Commnr. of Commercial Taxes & Ors Vs. Ruchi Soya Industries Ltd  INSC 700
(24 April 2008)
ASHOK BHAN & DALVEER BHANDARI
1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL
NO.7231 OF 2002 ASST. COMMNR. OF COMMERCIAL TAXES & ORS. Appellant (s)
VERSUS RUCHI SOYA INDUSTRIES LTD. Respondent(s) ASHOK BHAN, J.
1. The State of West Bengal and others, the appellants herein, have filed
this appeal against the final judgment dated 13/02/2002 of the High Court of
Calcutta in W.P.T.T. 32 of 2002, by which the High Court has dismissed the writ
application of the appellants herein holding, inter alia, that sanction to
retain the seized records was not in conformity with proviso (b) to Section 66
of the West Bengal Sales Tax Act, 1994 (for short 'the Act')
2. The respondent is a re-seller of "Neutrela" Soya beans food
product, palm fatly acid distillate, acid oil and RBD Palmolein oil after
importing the same from out side the State of West Bengal as well as by making
purchases within the State of West Bengal.
3. On 18th October, 2000, the files, books of accounts and documents kept at
the place of the business of the respondent were seized pursuant to a search
conducted by the officers 2 attached with the Central Section of Commercial Tax
Directorate. The books and documents were seized by the commercial Tax Officers
for the reason that the respondent was evading payment of tax under the Act and
the said books of accounts and documents as detailed in the seizure receipt are
required for taking action under the provisions of the Act.
In the report relating to the said seizure it was stated that the dealer was
evading tax by floating dummy files and fabricating documents. According to the
appellants since the seized books of accounts, registers and other documents,
on the basis of which investigation was to be conducted, were of extensive
nature, the assessment could not be completed within a period of one year as
stipulated under Section 66 of the Act. The seizure in the instant case had taken
place on 18th October, 2000. The period of one year was to expire on 17th
October, 2001. Show cause notice dated 9th October, 2001 was sent to the
respondent by speed post on 10th October, 2001 requiring its representative to
appear before the Additional Commissioner, Commercial Taxes on 12th October,
2001 to show cause as to why the seized records should not be retained for a
further period of one year beyond 18th October, 2001.
As no one on behalf of the respondent appeared on 12th October, 2001 and only
a few days were left before the prescribed period of one year was to lapse, the
Additional Commissioner vide its order dated 12th October, 2001 granted
sanction for retention of the seized records till 18th October, 2002 to enable
the investigating officer to complete the examination of the seized records and
the said order was sent to the respondent by speed post. The said sanction as
well as show cause notice were received by the respondent on 22nd October,
4. Aggrieved by the said order passed by the Additional Commissioner,
Commercial Taxes, the respondent filed an application under Section 8 of the
West Bengal Taxation Tribunal Act, 1987 before the West Bengal Taxation
Tribunal, Calcutta (for short 'the Tribunal') being Revision Case No.RN
450/2001, seeking a direction to assessing officer to forthwith release the
books of accounts, documents and records seized on 18th October, 2001 under
Section 66 of the Act and to pass an order quashing and/ or setting aside the
purported order dated 12th October, 2001 passed by the Additional Commissioner
according sanction for retention of the seized books of accounts and records,
till 18th October, 2002 under Section 66(1)(b) of the Act on the ground that no
opportunity whatsoever was given to the respondent before passing the said
5. The Tribunal by its order dated 4th January, 2002 allowed the application
of the Rubber Works [1984(1)SCC 700], the Tribunal held that the order of
retention had become invalid as the same was not communicated to the applicant
within the prescribed period of limitation and accordingly set aside the order
dated 12th October, 2001 passed by Additional Commissioner of Commercial Taxes
with a direction to release the books of accounts, records and documents seized
on 18th October, 2000 forthwith.
6. Aggrieved by the order passed by the Tribunal, the appellants filed a
writ application under Article 226 of the Constitution of India seeking setting
aside of the order passed by the Tribunal. The High Court by the impugned order
has dismissed the writ application 4 thereby upholding the order passed by the
Tribunal. It has been held by the High Court that the notice was issued to the
respondent on 10th October, 2001 to attend the hearing on 12/10/2001 to show
cause as to why the seized records should not be retained beyond the period of
one year. The said notice was admittedly received by the respondent on 22nd
October, 2001 which was beyond the period of one year as prescribed by Section
66, thus denying the respondent an opportunity of being heard which was the
object of the notice. It was also held that the order passed by the Additional
Commissioner granting sanction to retain the seized records, was sent to the
respondent on 18th October, 2001 which was received by him on 22nd October,
2001. It is not expected that an order dispatched on 18th October, 2001 would
be served on the same day. That the very purpose of issuance of such notice was
frustrated as the respondent was left with no time to submit his reply. That
the entire exercise was undertaken in a mechanical way as the order did not
even mention as to (i) whether the notice of hearing has been received by the
respondent, or (ii) whether he had been heard or not or (iii) as to why was it
necessary to retain the seized records for examination for another year,
although the said record had already been in the custody of the appellants for
a period of one year. The High Court thus agreed with the Tribunal and
dismissed the writ application.
