Rachana Flour Mill (P.) Ltd. Vs. Commercial Tax Officer, Secunderabad - Court Judgment

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sales tax - search of premises - sections 17 and 28 of andhra pradesh general sales tax act, 1957 - respondent carried out search of residential premises of director of petitioner-company - such search challenged in petition as illegal and without jurisdiction before high court - petitioner was in arrears of tax - in case of suspicion against any dealer that he is attempting to evade payment of any tax or any amount due a search can be made under section 28 - held, search not illegal. - - we would like to dispel any confusion in this case by stating clearly at this juncture itself that the petitioner-company herein is not an assessee before the commercial tax officer (c. this clearly means that a demand can be made on such person from whom money is due or may become due to the dealer. the authorities were well within their jurisdiction to make a demand on the petitioner-company to stop payment to m/s. we do not see any force in this contention for the reason that section 28 of the act clearly provides that any officer authorised by the state government may require any dealer to produce before him the accounts, registers and other documents and to furnish any other information relating to his business. but since there was a strong suspicion against the director and the authorities had cogent reasons to believe that the ledgers and account books were in the residential premises of the director, the c. we are satisfied that the requirements of section 28 of the act have been fully complied with in this case.sardar ali khan, j.1. the petitioner in this case is m/s. rachana flour mills (pvt.) ltd., pattancheru, medak district, which is represented by its director, ravinder agarwal. they seek a writ of mandamus declaring as illegal and without jurisdiction the search made at the residential premises of the director of the petitioner-company on october 18, 1984, and also the retention of the seized documents by the respondent beyond november 18, 1984 and also seek a direction to the respondent to return the books forthwith to the petitioner. 2. the essential facts are as follows : the petitioner is a manufacturer of wheat products having its factory at pattancheru, medak district. the petitioner claims that they are filing returns every month before the commercial tax officer, sangareddy circle and are paying taxes regularly without committing any default. the petitioner received a notice under section 17 of the a.p. general sales tax act, 1957, from the commercial tax officer, lad bazar circle, hyderabad, on october 11, 1984, directing the petitioner not to pay any amounts held by it to the credit of m/s. mahendra corporation, hyderabad, on the ground that the latter is a defaulter. the petitioner had replied that it does not owe any money to m/s. mahendra corporation. but another notice dated october 19, 1984, from the deputy commercial tax officer, malakpet, hyderabad, under section 17 of the act was issued directing the petitioner not to pay any amount to the credit of m/s. ganesh traders who were in arrears of sales tax. consequently, they stopped payment by cheques in favour of m/s. ganesh traders. 3. it is under these circumstances that the respondent carried out the search of the residential premises of the director of the petitioner-company, one sri ravinder agarwal at east marredpally, on october 18, 1984, which is challenged in this writ petition along with other prayers which have been indicated already. 4. the primary question, therefore, to be determined in this writ petition is whether the authorities had the jurisdiction to carry on the search at the residential premises of the director in east marredpally or not. in this connection, it would be necessary to examine the provisions of section 17 of the a.p. general sales tax act, 1957 (hereinafter referred to as 'the act'), which provides, inter alia, for the recovery of tax and other dues payable under the act from persons from whom money is due to the dealer. we would like to dispel any confusion in this case by stating clearly at this juncture itself that the petitioner-company herein is not an assessee before the commercial tax officer (c.t.o.), who has issued the notices. but under section 17 of the act, it is provided that the assessing authority may, at any time or from time to time by notice in writing, require any person from whom money is due or may become due to the dealer or any person who holds or may subsequently hold money for, or on account of the dealer, to pay to the assessing authority either forthwith if the money has become due or is so held, or within the time specified in the notice, a part or whole of the money as such. sub-section (5) of section 17 provides that where any person to whom a notice under this section is sent, proves to the satisfaction of the assessing authority that the sum demanded or any part thereof is not due by him to the dealer, or that he does not hold any money for or on account of the dealer, then nothing contained in this section shall be deemed to require such person to pay the sum demanded or any part thereof, to the assessing authority. under sub-section (5-a) of section 17 it is provided that where any person to whom a notice under sub-section (1) is sent, fails to pay to the assessing authority, the sum demanded or any part thereof as required in the said notice, such sum shall be recoverable from such person as if it were an arrear of land revenue due from him. 5. a reading of section 17 makes it clear beyond any doubt that when any demand is made for recovery of tax and other dues payable under the act from any person to the dealer, the person from whom demand is made has got a right to prove to the satisfaction of the assessing authority that the sum demanded or any part thereof is not due by him to the dealer. this clearly means that a demand can be made on such person from whom money is due or may become due to the dealer. in this case, the authorities had the reason to believe that money was due from the petitioner-company to m/s. mahendra corporation, who is a dealer. if so, it cannot be said that the notice issued under section 17 of the act suffers from any illegality or want of jurisdiction. the authorities were well within their jurisdiction to make a demand on the petitioner-company to stop payment to m/s. mahendra corporation and to divert that payment to the government towards the arrears of sales tax due from the dealer, m/s. mahendra corporation. 