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TMI Blog2014 (7) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... them. But it is apparent that the entire procedure was given go-bye by the respondents. Even they have not cared to call any of the witness at the time of search and seizure. It is not the case of respondents that no witness was available or attended the aforesaid search and seizure, in absence of which the entire seizure can be held to be illegal. The action of the respondents in respect of search and seizure cannot be approved by this court and it is held that the entire search and seizure was illegal - The respondents have seized various documents alleging evasion of tax by the petitioner. Though the entire search and seizure has been held to be illegal, but the respondents may proceed on the basis of documents seized by them to find out whether there was any evasion of tax by the petitioner. However, the evidence so collected by the respondents in respect of evasion of tax by the aforesaid search and seizure, which has been held to be illegal, the authority considering the matter shall evaluate the evidence with great caution, as per the law laid down by the apex court in Baldev Singh [1999 (7) TMI 630 - SUPREME COURT] - Decided in favour of assessee. - W.P. No. 14103 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiates. The petitioner has also raised allegations in respect of behaviour, use of language by the authorised officers, and challenged the same on the grounds, that procedure at the time of conduction of search and seizure was not followed. Engagement of private security personnel, avoiding local police to help the aforesaid persons for the search and seizure is also a ground to challenge the search. The facts of the case are: (a) that the petitioner is a body corporate registered under the Companies Act as a limited company and is engaged in the business of mining operations at village Gudri, Tehsil Bahoriband, District Katni. It is having mines at village Pipraud, National Highway No. 7, Katni and processing unit for marbles at Gudri. The company is having its registered office at E3, Mangolpuri, Industrial Area, New Delhi and work site at village Bahoriband, District Katni. The petitioner is a registered dealer under the M.P. Value Added Tax Act, 2002 (hereinafter referred to as the VAT Act , for short) having TIN No. 23606206423 and is regularly paying the value added tax by filing return to the concerned-authority. The petitioner's assessments have been completed up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency belonging to ISF (Indian Security Force, Jabalpur). These persons were dressed in black clothes. Section 55 of the VAT Act does not provide any assistance to such search party of private security forces. Sub-section (7) of section 55 of the VAT Act authorizes the Commercial Tax Officer to take assistance from the local police officers. (f) That during the search and till the aforesaid records were intended to be taken away by the search party, the entire staff was cooperative with the search party. (g) That because of the aforesaid request made by the employees of the petitioner to the search party for issuance of receipt, the behaviour of search party changed and the private security force manhandled the staff of the petitioner. Derogatory and abusive languages were used by respondent No. 5 with the staff of petitioner. (h) That the procedure as envisaged under section 55 of the VAT Act and section 100 of the Cr. P.C., was not followed. Neither two independent witnesses were called at the time of search, nor panchnama was prepared and no receipt was issued by the search party, which was contrary to the statutory provisions and mandate of section 100 of Cr. P.C. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigate into the matter of tax evasion by the petitioner. On August 18, 2010, the Deputy Commissioner, Anti Evasion Bureau (A.E.B.), Jabalpur had confidentially communicated to the Commissioner, Commercial Tax that there are sufficient material to believe that the petitioner is evading huge tax with respect of sale of marbles . On such information, the Commissioner, Commercial Tax, had directed investigation into the complaint of tax evasion by the petitioner. (b) That the preliminary report dated September 7, 2010 was sent by the Deputy Commissioner, A.E.B., Jabalpur to the Commissioner, Commercial Tax, which reveals that there was sufficient material so as to reasonably believe that the petitioner was indulged in tax evasion, while showing the sales to be of inter-State instead of intra-State . (c) That the A.E.B. was constituted vide order dated April 24, 2007, annexure R1. The Commissioner, Commercial Tax, on August 25, 2010 in exercise of powers conferred under section 55 of the VAT Act had delegated his powers to the officers mentioned in order to exercise the powers under section 55(3) to 55(7) of the VAT Act with respect to investigation into tax evasion by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooperate with the investigation of the case. The copies of the orders are enclosed as annexure R6. (h) That thereafter on August 31, 2010 again the inspection continued and the documents which were kept in two rooms were put up in two boxes, and were carried out from the petitioner's premises. (i) That on September 1, 2010 the investigation for tax evasion at the petitioner's site was completed by taking physical stock. On September 3, 2010 a notice was issued to the petitioner for seizure of documents as required under the proviso to sub-section (4) of section 55 of the VAT Act. A copy of notice is enclosed as annexure R7. The case was fixed for September 7, 2010 and on September 7, 2010 an advocate Shri Manoj Agrawal along with company accounts executive appeared and because of absence of regular books of account they sought time to produce the regular books of accounts. Time till September 23, 2010 was granted to them as per annexure R8. (j) That on September 10, 2010, another advocate Shri Abhishek Oswal, appeared on behalf of the petitioner and filed an application dated September 9, 2010, annexure R9, in which a request was made to inspect