ORDER
1. M/s. British Physical Laboratories India Limited, Petitioner No. 1, is a public limited company incorporated under the Companies Act and has its registered office at Palghat, State of Kerala and has its Head Office at M. G. Road, Bangalore City. Sri M. A. Uppal, who represents petitioner No. 1 as its 'Finance Director', is the second petitioner in the case. In the course of my order hereafter, I will refer to petitioner No. 1 who is the principal petitioner as the petitioner in the case.
2. The petitioner is principally engaged in the manufacture and sale of sophisticated electronic instruments and equipments at its factories situated at Palghat and Avalahali, Old Madras Road, Bangalore Distt. From 1982 the petitioner has started the manufacture of television sets and video cassette recorders (hereinafter referred to as T. Vs and VCRs). The petitioner has its sales offices at Bangalore, Bombay, Calcutta and Delhi.
3. The manufacturing places at Palghat, Avalahali and portions of the sales offices situated at Kengal Hanumanthaiah Road and M. G. Road, Bangalore are licensed premises under the Central Excises and Salt Act, 1944 (Central Act No. 1 of 1944) and the Rules made thereunder (hereinafter referred to as the Act and the Rules) and the petitioner as a manufacturer of excisable articles is eligible to excise duties under the Act.
4. On the basis of the material collected by him, the Assistant Director, Directorate of Revenue Intelligence Anti-evasion (Central Excise) Wing, Bangalore (hereinafter referred to as the Director) on 8-6-1983 reasonably believing that the petitioner was indulging in evasion of excise duty payable under the Act by adopting devious methods decided that a search of the various places detailed in his proceedings should be conducted by the authorised officers. In conformity with that decision, the Director issued authorisations or search warrants to a number of officers simultaneously to search the factories, office premises, residential premises of three senior executives of the petitioners, viz., Sriyuths Uppal, K. N. Rajasekharan and P. Hariharan. On the basis of search warrants so issued, the authorised officers searched the factories, business premises, sales offices and residential premises of the senior executives on 8-6-1983, 9-6-1983, 14-6-1983 and 17-9-1983 and seized a large number of documents, account books, 102 VCRs and Video testing machines on different dates.
5. While the search and seizure was in progress, the petitioner moved this Court on 17-6-83, impleading the Director and the Directorate of Revenue Intelligence, Anti-evasion (Central Excise) Wing, New Delhi as respondents 1 and 2 respectively challenging the searches and seizures that were in progress and also a notice dated 16-6-83 (Annexure-A) issued by the Director under Section 14 of the Act with appropriate interim prayers. On the same day this court issued rule nisi and made an interim order directing the respondents not to undertake any further searches and seizures and stay of further proceedings in pursuance of the notice dated 16-6-83. On 21-6-83, the earlier interim order was modified permitting the Director and his subordinates to identify the remaining documents and account books and their production before this court and in conformity with the same, a large number of documents have been identified and are kept in sealed boxes and were brought to court by the petitioner on the hearing date and they have been permitted to be retained by the petitioner as suggested by the respondents.
6. Both sides have used strong epithets and rhetoric in their pleadings. But, this Court cannot obviously be guided by either of them. With this preface it is necessary to summarise the pleadings of the parties to the extent they are necessary for a proper for a proper disposal of the questions urged before court.
7. The petitioner has asserted that in its 20 years of existence it had an unblemished record for fair dealing and honest maintenance of accounts and records with reference to all its transactions including all its transactions with government including all its transactions with governmental departments and there was not a single notice from the excise or the Customs Departments, pointing out to any lapses in regard to any of its manufacturing activities, in particular, of T.Vs and VCRs and the payment of taxes thereto to government (vide para 4 of the petition).
8. The petitioner has alleged that searches and seizures effected on all the days were almost in the nature of an 'invasion campaign' and have been made without rhyme or reason, arbitrarily and vexatiously at its factories, offices, show rooms and residential premises of the senior officers with the sole object of immobilising its manufacturing and sale activities and ruin its reputation in a competitive market. In the original petition, the reply and the additional reply filed, the petitioner has elaborated this plea by furnishing various particulars.
9. In the additional reply, the petitioner has urged that it was entitled for the supply of the formation of the opinion of the Director and without making the same available, the searches and seizures effected were unauthorised and illegal. In the original petition, the searches and seizures had been challenged on a number of grounds. But, at the hearing, all those grounds were not urged and hence that were not urged; and not noticed.
10. In their common return, the respondents have urged that on relevant material, the Director has formed his opinion and issued the search warrants to make clearances and seizures and the same does not to suffer from any infirmity. Secondly, the respondents have denied the illegalities, arbitrariness or vexatious ness alleged by the petitioner to any of the searches and seizures made by any of the officers on any day at any place. Lastly, the respondents have urged that searches and seizures have been made in strict conformity with the Act and the Rules and their actions were not arbitrary, irrational or vexatious to justify the interference of this Court before the proceedings are completed under the Act.
11. The respondents have asserted that on 10th and 15th June, 83, there were no searches and seizures and the petitioners had voluntarily surrendered various documents as undertaken by Sri Uppal on 10-6-83.
12. On the pleadings and contentions urged, the following points arise for determination :
I. Whether the petitioner is entitled for the supply of the opinion formed by the Director to search and seize documents
II. Whether the opinion formed by the Director to search is valid or not
III. Whether there has been any excesses in the searches and seizures made by any authorised officers
IV. Whether there was a search and seizure of documents on 10th and 15th June, 1983 as leaded by the petitioner or whether they were voluntarily delivered by the petitioner as pleaded by the respondents Whether the petitioner is entitled for the return of documents delivered on those days in either event and if so, on what conditions
V. Whether the petitioner is entitled for return of any of the documents and articles seized even if their search and seizure was valid and if so, on what conditions
VI. Whether the notice dated 16-6-83 (Annexure-A) issued by the Director is valid or not
Before dealing with those points in their order, it is convenient to notice the statutory provisions dealing with searches and seizures.
