tax. If that predominant intention cannot be fulfilled by an interpretation, it should be avoided. It is necessary to interpret the provision in the manner in which it can be worked out in aid of the statute. Thus, absence of a determination of the status of the applicant as a stockist prior to the impugned search and seizure does not vitiate the same. 14.. Mrs. Chandrima Bhattacharya, learned advocate for the applicant, at first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the respondents, submitted that the impugned search and seizure were made consistent with not only the object, purpose and language of section 12(3) of 1994 Act but also with the ratio of the three reported decisions on which Mrs. Chandrima Bhattacharya, appearing for the applicant, relied. 15.. Together with the affidavit-in-opposition of the contesting respondents, certain annexures were filed. Subsequently a bunch of papers was filed with copies made over to the learned advocate for the applicants. The last bunch of documents includes reports relating to searches and then seizures at the place of business and residence of the applicant, Giridharilal Agarwal in RN-58 of 1995 which is admittedly the common residence (when she visits Kharagpur) of the wife Nirmal Kumari Agarwal, the applicant in RN-59 of 1995. The said reports disclose that an information was received about alleged evasion of luxury tax by Giridharilal carrying on business under the trade name of Shanti Sons at 61, Janata Market having godowns at 87/87A, 88 and 89 of Janata Market and he was maintaining business records also in the name of Atul Traders of Baripada in Orissa, apart from in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation, and accordingly they recorded that they had reasons to believe that Giridharilal was acting as a stockist of luxuries and hence they proceeded to seize under section 12(3). The second "report" regarding search and seizure at the residence also notes detection of suspicious documents indicating Giridharilal s attempt to evade tax by carrying on business in luxuries as a stockist in different names and styles including the name of Atul Traders and hence the Commercial Tax Officer proceeded to seize under section 12(3) for carrying out further investigation, which is certainly a purpose of 1994 Act. The main object of the searches and seizures was to work out the reasons to suspect that Giridharilal was carrying on business as a stockist under the Act but was evading payment of luxury tax. In our opinion, respondents have been able to establish that the pre-requisites of section 12(3) were complied with before the searches and seizures were effected. 16.. By the supplementary affidavit-in-opposition, the respondents brought to the notice of this Tribunal certain findings of the investigation following the seizures. Mrs. Chandrima Bhattacharya, learned advocate for the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were found, is kept aside, it cannot be said that the officers who made the searches and seizures at the place of business and godowns and at the residence did not entertain the required "reasons to suspect". Being officers working in the tax department, their estimation of the circumstances including the information received should be held to be sufficient basis for actions taken. Even if the court thinks that it could not come to the same conclusion from the said circumstances, its own estimation could not replace that of the officers who effected the searches and seizures. It is true that the recorded reasons under the title "report" were not disclosed along with the affidavit-in-opposition, but that does not make the recorded reasons any less acceptable. It was stated in the affidavit-in-opposition that the reports prepared by the searching parties could not be annexed since the investigation involving numerous seized documents was still in progress. In the case of State of Gujarat v. Mohanlal Jitamalji Porwal AIR 1987 SC 1321, the reason to believe was entertained to the effect that the chain recovered from the person of respondent No. 1 was a smuggled one on the basis of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications like the present ones. In our opinion, if the ratio of the decision in State of Gujarat v. Mohanlal Jitamalji Porwal AIR 1987 SC 1321 is otherwise applicable to the instant case, that does not become inapplicable merely on the ground that the present applications are writ applications under article 226 of the Constitution of India. 18.. Mr. Bajoria submitted that the necessary mental state of forming the reasons to suspect within the meaning of section 12(3) was arrived at not only from the information and other circumstances but also from the inspection of business records done under section 12(2) prior to search and seizure. In this connection he refers to the "reports" drawn up by the searching and seizing parties. 19.. The impugned notice under section 12(1) at annexure "B" of the application in RN-58 of 1995 was alleged to be omnibus in nature. But we are unable to agree. Because, the notice specified that all books of account and connecting documents relating to the business run under the name and style of Shanti Sons should be produced for the period commencing from May 1, 1994 till the date of production thereof, except those already seized. Since the period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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