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Asst. Commnr. of Commercial Taxes & Ors Vs. Ruchi Soya Industries Ltd [2008] 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, 2001.

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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 order.

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 thereof."

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 held:

"...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 under :

"(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.

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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.

....................J.

(ASHOK BHAN) ....................J.

(DALVEER BHANDARI) NEW DELHI;

April 24, 2008.

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