13. Section 37(1) of the Act in general authorises the Central Government to make rules to carry out the purpose of the Act. Section 37(2)(xiv) empowers the Central Government to make Rules regulating inspection and searches under the Act.
14. Chapter 11 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) framed by the Central Government under the Act, provide for enter search, seizure and investigation under the Act. The officers of the Department and others empowered by Central Government are empowered to search under Rule 201 of the Rules. Under Section 18 of the Act directs that searches and arrests under the Act shall be carried out in accordance with the provisions of the Code of Criminal Procedure.
15. Section 12 of the Act empowers Central Government to apply the provisions of the Customs Act, 1962 (Central Act No. 52 of 1962) (hereinafter referred to as the Customs Act) in respect of duties imposed by Section 3 of the the Act. In exercise of that power, Central Government by various notifications has made applicable the provisions of the Customs Act relating to searches and seizures to the levy of excise duties under the Act.
16. Section 105 and 110 of the Customs Act providing for searches and seizures that are material read thus :
'105. Power to search premises. - (1) If the Assistant Collector of Customs, or in any area adjoining the land frontier or the frontier or the Govt. of India an officer of customs specially empowered by name in this behalf by the Board, has reason to believe that any goods liable to confiscation or any documents or things which in his opinion will be useful for or relevant to any proceeding under this Act, are secreted in any place, he may authorise any officer of customs to search or may himself search for such goods, documents or things.
(2) The provisions of the Code of Criminal Procedure, 1898 (5 of 1898) relating to searches shall, so far as may be apply to searches under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word 'Magistrate', wherever it occurs, the words 'Collector of Customs' were substituted.
* * * *110. Seizure of goods, documents and things. - (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods;
Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.
(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized :
Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding six months.
(3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to any proceeding under this Act.
(4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts therefrom in the presence of an officer of customs.'
The validity of these provisions are not challenged by the petitioner. Even if they had been challenged, the same had to be rejected by this Court in the light of the principles enunciated by the Supreme Court in R. S. Seth Gopikisan Agarwal v. R. N. Sen, Assistant Collector of Customs and Central Excise, Raipur and others : 1967CriLJ1194 ; The Commissioner of Commercial Taxes and others v. R. S. Jhaver and others : [1968]1SCR148 and Pooran Mal v. The Director of Inspection (Investigation), New Delhi and Others - : [1974]93ITR505(SC) .
RE : POINT NO. I :
17. While addressing his reply arguments on the second day or so Sri S. G. Sundaraswamy, learned counsel for the petitioner, filed an additional reply for the first time contending that the petitioner was entitled for a copy of the opinion formed by the Director and its non-supply vitiates the searches and seizures based on the construction of Section 165(2), Cr.P.C. made applicable by Section 105 of the Customs Act. On this basis Sri Sundaraswamy sought leave to urge the same, which was opposed by Sri K. Shivashankar Bhat, learned counsel for the respondents.
18. After hearing the counsel on the point, I was satisfied that this plea urged by the petitioner which did not involve any investigation of facts was a pure question of law and, therefore, I permitted Sri Sundaraswamy to argue the same and permitted Sri Bhat also to address his arguments on the same.
19. Sri Sundaraswamy has urged that on a true construction of Section 105 of the Customs Act and Section 165 of the Cr.P.C. the petitioner was entitled for a copy of the opinion formed by the Director and its non-supply vitiated the searches and seizures. In support of his contention Sri Sundaraswamy has strongly relied on a Division Bench ruling of this Court in C. Venkatareddy and another v. Income Tax Office (Central) I, Bangalore and others, 1967 (66) I.T.R. 212 and a Division Bench ruling of Allahabad High Court in New Kashmir and Oriental Transport Co. (Private) Limited v. Commissioner of Income Tax, Kanpur and another, 1973 (92) I.T.R. 334.
20. Sri Bhat has urged that on a true construction of Section 105 of the Customs Act, the petitioner was not entitled for the opinion formed by the Director. In support of the contention, Sri Bhat has strongly relied on a Division Bench ruling of the Madras High Court in I. Devarajan and others v. Tamil Nadu Farmers Service Co-operative Federation and others, 1981 (51) Company Cases 682.
21. Earlier I have set out Section 105 of the Customs Act in its entirety. Section 105(2) refers to the Code of Criminal Procedure, 1898 (Central Act 5 of 1898) that was in force when the Act was enacted. But, that Code has been repealed and replaced by the Code of Criminal Procedure, 1973 (Central Act No. 2 of the 1974), with effect from 1-4-1974. Section 165 of the new Code corresponds to Section 165 of the old Code and substantially reproduces reproduces the same. Even though the Customs Act has not been suitably amended, the court must necessarily read Section 165 of the new Code only. Section 165 of the new Code reads thus :-
'Section 165. (1) - Whenever an officer-in-charge of a police station or a police officer making an investigation has reasonable grounds for believing that anything necessary for the purposes for investigation into any offense which is he is authorised to investigate may be found in any place within the limits of the police station of which he is in charge, or to which he is attached, and that such thing cannot in his opinion be otherwise obtained without undue delay, such officer may, after recording in writing the grounds of his belief and specifying in such writing, so far as possible the thing for which search is to be made, search or cause search to be made, for such thing in any place within the limits of such station.
