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TMI Blog1967 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... x, must fall on the ground of repugnancy. Considering the fact that the legislature added this cornpulsory proviso later, it is clear that the legislature intended that the main part of the section and the second proviso should go together. It is difficult to hold therefore that after the introduction of the second proviso in 1961, the legislature could have intended that the main part of sub-section (4) should stand by itself. We are therefore of opinion that sub-section (4) with the two provisos must fall on this narrow ground. We therefore agree with the High Court and strike down sub-section (4) but for reasons different from those which commended themselves to the High Court. Cannot agree with the High Court that sub-sections (2) and (3) of section 41 of the Act are unreasonable restrictions on the right to hold property or carry on trade for reasons indicated. We are of opinion that they are reasonable restrictions which are protected by clauses (5) and (6) of article 19 of the Constitution. Thus the final order of the High Court allowing the writ petitions must stand, though we do not agree with the interpretation of the High Court with respect to sub-section (2) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to search the premises and seize either the account books or the goods found therein. Secondly, it was contended that if section 41(4) authorised seizure and confiscation of goods, it was beyond the legislative competence of the State Legislature, for it could not be covered by item 54 of List II of the Seventh Schedule to the Constitution relating to taxes on the sale or purchase of goods . Lastly, it was contended that if the various provisions in section 41 were capable of being construed as authorising search and seizure, the provisions contained therein were unconstitutional in view of article 19(1)(f) and (g) of the Constitution. It is not necessary to refer to the facts in the other petitions which have resulted in the other appeals before this court because in those cases also there was search and seizure by the officers of the department and their action is being attacked on the same grounds. All the petitions were opposed on behalf of the State Government and its case was, firstly, that section 41 authorised search and seizure; secondly, that the State legislature was competent to enact section 41(4) under item 54 of List II of the Seventh Schedule to the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and that is how the matter has come before us. The same three questions which were raised before the High Court have been raised before us on behalf of the appellant. Before, however, we deal with them we would briefly refer to the provisions of the Act which are material for our purposes. Section 3 is the main charging section which provides that every dealer whose total turnover for a year is not less than ₹ 10,000. . . . shall pay a tax for each year at the rate of 2 per cent. of his taxable turnover. The point at which tax has to paid on single point taxable goods is indicated in the First Schedule to the Act and that will show that in a large majority of cases the tax has to be paid at the point of first sale in the State, though in some cases it has to be paid at the point of first purchase or of last purchase in the State. Section 4 is another charging section in respect of declared goods and the Second Schedule to the Act deals with the point at which tax has to be paid in respect of such goods. That Schedule also shows that in a majority of cases the tax has to be paid at the point of first sale in the State, though in some cases it has to be paid at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any office, shop, godown, vessel or vehicle, or any other place of business or any building or place of the dealer, but not accounted for by the dealer in his accounts, registers, records and other documents maintained in the course of his business: Provided that before ordering the confiscation of goods under this sub-section, the officer shall give the person affected an opportunity of being heard and make an inquiry in the prescribed manner : Provided further that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation---- (a) in cases where the goods are taxable under this Act, in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater; and (b) in other cases, a sum of money not exceeding one thousand rupees. Explanation.----It shall be open to the Government to empower different classes of officers for the purpose of taking action under sub-sections (1), (2) and (3). It will be seen from the above brief review of the provisions of the Act that it mainly deals with sales tax to be levied at the point of first sale in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be seen that sub-section (2) differs from sub-section (1) in one respect. In sub-section (1) the dealer is required to produce his accounts, etc. and to furnish other information relating to his business and it is left to the dealer to produce what accounts he may say he has. The legislature was, however, cognizant of the fact that a dealer may not produce all accounts or furnish all information even though required to do so under sub-section (1). Therefore, sub-section (2) provides that all accounts, etc., of the dealer shall be open to inspection. It also provides that the dealer's offices, shops, godowns, vessels or vehicles shall be open to inspection. It is true that generally speaking a power to inspect does not necessarily give power to search. But, where as in this case, the power has been given to inspect not merely accounts, registers, records and other documents maintained by a dealer but also to inspect his offices, shops, godowns, vessels or vehicles, it follows that the empowered officer would have the right to enter the offices, etc., for purposes of inspection. Naturally, his inspection will be for purposes of the Act, i.e., for the purposes of seeing that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that, as the officer is entitled to inspect all accounts, etc., maintained by the dealer, he can search for them even in the dealer's residential premises. But we do not agree with this contention, for we have found the power of search by reading the power of inspection of offices, etc., with the power of inspection of accounts, etc., and the power of inspection of goods. Sub-section (2) does not give any power of inspecting the residential accommodation of the dealer and therefore it cannot be read as giving the power of search of the residential house for purposes of the Act. But where it is a case of business-cum-residence, the power of search will be there, for under sub-section (2) all offices, shops, godowns, vessels or vehicles of the dealer are open to inspection. Let us now see what light is thrown on the interpretation of sub-section (2) by the proviso and whether the interpretation we have put on the main part of sub-section (2) is supported by the proviso. The proviso lays down that: (i) no purely