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TMI Blog2019 (3) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. It is also well established that the reasons may or may not be communicated to the assessee but the same should exist on record. The petitioner has thus failed to even establish that the procedure followed during the search was illegal or tainted with mala fides. Thus, the writ petition fails and is liable to be dismissed. Validity of the confiscation order passed under Section 130 of the UPGST Act - Held that:- In the present case, the petitioner had informed the authorities concerned to defer the adjudication on confiscation because the issue of validity of the search was engaging the attention of the High Court, despite the fact that there was no stay order restraining the respondents from passing the confiscation order but in all fairness as the hearing was going on at the High Court, the respondent authorities should have awaited the outcome of the challenge made to the search by the petitioner - the matter remanded before the said authority to adjudicate on the question of confiscation afresh. - Writ Tax No. - 619 of 2018, 618 of 2018, 1528 of 2018 - - - Dated:- 15-3-2019 - Pankaj Mithal And Pankaj Bhatia JJ. For the Petitioner : Ritvik Upadhya, Shubham Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-company Sri Sunil Gupta was not present at the time of search, however, he was called and was manhandled and pressurized to admit large scale tax evasion. It is alleged that he was asked to sign on some blank papers on 13.3.2018, which were used for drawing the Panchnama on 14.3.2018. The signature of Sri Sunil Gupta, on blank papers, was used by exercising duress, thus, the said Panchnama has no legal sanctity. It has been further stated that the stocks of the raw-materials as well as finished goods were not weighed by the respondent nos. 3 and 4 despite the insistence of Sri Sunil Gupta. The search party was informed that the raw-materials were duly covered by the tax invoices and E-way bills and they were fully reflected in the books of accounts. It is further alleged that in the factory premises the computerized weigh bridge is installed, however, the respondents did not weigh the raw-materials as well as the finished products and recorded highly exaggerated figures on the basis of assumptions in the Panchnama. It has been alleged that the list attached to the Panchanama is based on mere physical verification and eye estimation and the entries recorded therein are arbitrary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search and seizure was done in complete disregard to the mandatory provisions of subsection 10 of Section 67 as also the provisions of Section 100 and Section 165 of the Cr.P.C. It has been argued at length that ''reasons to believe'' are mandatory and a sine qua non before authority empowered under the Act, exercises its powers under Section 67 of the UPGST Act. Mr. Upadhyay, learned Senior Counsel, has argued that all the returns were filed on a monthly basis along with the records of the goods of raw-materials and the finished products with the petitioner and there was no basis or material available with the respondent authorities to form a 'reason to believe' thus the powers have been exercised without there being any foundation or 'reasons to believe'. It is also argued that the 'reasons to believe' should be based upon tangible material and should not be based upon fanciful consideration as the exercise of powers of search and seizure is an exception to the fundamental right of the petitioner guaranteed under Article 19(1)(g) of the Constitution of India and this should be exercised strictly within the parameter prescribed for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Juhi Alloys Limited worth ₹ 55.10 crores from 267 bills and from 166 bills a sale of ₹ 29.63 crores was done to another sister concern namely M/s. Rimjhim Stainless Steel Limited. It is further stated that there is another sister concern of the petitioner namely M/s. Vandna Steel Private Limited and that Juhi Alloys Limited and M/s. Rimjhim Stainless Steel Limited has sold all the raw-materials to M/s. Vandana Steel Private Limited in the month of June itself. M/s Vandana Steel Private Limited in the month of June 2007, has again shown the sale of some goods valued at ₹ 6.49 crores and in the month of July, 2017 a sale of ₹ 41.40 crores to the petitioner. It has been further stated that three sisters concern and the petitioner are working in the same premises and they have used invoices of different series which is against the provision of section 22 of the U.P. Value Added Tax Act 2008 read with Rule 44(10) of the U.P. Value Added Tax Rules as well as under the provisions of UPGST Act. The Department found that the said transactions was doubtful and, thus, the premises of the petitioner were inspected together. It has been further stated that the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner was using two series of tax invoices, one series of tax being in relation to the goods manufactured on which excise duty was payable under the Central Excise Act and the other series of tax invoices was in relation to trading activity carried out by the petitioner. It has also been stated that two series of tax invoices were used during the period prior of enforcement of U.P. GST Act and in the returns filed these facts were well disclosed and were never objected to by the respondents. It is also stated that this practice of maintaining two sets of invoices, one for manufacture goods and one for drawing goods was the accepted norm prior to U.P. GST Act coming into force. It is further stated that there is no material in the counter affidavit to justify the allegations that the department has 'reasons to believe' that the petitioner was indulging in