(2) A Police officer proceeding under sub-section (1) shall, if practicable, conduct the search in person.
(3) If he is unable to conduct the search in person, and there is no other person competent to make the search present at the time, he may after recording in writing his reasons for so doing, require any officer subordinate to him to make the search, and he shall deliver to such subordinate officer, an order in writing, specifying the place to be searched and as far as possible the thing for which search is to made; and such subordinate officer may thereupon search for such thing in such place.
(4) The provisions of this Code as to search warrants and the general provisions as to searches contained in Section 100 shall, so far as may be, apply to a search made under this section.
(5) Copies of any record made under sub-section (1) or sub-section (3) shall forthwith be sent to the nearest Magistrate empowered to take cognizance of the offence, and the owner or occupier of the place searched shall, on application, be furnished free of cost with a copy of the same by the Magistrate.'
22. Section 105(1) of the Customs Act confers power of search or direct a search to be made if the authorised officer has reason to believe or is satisfied with its necessity. Section 105(2) directs that that the provisions of the Cr.P.C. relating to searches shall 'so far as may be' apply to searches made under sub-section (1) of that section and for the word 'Magistrate' occurring in Section 165 of the Cr.P.C., the words 'the collector of Customs' shall be read.
23. The words 'so far as may be' or 'as far as may be' occurring in Section 105(2) of the Customs Act must necessarily mean that the provisions relating to searches to the extent they can be made applicable, should only be made applicable and not that those provisions should be applied in their entirely. The legislature by advisedly using the words 'so far as may be' necessarily excludes the application of all the provisions of the Cr.P.C. in all its details to searches under the Act.
24. Section 105(2) no doubt directs that for the word 'Magistrate' the word 'Collector' shall be read in Section 165 of the Cr.P. C. On this provision, it is imperative for the officer exercising power under Section 105(1) to immediately forward his opinion to the Collector of Customs.
25. The object of requiring the opinion to be forwarded to the Collector is that the latter as a higher authority should guide, control and supervise his subordinate and prevent any misuse and excess committed by the former. Except for this, it has no other purpose. In any ordinary criminal proceeding, no question of secrecy arises either before the police or the Magistrate. But, in the cases of searches made under the Taxation and Prevention of anti-social measures, that is not the position. The essence of a search under such enactments, if it should really achieve the object of a search, is absolute secrecy, swift and sudden action. If it is otherwise, a search in all likelihood, will be an exercise in futility. Without any doubt, the construction suggested by Sri Sundaraswamy is fraught with grave dangers at least to informants on whose information many a search is undertaken by an authority. For these reasons, I have no hesitation in rejecting this contention of Sri Sundaraswamy.
26. In any of the cases brought to my notice, the Supreme Court or this Court has not accepted the construction suggested by Sri Sundaraswamy.
27. In R. S. Seth Gopikisan Agarwal's case, a Constitution Bench of the Supreme Court examining the validity of Section 105 of the Customs Act and its true construction has expressed thus :-
'Though under the section the Assistant Collector of Customs need not give the 'reasons, if the existence of belief is questioned in any collateral proceedings, he has to produce relevant evidence to sustain his belief. That apart, under Sec. 165(5) of the Code of Criminal Procedure, read with Section 105(2) of the Act, he has to send forthwith to the Collector of Customs a copy of any record made by him. The Collector would certainly give necessary directions if the Assistant Collector went wrong, or if his act was guided by mala fides. But, the more effective control on him is found in Section 136(2) of the Act.'
As I apprehend, these observations of the Supreme Court, though not directly but indirectly negative the contention urged for the petitioner.
28. In Venkatareddy's case that dealt with a case of search and seizure under Section 132 of the Income Tax Act of 1961 (hereinafter referred to as the I.T. Act), as it stood then, the respondents produced a copy of the order before Court and supplied a copy of the same to the petitioner without claiming privilege for furnishing a copy of the latter (vide para 3 page 244). But, the question itself did not arise for determination and no opinion was expressed on the point and, therefore, the same does not assist Sri Sundaraswamy.
29. In New Kashmir and Oriental Transport Company's case, a search and seizure had been effected of the business and residential premises under Sec. 132 of the I.T. Act as it stood. An application made by the petitioner for copies of the opinion formed by the officer and search warrants and a subsequent request for their inspection were rejected by the Commissioner of Income Tax, the validity of which was challenged by the petitioner before the High Court of Allahabad under Article 226 of the Constitution. In accepting the contention of the petitioner for copies and inspection, a Division Bench of the Allahabad High Court speaking through Gulati, J. expressed thus :-
'Before we deal with these contentions, we wish to observe that the Commissioner of Income Tax appears to be labouring under a great misconception with regard to the scope of Section 132. As we have pointed out at an earlier occasion, the seizure of the books of accounts of a businessman is a serious encroachment upon his fundamental right to carry on business. Such an encroachment, of course, is permitted by law in public interest.
But it is necessary that the powers under Section 132 as also under Section 131 should be exercised strictly in accordance with the law and the principles of natural justice. The petitioner asked for copies of the search warrants and the reasons recorded by the Commissioner for authorising the search. This request was refused. The petitioner then applied for inspection. That too was refused by the Commissioner on the ground that there was no provision permitting the inspection of the documents. This approach of the Commissioner is obviously erroneous. Unless there is a statutory prohibition, a person against whom action being taken under Section 132 is entitled to inspect the record of the proceedings and to obtain copies of the orders passed in these proceedings. If such a right is denied to him, he will not be able to satisfy himself that the action against him is justified and to seek redress against any illegal action taken or orders passed. It is a well known maximum that 'justice not only should be done; but should be seem to have been done'. An aggrieved person is entitled to know that the requirements of the law have been complied with. We are thus satisfied that the Commissioner was not justified in refusing to the petitioner the inspection of the record or copies asked for by him. We may make it clear that in a given case it may be possible for the Commissioner to treat a particular information or a document as confidential and to withhold its inspection. But that is not the case of the department in the instant case. Wholesale refusal to grant copies or allow inspection is not justified by law'.