the record which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether and they need refreshment and food. In the situations of investigation it is not possible to get any cooperation from the dealer and the atmosphere normally becomes tense, so it is necessary for the officers to have some people to provide them refreshment and water, etc. The private security people were allowed for the aforesaid purposes and no other work was taken from them. The vehicles of the officers were also required to be parked under the supervision of some person other than the person associated with the dealer. In case of any resistance only the police officers are called for. In this regard the Commissioner had issued instructions, annexure R15. (o) That under the proviso of sub-section (4) of section 55 which requires that for seizure, the Commissioner shall serve upon the dealer, a notice in the prescribed form, and on the date fixed, he shall open the seal of the seized box or bag or container or packet in the presence of the dealer or any agent of the dealer entitled to appear in accordance with the provisions of section 23. Thereafter in presence of at least two other persons, the examination of the document is required to be done. Thereafter a receipt of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch party to prepare a list of all things seized in the course of search and other places, in which they are respectively found the list shall be prepared by such officer and signed by such witnesses. In this case though the list was not prepared but the documents were placed in boxes. The search party was duty-bound to prepare a list duly signed by two independent witnesses recording the facts of taking possession of the documents and a copy of the same ought to have been supplied to the petitioner as provided in sub-section (7) of section 100 of the Cr. P.C. In para 5, it is stated that the employees of the petitioner had not caused any obstruction during the course of search or thereafter, except making a request to the officers of the search party for providing a copy of the receipt of documents taken in possession by the search party. The F.I.R., was made at 1.35 a.m., on August 29, 2010, while the staff of the petitioner itself had called the police around 10 p.m., on August 28, 2010, which is evident from annexure P1 a copy of the letter addressed to T.I. Saleemnabad. Another letter was addressed to search party has been also filed as annexure P2 with the petition, by whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 7, 2010 and after examination of the documents, the Commercial Tax Officer, Anti Evasion Bureau, Jabalpur, has seized the documents necessary for the purpose of scrutiny and receipt thereof was issued to the authorized signatory of the petitioner on October 7, 2010 itself. A copy of seizure memo and statement of Shri Pushpraj Singh is filed as annexure R17. (e) That thereafter the competent officer, the Assistant Commissioner, Commercial Tax, Katni, has undertaken the proceedings for scrutiny of documents, but inspite of extending more opportunities the petitioner has not rendered co-operation. That respondent No. 5 has filed separate return reiterating the same contentions, which were raised by other respondents. From the perusal of the aforesaid, we find that this petition involves following questions for our consideration: (1) Whether the authorisation/search letter was issued in accordance with law? (2) Whether before inspection/search such authorisation was shown to the persons in occupation of the premises of petitioner? (3) Whether independent witnesses were called at the time of search and seizure? (4) Whether any receipt was issued by the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f authorisation was shown to any of the employees of the petitioner, who were present on various premises of the petitioner, which were searched by the respondents. If the authorisation letter was shown to any of the employees then a specific note/panchnama ought to have been prepared by the officers of the respondents about showing such authorisation to the employees of the respondents. So far as the contention of the respondents that no such ground was raised by the petitioner in the petition is concerned in this regard para 5.3 may be looked into, in which the petitioner has specifically stated that it is pertinent to note that no authorisation was shown by the group leader to the persons in-charge at various places . The respondents in reply nowhere stated that such letter of authorisation was shown to any of the employee of the petitioner. Though initially a short reply was filed by the respondents, but later on the respondents have filed additional reply in which also this fact has not been mentioned by the respondents that such authorisation was shown to the employees of the petitioner, in possession of various premises, which were inspected and search was carried out. Apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being filed herewith as annexure R5. Bare perusal of the F.I.R., it is apparent that Crime No. 287/2010 dated August 29, 2010 has been registered at police station Saleemnabad for offence punishable under sections 147, 353 and 342 of IPC against Jayat Goswami, Pushpraj Singh, Fotedar Mishra and Anil Gupta. The answering respondents respectfully submit that the accused persons of the aforesaid crime have made an application for grant of bail before the court of CJM, Katni and the learned CJM vide order dated August 30, 2010 and August 31, 2010 has granted bail with the condition that they should fully co-operate with the investigation of the case. A copy of the order dated August 30, 2010 and August 31, 2010 are being filed herewith as annexure R6. From the perusal of aforesaid, it is apparent that though the documents were sealed for the purposes of effecting seizure, but no witness was called on the spot for seizure of the documents. The contention of the petitioner is, that without preparing seizure of documents when the officers of the respondents were taking over the boxes, in which documents were kept, they demanded the receipt and insisted for the seizure memo and