residential accommodation shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at so far as a general principle of construction of a proviso is concerned, it has been broadly stated that the function of a proviso is to limit the main part of the section and carve out something which but for the proviso would have been within the operative part. But it was further observed that the proviso in that particular case was really not a proviso in the accepted sense but an independent legislative provision by which to a remedy which was prohibited by the main part of the section, an alternative was provided. These three cases show that in exceptional circumstances a proviso may not be really a proviso in the accepted sense but may be a substantive provision itself. It seems to us that the proviso under consideration now is of this exceptional nature. As we have already held, there is no provision in the main part of the sub-section for searching purely residential premises. Therefore when the proviso provides for such search it is providing for something independent of the main part of the sub-section. Further the second part of the proviso which talks of searches made under this sub-section shows that the power of inspection provided in the main part of the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place searched is purely residential accommodation it cannot be searched without a search warrant from a Magistrate. It naturally follows that, if it cannot be searched without a search warrant, it is not open to the empowered officer to seize anything from a residential accommodation for he cannot enter and search it unless he has a warrant from a Magistrate to do so. The next question relates to the legislative competence of the State legislature to enact sub-section (4). This sub-section provides for seizure and confiscation of any goods found in any office, etc., including purely residential accommodation, after search, if they are not accounted for in the accounts maintained in the course of the dealer's business. The sub-section thus completes the process which starts with sub-section (1) and gives authority to the empowered officer to seize and confiscate goods of the nature indicated therein. The contention on behalf of the respondents is that the power of confiscation provided by sub-section (4) was not within the competence of the State legislature under item 54, List II, of the Seventh Schedule relating to tax on sales and purchases of goods. On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Andhra Pradesh High Court. Sub-section (4) of section 41, before it was amended by the Madras General Sales Tax (Second Amendment) Act, from April 1, 1961, had only the first proviso with respect to giving an opportunity of being heard and making an enquiry in the matter before ordering confiscation. By the amendment of 1961, the second proviso was added. That provides that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation, in cases where the goods are taxable under the Act, in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater. This provision clearly requires the officer ordering confiscation to do two things : (i) to order the person concerned to pay the tax recoverable, and (ii) to pay a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater. We have already indicated that in a large majority of cases covered by the Act the tax is payable at the point of first sale in the State. But under clause (a) of the second proviso the tax is ordered to be recovered even b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act which have been struck down by the High Court on the ground that they are unreasonable restrictions on the right to hold property and to carry on trade have been correctly struck down. The main reason which impelled the High Court to strike down sub-section (2) was that there was no safeguard provided for search made thereunder. The High Court held that section 165 of the Code of Criminal Procedure did not apply to searches made under sub-section (2). It also held that the State Government was given the power to empower any officer to make a search under sub-section (2) and this meant that even an officer of low status could be empowered. Consequently, the High Court struck down sub-section (2) on the ground that it gave arbitrary power of search which could be made even by an officer of low status. It is true that search under this sub-section can be made by any officer empowered by the Government in this behalf; but we have no reason to think that Government will not empower officers of proper status to make searches. In this very case, we find that the Government empowered an Assistant Commercial Tax Officer, a Revenue Inspector and a Sub-Inspector of Police to make s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as far as may be possible, we see no reason why section 165 should not apply mutatis mutandis to searches made under sub-section (2). We are therefore of opinion that safeguards provided in section 165 also apply to searches made under sub-section (2). These safeguards are----(i) the empowered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) he must record in writing the grounds of his belief and (iv) he must specify in such writing so far as possible the thing for which search is to be made. After he has done these things, he can make the search. These safeguards, which in our opinion apply to searches under sub-section (2) also clearly show that the power to search under sub-section (2) is not arbitrary. In view of these safeguards and other safeguards provided in Chapter VII of the Code of Criminal Procedure, which also apply so far as may be to searches made under sub-section (2), we can see no reason to hold that the restriction, if any, on the right to hold property a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation was bad because it showed that the Magistrate had not applied his mind to the question of issuing it, inasmuch as there were portions which should have been struck out from the printed form and gaps which should have been filled in. But this was not done. That conclusion of the High Court has not been challenged before us. The High Court has further held that a proper and reasonable opportunity was not given to the persons concerned to show that the goods seized were not properly accounted for in their account books, though this finding is not material now for we have held that sub-section (4) falls in its entirety. It follows therefore that anything recovered from the search of the residential accommodation on the basis of this defective warrant must be returned. It also follows that anything confiscated must also be returned, as we have held that sub-section (4) must fall. As to the accounts, etc., said to have been seized, it appears to us that the safeguards provided under section 165 of the Code of Criminal Procedure do not appear to have been followed when the search was made for the simple reason that everybody thought that that provision was not applicable to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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