With great respect to the Lordships, these observations in so far as they relate to a copy of the opinion formed to make a search are very wide and have been made without a full examination of the nature of the proceedings the necessity to maintain absolute secrecy, public safety, the injury that will be caused by such disclosure and the ultimate ineffectiveness of the power and all other relevant factors. In my view, the very wide observations, made by their Lordships, far from advancing the object of the enactment and its proper enforcement, will stifle the very administration of the Act and public revenues. For these reasons, I cannot persuade myself to subscribe to the view expressed on this point by their Lordships in New Kashmir and Oriental Transport Company's case.
30. In Devarajan's case, there was a search and seizure under Section 132 of the I.T. Act substantially amended in 1965, the validity of which was challenged before the High Court, of Madras. In rejecting the claim of the petitioner, for the disclosure of the opinion formed by the officer for making the search, a Division Bench of the Madras High Court speaking through Sethuraman, J. expressed thus :-
'The next question that was argued was that the ground for the belief entertained by the authority issuing the authorisation should have been disclosed. As pointed out by the Supreme Court in R. S. Seth Gopikisan Agarwal v. R. N. Sen, : 1967CriLJ1194 , there is no provision of law which requires reasons to be communicated. That was decision under Sec. 105 of the Customs Act, 1962. There also the contention was that the Assistant Collector of Customs should give reasons, which led him to authorise the search. It was pointed out that Sec. 105 did not say that the Assistant Collector should give reasons and that though he could not make a search or authorise any officer to make a search unless he had reason to believe the existence of the facts mentioned in the section, the section did not compel him to give reasons. That such a disclosure is not necessary has also been decided by a Bench of this Court in relation to the provisions of Section 147 where also the expression used is 'if the Income-tax Officer has reasons to believe' in Thanthi Trust v. ITO, : [1973]91ITR261(Mad) . After referring to several decisions of the Supreme Court and the Privy Council with reference to Sec. 34 of the Act of 1922 or Sec. 147 of the Act of 1961, it was held that one disclosure of the reasons for the belief was unnecessary. The Court examined the contention whether such reasons could be required to be disclosed to the assessee in proceedings under Art. 226 of the Constitution. It was pointed out that the proceedings under Art. 226 did not confer any higher rights and that whatever applied under the particular statute would also apply to the proceedings under Art. 226, as otherwise, it was only necessary for any assessee to file a petition under Art. 226 to get at the reasons, which he would not get in the proceedings under the Act. At p. 281 it was pointed out that on going through the materials there were reasons to believe that income had escaped assessment and that the proceedings could go on. On the particular facts of that case the proceedings were not allowed to go on and the notice were quashed because the information, on the basis of which the ITO started proceedings for reopening the assessment already completed, was not considered to be relevant. It is enough if we are satisfied, about the existence of the reasonable belief.'
In my view, these observations made by the Madras High Court on the scope and ambit of Section 132 of the I.T. Act which are sound and correct also govern a proceeding under Section 105 of the Customs Act. With respect, I am in complete agreement with these views.
31. On the foregoing discussion, I hold that there is no merit in this contention of Sri Sundaraswamy and I reject the same.
RE : POINT NO. II :
32. Sri Sundaraswamy has urged that the opinion formed by the Director to search based on no material or on irrelevant material, without complying with the conditions precedent for directing a search was illegal and invalid. In support of his contentions, Sri Sundaraswamy has relied on a large number of rulings of the Supreme Court, this Court and various other High Courts.
33. Sri Bhat has urged that the opinion formed based on relevant material was valid. In support of his contention Sri Bhat has also relied on a large number of rulings of the Supreme Court, and other High Courts.
34. The meaning of the term 'reasonable belief' occurring in Section 105 of the Customs Act, the necessity to record reasons that are relevant, the sufficient or otherwise of reasons and the scope of judicial review are concluded by a large number of the Supreme Court, this Court and other High Courts. A reference to all of them is neither necessary nor useful. But it is enough to refer to two rulings of the Supreme Court and one ruling of this Court.
35. In Pukhraj v. D. R. Kohli, Collector of Central Excise, Madhya Pradesh and Vidarbha and another : 1983(13)ELT1360(SC) , the Supreme Court, dealing with a case arising under the earlier Sea Customs Act, 1878, that is now repealed by the Customs Act, on the sufficiency of the reasonable belief, expressed thus :
'After all, when we are dealing with a question as to whether the belief in the mind of the officer who effected the seizure was reasonable or not, we are not sitting in appeal over the decision of the said officer. All that we can consider is whether there is ground which prima facie justifies the said reasonable belief'.
36. In Income-tax Officer, Special Investigation Circle B Meerut v. M/s. Seth Brothers and others : [1969]74ITR836(SC) the Supreme Court examining a case of search and seizure under Section 132 of the I.T. Act, speaking through Shah, J. (as he then was) exhaustively explained on every one of the aspects in these words :
'8. The section does not confer any arbitrary authority upon the Revenue Officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designed officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceeding under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the Officer issuing the authorisation, or of the designated officer is challenged the Officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designed officer to enter and search premises for books of account and documents relevant to or useful for any proceedings under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the Officer acting in pursuance of the authorisation will be sufficient to vitiate the action taken, provided the Officer has in executing the authorisation acted bona fide.