large scale taxes evasion which led to the exercise of powers under Section 67 of U.P. GSt Act and, thus, the 'reasons to believe' even if any were based upon no material. As regards the allegations in the counter affidavit pertaining to the goods intercepted on 11.3.2018. It is stated that the same was subject m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasijudicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. The said judgement relates to recording all reasons for exercise of administrative decisions and judicial decisions and the Hon'ble Supreme Court has held that recording all reasons while exercising judicial, quasi-judicial or even administrative powers are indispensable component of decision making process, however, the power exercises in the present case is not a part of the decision making process, thus, the said judgement has no applicability because of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1975 the reasons for the belief found should be recorded. 8.5 .......................................... 8.6 Such reasons, however, may have to be placed before the Court in the event of a challenge to formation of the belief of the authorized official in which event the court (exercising jurisdiction under Article 226) would be entitled to examine the relevance of the reasons for the formation of the belief though not the sufficiency or adequacy thereof. During the course of hearing learned Standing Counsel for the Department had placed before this Court certain documents relating to the authorization for inspection of search in terms of Rule 139(1) of the U.P.GST Rules to impress the Court that based upon the materials, 'reasons to believe' were recorded. The Court has perused the said 'reasons to believe', however, para 6 and 7 of the counter affidavit, which recorded the reasons for carried out the search and seizure, are not mentioned in the 'reasons to believe' as brought before this Court. Learned counsel for the petitioner has heavily relied upon para 6 and 7 of the counter affidavit to demonstrate that the said averments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate that the chance witnesses were private off-roll employees employed by the Officers of the SIB Commercial Tax/GST, Kanpur and had been working with the SIB Officers for the last ten years. It is stated that this fact clearly demonstrates that the procedure for search was not in accordance with the provisions of sub-section 4 of section 100 of the Cr.P.C. The petitioner has reiterated in the written arguments that fair procedures were not adopted in preparation of the list attached to the Panchnama despite the weighing scale available in the factory premises itself. The petitioner has also relied upon two judgements of Hon'ble Supreme Court in case of CIT vs. Utkal Alloys Ltd. (2009) 319 ITR 339 (Ori.), para 10, 12 and 13 and in case of Tata Chemicals Ltd. vs. Commissioner of Customs, (2015) 320 E.L.T. 45 (SC), para 15, 16 and 17 and a judgement of Delhi High Court in the case of CIT vs. Balaji Wire P. Ltd., (2008) 304 ITR 393 (Del) para 16 to 20. In view of submissions made by the petitioner and the respondents points that emerge for adjudication are whether the search and seizure was carried out by observing the 'substantive due process' as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non-observance of procedures prescribed during the search and seizure, the two questions raised in the present petition highlighting the non-following the procedures relate to not carrying out the actual weighment of goods, the preparation of inventory basis of eye estimation as well as the chance witnesses not being independent, we are of the view that the chance witnesses or the witnesses to the search in the present case cannot be termed as interested witnesses as the Hon'ble Supreme Court has held that while questioning the independence of the witnesses it has to be categorically established that the witnesses were dependent or their livelihood on the investigating agency, which fact although pleaded, has not been established by any cogent evidence. As regards the overwriting in the weighment sheets prepared by the Department, we are persuaded to accept the version of the respondent authorities that the overridings were done at the time of weighment due to recordings made by mistake which were corrected and the corrected sheets were got signed by the petitioner. The petitioner has thus failed to even establish that the procedure followed during the search was illegal or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the respondent no. 3 and under challenge in Writ Tax No. 618 of 2018. With regard to Writ Tax No. 1528 of 2018, Sri Shubham Agrawal, learned counsel for the petitioner, adopted the argument of Sri V.K. Upadhyay, Senior Counsel, and in this case, the respondents have placed before this Court the reasons to believe as recorded in their file on 26.10.2018. The said reasons, on perusal, do not appear to be fanciful or arbitrary and as held hereinabove that the Court cannot go into the question of validity of the reasons as an Appellate Court and for the similar reasons as recorded hereinabove, the Writ Tax No. 1528 of 2018 fails and is dismissed. Since there is no challenge or order on record confiscating the goods, the said question has not been considered. With regard to Writ Tax No. 659 of 2018 (M/s Shri Balaji Concast (Unit-I) Private Ltd. vs. State of U.P. And 2 others), this case was heard along with Writ Tax Nos. 619 of 2018, 618 of 2018 1528 of 2018. However, the reasons to believe as recorded by the respondents were not produced by the learned Standing Counsel and for this reason the Writ Tax No. 659 of 2018 is not being decided alongwith connected cases. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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