7. The said order of the High Court is under challenge before us.
8. The relevant portion of Section 66 of the Act dealing with extension of
time is stated hereinbelow for reference:
5 "66. Seizure of dealer's accounts:- If the Commissioner, an
Additional Commissioner or any person appointed under sub-section (1) of
Section 3 to assist the Commissioner, has reason to suspect that any dealer is
attempting to evade payment of any tax, he may, for reasons to be recorded in
writing, seize such accounts, registers or documents of the dealer (including
computerised or electronic accounts maintained on any computers or electronic
media) as may be necessary and shall grant a receipt for such accounts,
registers or documents seized by him and shall retain all or any of them only
for such period as may be necessary for examination thereof or for prosecution
or for any other purpose of this Act.
Provided that:- (a) the Commissioner or an Additional Commissioner shall not
retain any of the accounts, registers or documents seized by him under this section
for a period exceeding one year from the date of the seizure unless he records
in writing the reasons therefor, and (b) any person appointed under sub-section
(1) of Section 3 to assist the Commissioner shall not retain any of the
accounts, registers or documents seized by him under this section for a period
exceeding one year from the date of seizure unless he states the reason in
writing therefor and obtains sanction of the Commissioner in writing in respect
9. A reading of proviso (a) and (b) of Section 66 makes it clear that either
of the two conditions must be fulfilled before such extension is given, viz.
(a) reasons in writing must be recorded by the Commissioner or Additional
Commissioner for extending the period or by a person appointed under
sub-Section (1) of Section 3 to assist the Commissioner or the Additional
Commissioner and (b) if the books are to be retained by an officer appointed 6
under sub-Section(1) of Section 3 to assist the Commissioner then that officer
shall not retain the seized books beyond the prescribed period unless he
records reasons in writing therefor and seeks approval of the Commissioner.
10. An inference can well be drawn from these two provisions that if either
of these two conditions are not fulfilled, such extension shall become unlawful
and the concerned officer has to return the books or documents forthwith.
However, a bare perusal of the proviso (a) and (b) of Section 66 would show
that there is no requirement in law of either (i) to convey the reasons or the
orders passed by the Commissioner/Additional Commissioner to the assessee or
(ii) that it should be conveyed before the expiry of one year of the seizure of
the books or the documents.
while interpreting Section 132(8) of the Income tax Act which in substance
is identical with the provisions of Section 66 of the West Bengal Sales Tax Act
"...It is true that sub-section (8) does not in terms provide that the
Commissioner's approval or the recorded reasons on which it might be based
should be communicated to the concerned person but in our view since the person
concerned is bound to be materially prejudiced in the enforcement of his right
to have such books and documents returned to him by being kept ignorant about
the factum of fulfilment of either of the conditions it is obligatory upon the
Revenue to communicate the Commissioner's approval as also the recorded reasons
to the person concerned.
7 In the absence of such communication the Commissioner's decision
according his approval will not become effective."
12. No doubt it is laid down in this judgment that the Commissioner's
approval as also the recorded reasons may be communicated to the person whose
books of account have been seized but it does not say that such approval and
the reasons therefor be communicated before the expiry of the maximum period
prescribed for retention of books of account.
13. This Court in the said judgment has further dealt with sub-sections (10)
and (12) of Section 132 of the Income Tax Act. These two provisions read as
"(10) If a person legally entitled to the books of account or other
documents seized under sub-section (1) or sub-section (1-A) objects for any
reason to the approval given by the Commissioner under sub-section (8), he may
make an application to the Board stating therein the reasons for such objection
and requesting for the return of the books of account or other documents.
(11) ... ... ... ...
(12) On receipt of the application under sub- section (10) the Board ...
may, after giving the applicant an opportunity of being heard, pass such orders
as it thinks fit."
14. As per these provisions a statutory right vests in the person, whose
books have been seized, to approach the Board to object to the approval.
Therefore, as a logical corollary, it was necessary to communicate the
Commissioner's approval as also the reasons therefor.
15. It may not be out of place to mention here that in the said judgment
this Court was dealing with the provisions of Income Tax Act and in the present
case, we are concerned with the provisions of West Bengal Sales Tax Act, 1994
and there is no provision in the Act parallel to sub-sections (10) and (12) of
the Income Tax Act in the Act being dealt with here.
16. The High Court under some misconception assumed that this Court had held
that the reasons had to be communicated before the expiry of one year of the
seizure of the books or documents and/ or the assessee was required to be heard
before passing the order extending the period beyond the prescribed period of one
year. To that extent, the order passed by the High Court deserves to be set
aside and is accordingly set aside.
17. The Additional Commissioner while granting sanction to retain the seized
records has not only recorded reasons therefor, but the same were communicated
also in accordance with the judgment of this Court in the case of Oriental
Rubber Works (supra). Thus, the condition prescribed by law to record reasons
is fulfilled. The order was despatched the same day which was received by the
assessee a few days later. The delay in no way has caused any prejudice to the
assessee. Moreover, we are informed that the books of accounts/documents were
returned to the assessee after the passing the order by the Tribunal. To that
extent, the appeal has become infructuous, but since the point involved is of
recurring nature, we thought it appropriate to record a finding regarding the
correctness or otherwise of the view taken by the High Court on merits.
18. In case the investigation or assessment is not complete then the
respondent whose 9 books of accounts have been returned, he may not be asked
to re-deposit the books of accounts with the assessing officer but as and when
he is called upon to produce the books of accounts/documents which were
returned to the assessee, the assessee shall be under an obligation to produce
the documents before the authorities as and when asked to do so. The
authorities would be at liberty to retain photostat copies of the documents, if
not already kept by them while returning the books.
19. The appeal stands disposed of in the above terms and there will be no
orders as to costs.
(ASHOK BHAN) ....................J.
(DALVEER BHANDARI) NEW DELHI;
April 24, 2008.