9. The Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of account; a general authorisation to search for and seize documents and books of account relevant to or useful for any requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and size or not to seize any documents or books of account. An error committed by the Officer in seizing documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, no will it entitle the aggrieved person to an omnibus order releasing all documents seized.
10. The aggrieve party may undoubtedly move a competent court for an order releasing the documents seized. In such a proceeding the Officer who has made the search will be called upon to prove how the documents seized are likely to be useful for or relevant to proceeding under the Act. If he is unable to do so, the Court may be order that those documents be released. But, the circumstance that a large number of documents have been seized is not a ground for holding that all documents seized are irrelevant or the action of the Officer is mala fide. By the express terms of the Act and the Rules the Income Tax Officer may obtain the assistance of a police officer. By sub-section (13) of Section 132 the provisions of the Code of Criminal Procedure, 1898, relating to searches apply, so far as my be, to searches under Section 132. Thereby it is only intended that the Officer concerned shall issue the necessary warrant, keep present respectable persons of the locality to witness the search and generally carry out the search in the manner provided by Code of Criminal Procedure. But, sub-section (2) of Section 132 does not imply that the limitations prescribed by Section 165 of the Code of Criminal Procedure are also incorporated therein.'
These principles equally apply to proceedings under Section 105 of the Customs Act.
37. In A. Govindarajan v. Superintendent of Central Excise and another [(1974) (1) Karnataka Law Journal 455], Jagannatha Shetty, J. examining a search and seizure under the Customs Act referring to all the earlier rulings of the Supreme Court and several High Courts, observed thus :-
'The condition precedent either for a search under Section 106 or for seizure under Section 110 is that the proper officer must have 'reason to believe' that a vehicle is being used in the smuggling of any goods or the goods he may seize are liable to confiscation under the Act. The expression reason to believe' occurs in several statutes. Reference may be made to Section 34 of the Income Tax Act, 1922; Section 132 of the Income Tax Act, 1961, Section 178A of the Sea Customs Act, 1878, Sec. 66 of the Gold Control Act, 1968; etc. * * * *
In my opinion, the said expression whether it occurs in one Act or the other, has settle meaning and its several features may conveniently be set out as follows :
It is not just an abstract concept so that it could be fitted into picked situations. It is precise and circumscribed. It may be based on broad but, nevertheless, should rest on definite information. The information should be anterior in point of time of search or seizure and not subsequent to it. It cannot, therefore, be the result of something the facts discovered or circumstances revealed during the process of search or seizure. The reasonable belief should always be above the uncertain thing called 'the suspicion'.
The courts fairly concede the right of the Customs Authorities to be the judge of their own information as giving them a fair basis for reasonable belief. But the Courts are entitled to look out for the basis of reasonable belief adopted by the authorities in justification of search or seizure, though that scrutiny does not extend to the determination of its adequacy. In other words, the satisfaction of the authorities cannot be purely a subjective process but should be tempered with objective tests.'
But, this decision of Jagannatha Shetty, J. in this case has been reversed by a Division Bench of this Court in Write Appeal No. 31 of 1974 disagreeing with the conclusions reached by His Lordship on the merits of that case, but without disagreeing with the above exposition as such, which nearly summarises the principles enunciated by the Supreme Court.
38. Bearing the principles enunciated in the above case, the challenge of the petitioner to the opinion formed by the Director requires to be examined which I now proceed to do.
39. Sri Bhat while rightly claiming privilege against the petitioner, which I have upheld, has produced the original file of the Director for my examination.
40. The opinion formed by Director cannot be examined by this Court as if it is an appeal. Even the possibility of another officer or this Court taking a different view than the one taken by the Director when examined as an appeal, cannot also be ruled out. But, what is necessary to decide is whether the Director could have reasonably taken the view he had taken on the facts and circumstances that were before him.
41. In this intelligence report dated 28-5-1983 addressed to the Collector of Customs, Madras the Director has adverted to the various facts and circumstances that prima facie or tentatively lead to reasonable belief that the petitioner was evading excise duty on T.Vs. and VCRs manufactured by it. On an examination of that very report, the Director on 8-6-1983 has formed his opinion to authorise a simultaneous search and seizure. In pursuance of that opinion, the Director issued search warrants to various officers broadly indicating the nature of documents to be seized.
42. I have carefully examined the report of the Director and the opinion formed by him on 8-6-983 bearing the above and other relevant principles enunciated by the Supreme Court and this Court. On such an examination, I am of the opinion, that the material on which the Director acted was relevant and that the opinion formed by him was honest and definite and satisfies the requirements of Section 105 of the Customs Act. From this, it follows that the decision reached by the Director in 8-6-1983 cannot be interfered with by this Court under Article 226 of the Constitution.
43. Before considering the next point, it is useful to deal with a few allied questions that are intimately connected with point No. II itself which I now propose to do.
44. Sri Sundaraswamy has urged that the 'Account Books' were not 'documents' within the meaning of that term occurring in Section 105 of the Customs Act and, therefore, it was not open to the Director and his subordinates to search and seize them. In support of his contention Sri Sundaraswamy has strongly relied on a ruling rendered by the High Court of Allahabad in Gurucharan Singh v. The State : AIR1965All543 .
45. The term 'document' occurring in Section 105 of the Customs Act has not been defined in that Act. But, Section 3(18) of the General Clauses Act (Central Act X of 1897) defines that term as hereunder :
''document' shall include any matter written or expressed or described upon any substance by means of letters, figures or marks, or by more than one of these means which is intended to be used, or which may be used, for the purpose of recording that matter.'