6. the next section to be considered in this case is section 28, which provides 'powers to order production of accounts and powers of entry, inspection, etc.' it would be in the fitness of things to reproduce sub-sections (1) and (3) of section 28 of the act which read : '(1) any officer not below the rank of an assistant commercial tax officer authorised by the state government in this behalf may for the purposes of this act, require any dealer to produce before him the accounts, registers and other documents, and to furnish any other information relating to his business. (2) ............. (3) if any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax or other amount due from him under this act, he may, for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealers as he may consider necessary and shall give the dealer a receipt for the same. the accounts, registers and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under this act : provided that such accounts, registers and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority.' 7. a reading of sub-sections (1) and (3) of section 28 of the act shows that any officer not below the rank of an assistant commercial tax officer authorised by the state government may, for the purposes of this act, require any dealer to produce before him the accounts, registers and other documents and if such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealer as he may consider necessary and shall give the dealer a receipt for the same. 8. the main thrust of the argument advanced on behalf of the petitioner-company in this case is that the c.t.o., lad bazar, hyderabad, had no jurisdiction to order a search of the residential premises of the director of the petitioner-company, who was residing at east marredpally. indeed the learned counsel for the petitioner has gone to the extent of saying that the c.t.o., lad bazar, hyderabad, had no jurisdiction to visit the premises of the petitioner, m/s. rachana flour mills (pvt.) ltd., situated at pattancheru, as he does not have the territorial jurisdiction to do so. we do not see any force in this contention for the reason that section 28 of the act clearly provides that any officer authorised by the state government may require any dealer to produce before him the accounts, registers and other documents and to furnish any other information relating to his business. moreover, if such an officer has reason to suspect that such dealer is attempting to evade the payment of any tax or other amount due from him under this act, he may, for reasons to be recorded in writing, seize such accounts, registers or other documents, as the case may be. 9. we have examined the records in this matter, which reveal that the c.t.o., lad bazar, hyderabad, has addressed a letter to the deputy commissioner, commercial taxes, hyderabad-iii division, on october 12, 1984, in which he has stated that m/s. mahendra corporation has got sales tax liability to the tune of rs. 88,000 for which a notice has been issued to the said corporation. it is further stated that on personal enquiries, it was noticed that the petitioner, m/s. rachana flour mills (pvt.) ltd. at pattancheru, who are doing customs milling, had to pay more than rs. 1 lakh to m/s. mahendra corporation against the purchase of wheat worth rs. 10 lakhs and above. on such suspicion, the assistant commercial tax officer, lad bazar, rushed to their factory on october 11, 1984, at pattancheru for verification of cash book, ledger, bank cheque receipts, etc. it seems he was informed that all these accounts and ledger books were with the director who was residing at east marredpally, secunderabad. then they proceeded to east marredpally and questioned sri ravinder agarwal, the director of the petitioner-company. the said director expressed his inability to furnish any books or ledgers on the ground that the same would be at the head office in madras. but since there was a strong suspicion against the director and the authorities had cogent reasons to believe that the ledgers and account books were in the residential premises of the director, the c.t.o., lad bazar, hyderabad, addressed a letter to the deputy commissioner, c.t., hyderabad-iii division, requesting him that he may contact the deputy commissioner, c.t. hyderabad-i division, and arrange for a search of the above premises. we are satisfied that the requirements of section 28 of the act have been fully complied with in this case. the c.t.o., lad bazar, recorded his reasons as to why such a search was necessary in this case and requested the concerned authority, i.e., the deputy commissioner, c.t., hyderabad-iii division, to contact the deputy commissioner, c.t., hyderabad-i division and arrange for a search of the residential premises of the director through the concerned c.t.o. therefore, the power vested in the authorities under section 28 of the act has been duly and properly exercised and we do not see any illegality or impropriety in the exercise of the same. 10. it may also be mentioned that the learned counsel for the petitioner has submitted that the c.t.o., lad bazar, does not have the territorial jurisdiction to carry out the search under section 28 of the act. but as stated earlier, it is clear that under section 28 of the act if there is any suspicion against any dealer that he is attempting to evade the payment of any tax or other amount due from him under this act, then a search can be made at his instance. it may be true that there is no tax due from the petitioner herein. but surely, a notice under section 17 of the act has been issued and an amount had become due from the petitioner as believed by c.t.o., lad bazar, under the act. therefore, there is no substance in the argument that section 28 cannot be invoked in a case of this nature. 11. the other aspect of the matter is with regard to the retention of the seized documents. the learned counsel for the petitioner has submitted that these documents have been retained without seeking extension of time as provided under section 28 of the act. in this regard also, we have examined the records, which revealed that the documents were seized on october 18, 1984 and a communication was addressed by the c.t.o. on november 17, 1984, to the deputy commissioner, c.t., for extension of time, which was granted vide a letter dated november 30, 1984. thereafter, extensions of time have been granted by the concerned authority for the retention of the seized documents from time to time. in this view of the matter, the submission made by the learned counsel for the petitioner is rendered devoid of any merit. however, it may be stated that the respondent has fairly stated in the counter-affidavit that they were ready to provide xerox copies of the seized documents to the petitioner. we are of the view that the documents have been retained for over a period of five years, which is unduly long. it is, therefore, directed that the authorities may retain the photostat copies of the seized documents by taking signature of the petitioner on the same and return the originals to the petitioner, within a month from the date of this order. 12. the writ petition is accordingly disposed of. but there will be no order as to costs. advocate's fee rs. 200. 13. writ petition disposed of accordingly.