then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dged on August 29, 2010 at 1.35 a.m. Meaning thereby that the dispute arose at the time when the officers of the respondents tried to take over the sealed boxes from the premises of the petitioner. Even in annexure R5 it is not stated that the seizure memo was prepared or any receipt was issued in respect of the taking over of three boxes from the premises of the petitioner. The aforesaid circumstances reveals that the documents were sealed in three boxes and the respondents were taking over the aforesaid documents from the premises of the petitioner. No seizure memo was prepared. No receipt was issued to the employees present on the spot in respect of the boxes containing documents, from the premises of the petitioner. It is also apparent that till 1.35 a.m. on August 29, 2010 police was not informed, in respect of inspection and seizure, by the respondents. In the light of the aforesaid facts the statutory provision may be looked into. Section 55 of the VAT Act is relevant, which provides power of Commissioner to investigate into tax evasion by the dealer. Section 55 is quoted as under: 55. Detection and checking evasion of tax by dealers liable to pay tax and power of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize such documents as he considers necessary and grant a receipt thereof to the dealer. (5) For the purpose of clause (b) of sub-section (3), the Commissioner may- (a) enter and search any place of business of such dealer or any other place whether such place be the place of his business or not, where the Commissioner has reason to believe that the dealer keeps or is for the time being keeping any accounts, registers or documents of his business or stock of goods relating to his business and the Commissioner may, for exercising the powers under this clause, seal or break open the lock of any door, box, locker, safe, almirah or any other receptacle in order to continue the inspection subsequently or where the keys thereof are not produced on demand or are not available; (b) also search any person who leaves or is about to enter or is already in the place referred to in clause (a), if the Commissioner has reason to suspect that such person has secreted about his person, books of accounts or other documents relating to the business of such dealer; and (c) if considered necessary, get the search proceedings video graphed or recorded in suitable electronic medium for use as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pass an order imposing a penalty not less than three times but not exceeding 3.5 times of the amount of tax referred to in clause (b). (d) The Commissioner may, at any time after the service of the notice under clause (b) and before passing an order imposing penalty under clause (c), release the goods seized if the dealer or the person from whom the goods were seized furnishes security in the form of cash security or bank guarantee to the satisfaction of the Commissioner, in each case for such reasonable amount as the Commissioner may specify by order in writing with due regard to the amount of penalty proposed. On payment by the dealer of the penalty imposed upon him under clause (c), if the security furnished is in the form of bank guarantee, the bank guarantee shall be released and if such security has been furnished in the form of cash security, it shall be adjusted towards the penalty so imposed and the balance, if any, shall be refunded to the dealer. (e) Where no security is furnished under clause (d), the dealer shall pay the amount of penalty, within thirty days of the service of the order imposing penalty on him and on payment of such amount goods seized shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h), any such order made shall be deemed to be an order relating to assessment of tax against a dealer under section 20 and shall be subject to the same condition as to appeal, revision or any other remedy under this Act. (7) Where the Commissioner, apprehends any resistance to entry, search or seizure of goods he may for reasons to be recorded in writing requisition the services of any police officer of the State Government, having jurisdiction over the local area in which such entry, search or seizure is to be made, to assist him for all or any of the purposes specified in sub-section (3) or clause (a) of sub-section (5) or clause (a) of sub-section (6) and it shall be the duty of such police officer to comply with such requirement. (8) The Commissioner while making entry, search and seizure under this section shall, unless otherwise expressly provided by or under this Act exercise the same power and follow the same procedure as are exercised by and are required to be followed by a police officer in relation to entry, search and seizure under the provisions of the Code of Criminal Procedure, 1973 (No. 2 of 1974). The aforesaid provision specifically provides that an insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide that the Commissioner can take over the sealed documents along with him without issuance of any receipt to the dealer. In both the circumstances he was required to record his reasons in writing, but as stated hereinabove no material is produced before this court that after the search any such reasons in writing were recorded by the officer incharge of the search. Apart from this, there is no material before this court to show that before taking over the sealed boxes from the premises of the petitioner any receipt was issued in this regard. Sub-section (8) provides that the Commissioner while making entry, search and seizure under this section shall, unless otherwise expressly provided by or under this Act exercise the same power and follow the same procedure as are exercised by and are required to be followed by a police officer in relation to entry, search and seizure under the provisions of the Code of Criminal Procedure, 1973. The relevant provision in this regard is section 100 of Cr. P.C., which provides for search of premises. For ready reference we quote section 100 of the Cr. P.C., which reads thus: 100. Persons in-charge of closed place to allow search.