According to this definition any matter written, expressed or described upon any substance by mean of letters, figures or marks or by more than one of those means which is intended to be used or which may be used for the purpose of recording that matter is a document. In the absence of a definition of the term 'document' in the Customs Act, the definition of that term in the General Clauses Act has to be applied. On such application the 'account book' is a document within the meaning of that term occurring in Section 105 of the Act.
46. Even otherwise, the ordinary dictionary meaning of the term 'document' would also include an account book. Oxford Advanced Learner's Dictionary of Current English defines the term 'document' as follows :-
''document' written or printed, to be used as a record or in evidence (e.g. birth, marriage and death certificate) : of title, providing evidence or rights ownership, etc.; a human of facts or incidents that illustrate human nature.'
In Hill v. Regem [1945 (1) King's Bench 329] Humphreys, J. of the King's Bench Division interpreted the words 'documents owned for purpose of business' occurring in the War Damage Act, 1943, as including Account Books, Journals and Ledgers.
47. On the above meanings, anything written, typed or printed or a paper on which markings are made will be a document. Account books written and maintained by farms, companies, business houses and individuals without an iota of doubt are documents. On any principle it is impossible to hold that account books are not documents within the meaning of that term occurring in Sec. 105 of the Customs Act.
48. In Gurucharan Singh's case the facts so far as they are necessary for this case were these. Gurucharan Singh was prosecuted for committing an offence of theft of account books under Section 392 of the IPC that had been earlier seized from his business premises by an official of the Central Excise Department. In accepting the plea of the accused that account books were not documents and, therefore, there was no theft of them. Mathur, J. has expressed thus :-
'My attention has not been drawn to any provision under which the officers of the department can seize the account books maintained by the manufacturer. When the Central Excise Officers are not empowered to seize the books of account not maintained in accordance with the Rules, they cannot take such registers in their possession either during the course of inspection or during search, though they can demand such registers from the manufacturer. In addition the Central Excise Officers can take extracts therefrom or make any minute therein to enable them to take further action in accordance with the law.'
In reaching this conclusion Mathur, J. has overlooked the definition of the term 'document' found in the General Clauses Act as also its plain meaning. In any number of cases, the Supreme Court, the Privy Council and various High Courts in the country have proceeded to examine account books as documents and upheld their seizure, if their seizure was valid. For all these reasons, with respect, I cannot persuade myself to subscribe to the views expressed by Mathur, J. in Gurucharan Singh's case.
49. On the above discussion, I hold that there is no merit in this contention of Sri Sundaraswamy and I reject the same.
50. Sri Sundaraswamy has next contended that the seizure of 102 VCRs on the second occasion, which were earlier found to have suffered excise duty and all other documents were in order, was perverse and illegal.
51. Sri Bhat has urged that the seizure of 102 VCRs on the second occasion was legal and justified.
52. In pursuance of the search warrant issued by the Director on 8-6-1983 one Sri V. R. Jadav, Inspector of Central Excise, Yeshwanthpur Division, Bangalore searched the office premises of the petitioner at No. 84 Barton Court Building, Mahatma Gandhi Road, Bangalore. On a thorough search of the said premises on that day, said Inspector stated thus with reference to 99 VCRs :
'During the course of search the Officers have seen 99 sets of Video Cassette Recorders kept in the godown which is behind the above said premises, and verified the same with the relevant documents namely G. P's etc. and found them in order.'
On this view, Jadav did not seize the 99 VCRs on that day. But, on 16-6-1983 these very 99 VCRs and three other VCRs stored at the very same place were searched and seized. The other 3 VCRs had been received by the petitioner from its customers for repairs and that is how the earlier number of 99 VCRs has become 102 VCRs by 16-6-1983.
53. On 16-6-1983 the Director recorded that the new evidence before him disclosed that M. G. Road godown was used by the petitioner for manufacture of VCRs without obtaining a Central Excise Licence for that place and, therefore, they were liable for confiscation. On that opinion, they were liable for confiscation. On that opinion, the Director issued a search warrant to one Sri D. Ravishankar, Inspector of Central Excise attached to Cantonment Division, Bangalore who executed the same on that very day in the manner indicated in his mahazar of that day. Briefly stated 102 VCRs have been seized, sealed and are allowed with the petitioner as custodia legis for Government. In other words, the petitioner is prevented from using them or selling them to its customers.
54. As a pure proposition of law, it cannot be said that what is not seized on an earlier occasion, cannot be seized on second occasion. But, still Court will be justified in insisting that there should be compelling or very good reasons for making a second search and seizure on a second occasion; that too; within a week as in the present case. If that much is not insisted, searches and seizures causing serious inconvenience and anxiety if not anything also to citizens will almost become a child's play.
55. In this opinion dated 16-6-1983 the Director does not even say that Jadav had committed any impropriety and had failed to perform his duty as was expected from him. When that was so, there was hardly any ground to order for a search of the very place on the second occasion; that too; within a week.
56. Even the sole reason given by Director that the place was being used for manufacturing VCRs without a licence under the Act, and therefore liable for confiscation appears to have been given by him in somewhat a casual manner without a full and proper examination of all the facts and circumstances to reach such a conclusion. An examination of the dimensions of the office and the facilities at that place would reveal that at the highest the said place can be used for storage and not for manufacturing sophisticated electronic equipments like VCRs. On a conspectus of all the relevant facts and circumstances and the reasons given, I am constrained to hold that the opinion formed by the Director on 16-6-1983 was so unreasonable and perverse that no reasonable person could have reached that conclusion and the same therefore, call for interference by this Court in exercise of its supervisory jurisdiction under Article 226 of the Constitution.
57. In my view, the ratio in Collector of Customs & Central Excise and another v. Lal Mabudrani and another [1982 (2) Karnataka Law Journal 73] on which very strong reliance was placed by Sri Bhat cannot apply to a case of illegal search and seizure as found by me in the case of VCRs.
58. In the course of searches and seizures 10 Video Cassette testing machines have also been seized, sealed and allowed with the petitioner on the reasonable belief that those instruments imported from Japan, have undergone a manufacturing process without paying the excise duty due under the Act. But, according to the petitioner, those instruments imported in 'a knocked down condition' on payment of import duty are meant for use in the manufacture of VCRs and, therefore, their seizure were wholly unauthorised and illegal.
59. As to which of the two claims is true and correct, in the very nature of things, cannot be decided by this Court before the authority examines the matter and decides the same under the Act. At this stage, this Court cannot interfere with their seizure, except to the extent of directing their return to the petitioner for its use on terms and conditions to be specified in the order.
RE : POINT NO. III :
60. Sri Sundaraswamy with considerable vehemence has urged that searches and seizures have been made without rhyme or reason excessively and vexatiously and such of those that are found to be in excess at least should be ordered to be returned to the petitioner.
61. Sri Bhat refuting the contention of Sri Sundaraswamy has urged that excesses cannot be determined on the mere number of documents seized.
62. In examining this plea of the petitioner it is necessary to remember that the proceedings are still to be completed by the authorities and this Court does not sit as a Court of appeal and examine the validity of every document seized by the authority.
63. On the mere number of documents, account books seized, it is not possible for this Court to hold that there has been excesses in the searches and seizures. Even the possibility of some marginal excesses likely to occur in cases has of searches and seizures is not a good ground for this Court to hold that there has been excesses. From this it follows that there is no merit in this contention of Sri Sundaraswamy and I reject the same.
RE : POINT NO. IV :
64. Sri Sundaraswamy has urged that there was no search and seizure on 10th and 15th June, 1983 of the M. G. Road Office of the petitioner and the documents seized on those days from that office are liable to be returned to the petitioner.
65. Sri Bhat has urged that the documents voluntarily delivered cannot be ordered to be returned to the petitioner.
66. While the petitioner has asserted that there was searches and seizures of the M. G. Road Office on 10th and 15th June, 1983, the respondents dispute the same and have asserted that there was no searches and seizures on those days and the petitioner had voluntarily delivered various documents on those days. Which of the two versions is true, requires to be first decided.
67. On 8-6-1983 extensive searches and seizures of offices, factories, residential premises of senior executives commenced. On that day, M. G. Road Office was searched and a large number of documents were seized from that place. The searches at Bangalore and other places did not end on that day but they continued on the following days also. Even at Bangalore, various other offices and factory premises of the petitioners were searched on 9th, 10th and 14th June, 1983. With this background it is somewhat add to expect that the petitioner would voluntarily deliver the documents on 10th and 15th June, 1983. All these circumstances militate against the voluntary surrender of documents; that too; in the tense atmosphere that was prevailing in the offices and factories of the petitioner. Even the statement of Sri Uppal made on 10-8-1983 on which very strong reliance has been placed by Sri Bhat to sustain the plea of the respondents, must be viewed in the above context.
68. On an examination of all facts and circumstances, the plea of the petitioner that there were searches at M. G. Road Office on 10th and 15th June, 1983 and the documents have been surrendered by the petitioner in the course of such searches appears to be more probable. From this, it follows that the seizure of documents on 10th and 15th June, 1983 of M. G. Road Office was illegal and, therefore, the petitioner is entitled for their return.
69. Let me also assume that there was no searches and seizures of M. G. Road Office on 10th and 15th June, 1983 as pleaded by the respondents and examine the case on that basis also.
70. The petitioner who is stated to have voluntarily delivered various documents on 10th and 15th June, 1983 is now demanding the respondents to return those documents to it. No provision of law enables the respondents to demur this demand of the petitioner and indefinitely retain those documents with them. In this view also, the petitioner is entitled for the return of documents delivered by it on 10th and 15th June, 1983.
RE : POINT NO. V :
71. Sri Sundaraswamy has urged that even if the searches and seizures were valid, in such an event also, it was necessary to direct the return of the account books, protocols, VCRs and testing machines on such conditions as are necessary to safeguard the interests of revenue and other legal proceedings to be initiated against it.
72. Sri Bhat has vehemently opposed the return of any documents or articles before the proceedings are completed by the authorities under the Act.
73. The petitioner is a public limited company and its financial year has ended on the 30th June, 1983 is not disputed by the respondents. For complying with the requirements of the Companies Act like circulation of Director's report with the audited statement of accounts and for various other requirements, the petitioner immediately requires the accounts books. As it is more than a month has elapsed after their seizure, which I have earlier held to be valid. But, still it does not necessarily meant that they should be retained indefinitely and in any event for the maximum period by law, thus, needlessly paralysing the smooth functioning of the company.
74. Sri Bhat, however, suggested that it is open to the petitioner or its officers and auditors to appear in the office of respondent No. 1, inspect and take out extracts whenever necessary with permission and, therefore, there was no warrant for the return of the account books. In my view, this course suggested by Sri Bhat is extremely inconvenient and even denigrating to a professional chartered accountant/auditor that has necessarily to do that job.
75. After all the return of the permanent account books with necessary safeguards for their retention and production wherever reasonably required by the authorities will not in any way hamper the investigation, inquiry and adjudication proceedings by the authorities. On this finding, the petitioner is entitled for the return of 67 account books.