-(1) Wheneve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory provision as quoted hereinabove and factual position of the present case, legal position may be examined. In Radha Kishan v. State of Uttar Pradesh AIR 1963 SC 822, the apex court considering the question in respect of search in contravention of sections 103 and 165 of Cr. P.C., held that where the provisions of sections 103 and 165 of Cr. P.C., are contravented, the search can be resisted by the person whose premises are sought to be searched. It may also be that, because of the illegality of the search, the court may be inclined to examine carefully the evidence regarding the seizure. But beyond these two consequences no further consequence ensues, and the seizure of the articles is not vitiated. In Pooran Mal v. Director of Inspection (Investigation), Income-tax, New Delhi [1974] 93 ITR 505 (SC); AIR 1974 SC 348, the apex court while considering the provision of income-tax in respect of search and seizure held that the provisions of section 132(1), (5), 132A and rule 112A are directed against persons who are believed on good grounds to have illegally, evaded the payment of tax on their income and property, drastic measures to get at such income and property with a vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus: 23. In Mohinder Kumar v. State, Panaji, Goa [1998] 8 SCC 655, a three-Judge Bench (to which one of us, Sujata V. Manohar, J. was a party) once again considered the requirements of sections 42 and 50 of the Act. In that case the police officer 'accidentally' reached the house while on patrol duty and had it not been for the conduct of the accused persons in trying to run into the house on seeing the police party, he would perhaps not have had any occasion to enter the house and effect search. But when the conduct of the accused persons raised a suspicion, he went into the house and effected the search, seized the illicit material and caused the arrest. The court opined that in the facts and circumstances of the case, when the investigating officer accidentally stumbled upon the offending articles and himself not being the empowered officer, then on coming to know that the accused persons were in possession of illicit articles, then from that stage onwards he was under an obligation to proceed further in the matter only in accordance with the provisions of the Act. On facts it was found that the investigating officer did not record the grounds of his belief at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst an accused, unless the prosecution establishes it to the satisfaction of the court, that the requirements of section 50 were duly complied with. 26. The safeguard or protection to be searched in presence of a Gazetted Officer or a Magistrate has been incorporated in section 50 to ensure that persons are only searched with a good cause and also with a view to maintain the veracity of evidence derived from such search. We have already noticed that severe punishments have been provided under the Act for mere possession of illicit drugs and narcotic substances. Personal search, more particularly for offences under the NDPS Act, are critical means of obtaining evidence of possession and it is, therefore, necessary that the safeguards provided in section 50 of the Act are observed scrupulously. The duty to inform the suspect of his right to be searched in presence of a Gazetted Officer or a Magistrate is a necessary sequence for enabling the concerned person to exercise that right under section 50 because after Maneka Gandhi v. Union of India [1978] 1 SCC 248, it is no longer permissible to contend that the right to personal liberty can be curtailed even temporarily, by a proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prosecution must think itself for its lapses. Indeed in every case the end result is important but the means to achieve it must remain above board. The remedy cannot be worse than the disease itself. The legitimacy of judicial process may come under cloud if the court is seen to condone acts of lawlessness conducted by the investigating agency during search operations and may also undermine respect for law and may have the effect of unconscionably compromising the administration of justice. That cannot be permitted. ... 43. . . . Prosecution cannot be permitted to take advantage of its own wrong. Conducting a fair trial for those who are accused of a criminal offence is the cornerstone of our democratic society. A conviction resulting from an unfair trial is contrary to our concept of justice. Conducting a fair trial is both for the benefit of the society as well as for an accused and cannot be abandoned. While considering the aspect of fair trial, the nature of the evidence obtained and the nature of the safeguard violated are both relevant factors. Courts cannot allow admission of evidence against an accused, where the court is satisfied that the evidence had been obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them. But it is apparent that the entire procedure was given go-bye by the respondents. Even they have not cared to call any of the witness at the time of search and seizure. It is not the case of respondents that no witness was available or attended the aforesaid search and seizure, in absence of which the entire seizure can be held to be illegal. In the aforesaid circumstances, the action of the respondents in respect of search and seizure cannot be approved by this court and it is held that the entire search and seizure was illegal. Now after declaring the search and seizure as illegal what directions can be issued is to be seen. The respondents have seized various documents alleging evasion of tax by the petitioner. Though the entire search and seizure has been held to be illegal, but the respondents may proceed on the basis of documents seized by them to find out whether there was any evasion of tax by the petitioner. However, the evidence so collected by the respondents in respect of evasion of tax by the aforesaid search and seizure, which has been held to be illegal, the authority considering the matter shall evaluate the evidence with great caution, as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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