76. As many as 4200 protocols or history sheets have seized from the petitioner. These history sheets of the articles manufactured by it, most of which have been sold or still to be sold are stated to be required by the petitioner now and then in particular to attend to complaints by customers. Why all of them are required considerably inconveniencing the petitioner in carrying on its business is not explained by the respondents. As I apprehend retention of a small number, as samples, with a direction to the petitioner to produce the others whenever required, would undoubtedly enable the respondents to complete the proceedings or initiate any other legal proceedings under the Act. In this view, I consider it proper to permit the respondents to retain not more than 200 protocols and direct the return of the rest to the petitioner.
77. Video testing machines imported from Japan have been seized apprehending that they had not suffered excise duty in the course of manufacturing process, though they had suffered customs duty. These machines are not intended for sale to others but are required by the petitioner for testing VCRs manufactured by it. Assuming that the apprehension of the department turns out to be true, the excise duty that may become leviable and recoverable is not likely to exceed Rs. 1,60,000/- for which the petitioner is ready and willing to furnish bank guarantee. In this view, it is necessary to direct the return of Video testing machines to the petitioner on its furnishing bank guarantee and other appropriate safeguards.
78. As noticed earlier, this writ petition was filed before this Court while the searches and seizures were in progress. In pursuance of an interim order made on 21-6-1983 a number of documents have been indentified sealed and are allowed to be retained by the petitioner. But for the interim orders made on 17-6-1983 and 21-6-1983 they would have been searched and seized, the validity of which I have upheld. In this view, it is necessary to direct the petitioner of deliver the sealed boxes of documents to respondent No. 1.
79. As regards to various other documents seized, in the very nature of things, this Court will not be justified in directing their return to the petitioner and the same is, therefore, rejected.
RE : POINT NO. VI :
80. Sri Sundaraswamy has urged that the notice dated 16-6-1983 issued by the Director is unwarranted and illegal.
81. The notice dated 16-6-1983 (Annexure-A) is issued by the Director under Section 14 of the Act, the validity of which is not challenged by the petitioner. Section 14 of the Act empowers the Director to summon any person to give evidence and produce documents in inquiries under the Act. The notice issued is within the power of the Director and is for purpose of the Act and cannot be interfered by this Court on any ground.
82. At the hearing Sri Bhat very rightly assured the Court that the officers will complete the investigation and make every effort to return all such documents as are found not necessary without taking a revengeful attitude by reason of the presentation of this writ petition or the allegations made against any of them. I sincerely hope and trust that the authorities will complete the proceedings with utmost expedition and return all such documents that are not found necessary from time to time and retain only such of them as are absolutely necessary for such time as is allowed by law.
83. In the light of my above discussion, I make the following orders and directions :
(a) I quash the decision dated 16-6-1983 contained in File No. DAE. V/1/83-DBRU of respondent No. 1 to search M. G. Road godown of petitioner No. 1, the search and seizure of 102 Video Cassette recorders effected by Sri D. Ravishankar, Inspector of Central Excise, Bangalore in pursuance of the search warrant issued to him and direct their return to petitioner No. 1 with all such expedition as is possible in the circumstances of the case and in any event with in 7 days from the date of receipt of this order;
(b) I direct respondent No. 1 to return the documents delivered to him or his subordinates on 10th and 15th June, 1983 to petitioner No. 1 with all such expedition as is possible in the circumstances of the case and in any event within 7 days from the date of receipt of this order;
(c) I dismiss this writ petition in all other respects;
(d) I direct petitioner No. 1 to deliver the sealed boxes containing documents indentified and sealed by respondent No. 1 or his subordinates on 22-6-1983 in pursuance of the interim order made by this Court and thereafter permitted to be retained by it by this Court at the hearing to respondent No. 1 within 3 days from this day and report its compliance thereof to this Court.
(e) But, notwithstanding my order made in sub-para (c) of this para :
(i) I direct respondent No. 1 to return the 10 Video Testing machines to petitioner No. 1 after making all such inventories as he considers necessary for the completion of the proceedings under the Act on its furnishing bank guarantee for a sum of Rs. 1,60,000/- for the payment of excise duty and other liabilities that may ultimately be found due in respect of those machines with an undertaking that those machines will not be sold or destroyed and will not be used for manufacturing VCRs and will be produced before him or a criminal Court whenever necessary for any legal proceeding.
(ii) I direct respondent No. 1 to return 67 account books to petitioner No. 1 after making all such inventories as he considers necessary on petitioner No. 1 filing an undertaking to produce all or any of them before him whenever called upon to do so for the completion of the proceedings under the Act or before a criminal Court, as the case may be, with all such expedition as is possible in the circumstances of the case and in any event, within 10 days from the date petitioner No. 1 files its undertaking before him.
(iii) I direct respondent No. 1 to retain such number of protocols or history sheets not exceeding 200 out of 4200 seized as he may decide to choose and return the remaining protocols - history sheets to petitioner No. 1 after making all such inventories as he considers necessary in that behalf on petitioner No. 1 filing an undertaking not to tamper any of the entries in any of them and produce all or any of them, when called upon by him for completion of the proceedings under the Act or any legal proceedings before a criminal Court with all such expedition as is possible in the circumstances of the case, and in any event within 15 days from the date petitioner No. 1 files its undertaking before him.
84. Writ petition is disposed of in the above terms. But, in the circumstances of the case, I direct the parties to bear their own costs.
85. Let this order be communicated to the respondents within 3 days from this day. Let another copy of this order be also furnished to Sri K. Shivashankar Bhat, Learned Central Government Senior Standing Counsel within the same time.