Shri Tushar Kanti Mazumdar Vs. State of Assam and ors. - Court Judgment

Excerpt:
1. this appeal is directed against the judgment and order dated 30-9-2008 passed by the learned single judge of this court in w.p.(c) no. 423 of 2002 upholding the seizure of certain documents pertaining to the business of the petitioner effected under section 44(3) of the assam general sales tax act, 1993 ("the sales tax act" for short), of the retention of the seized document beyond the period of 120 days prescribed by the act and of the notice dated 8-11-2001 issued by respondent no. 4 requiring the appellant to appear before him and to produce some account books maintained by him. 2. the appellant is the proprietor of the firm under the name and style of m/s. eastern drugs and chemicals, which is registered as dealer under the sales tax act and the central sales tax act, and is engaged in the business of pharmaceutical products with its registered office at guwahati. according to the appellant, on 31-7-2001 at about 12.30 p.m., a team of sales tax officials under respondent 3 visited the business premises of the appellant during his absence and issued a notice under section 44(1) of the sales tax act requiring his employees present to produce the books of accounts of the firm for the year 1998-99 onwards for verification. thereafter, according to the appellant, the visiting team made a search of the business premises of the petitioner and effected seizure of certain documents which are specifically mentioned in the seizure list dated 31-7-2001 enclosed as annexure-b to the writ petition. the case of the respondents is that the seizure was made on the ground that the appellant, as the dealer, has been dealing in some taxable goods which are not covered by his registration leading to evasion of taxes and additionally, he could not explain some transactions recorded in loose sheets and exercise books which were detected and seized on the date in question i.e. 31-7-2001.    3. it would appear that the notice dated 8.11.2001 was subsequently received by the appellant from respondent 4 wherein it was mentioned that the preliminary verification report in respect of the seized documents had indicated evasion of taxes to the extent of rs.31,43,454/- by him. he was, therefore, asked to appear before respondent 4 on 16-11- 2001 and to produce all relevant books of accounts, etc. and explain the facts revealed by the seized documents. in reply to the notice dated 8-11- 2001, the appellant sent the letter dated 3-11-2001 requesting the respondents to release the seized documents so as to enable him to prepare final accounts and also for running his day to day business or, in the alternative, to furnish him the xerox copies thereof. another letter dated 5-12-2001 was sent by him to respondent 4 requesting him to adjourn the case to another on the ground of his absence followed by another letter dated 12-12-2001 for releasing the seized documents but without any tangible result. this prompted him to file the writ petition for appropriate directions. 4.the contentions of the appellant are that the seizure was not based on requisite satisfaction of the seizing authority as required by the sales tax act; that if a dealer is found be engaged in business beyond those enumerated in the registration certificate, there are ample provisions in the act for amendment of the registration certificate; that the second ground in support of the seizure, as recorded in the seizure list dated 31- 7-2001, is also not tenable as no loose sheets had been specifically mentioned in the seizure list; that the seized documents or photo copies thereof are required by him for the purpose of preparing his books of accounts without which he is not in a position to produce such accounts before the concerned sales tax officer; that retention of the seized documents can be for a maximum period of 120 days under the proviso to section 44(3) of the sales tax act whereafter the reasons for the retention has to be recorded and approved by the commissioner of taxes, but in this case, neither any such reasons have been recorded nor has the approval of the commissioner been obtained; and that the documents seized followed a search operation which, however, was not carried out in accordance with the provisions of the code of criminal procedure. the appellant, therefore, contends that impugned notice cannot be sustained in law from any angle and prays for the intervention of the court. 4a. the state-respondents contested the writ petition and stated in their counter-affidavit, that on 31-7-2001 at about 12-30 p.m., an inspection was carried out in the business premises of the appellant under section 44(1) of the sales tax act and in the course of the inspection, some incriminating documents were found, which, when not reasonably explained by the employees of the appellant, were seized under section 44(3) of the act. it was submitted by the respondents that the seizure followed an inspection under section 44(1) of the act and was not pursuant to any search operation so as to require compliance with the provisions of the code of criminal procedure; that the commissioner by the order dated 11-2-2002 accorded his approval for retention of the seized documents by the respondents beyond 120 days; that in so far as the notice dated 8-11-2001 is concerned, the books of accounts which he was asked to produce before the authority were required to be produced by him much before the date of seizure of those documents i.e. 31-7-2001 and it was not reasonable on his part to request their return for preparation of the books of accounts and that in any case, if such documents were to be returned as insisted upon by him, that would enable him to rectify the anomalies detected by suitably preparing the books of accounts. 5. though a number of contentions has been urged on behalf of the appellant in the memo of appeal, mr. o.p. bhati, the learned counsel for the appellant, has, however, in the course of hearing, confined himself to only one issue, namely, the question of violation of principles of natural justice by the respondent authorities in denying the appellant copies of the alleged preliminary verification report on the seized books of accounts as well as the photo copies of the seized documents despite his request to that effect in his application dated 3-12-2001. according to the learned counsel, the refusal on the part of the respondents to supply those documents has prevented him from making effective reply to the impugned notice dated 8-11-2001, and the impugned notice is liable to be quashed for this reason alone. on the other hand, mr. r. dubey, the learned counsel for the respondents, contends that there is no provision under the sales tax act for supplying such documents and report and the request made by the appellant for supply of those documents, in the absence of an enabling statutory provision, is ill-conceived: there is no question of violation of principles of natural justice when the law does not prescribe observance of the principles of natural justice. countering this submission of the learned counsel for the respondents, mr. bhati submits that the appellant is entitled to supply of copies of the report as well as the seized documents even if the statutory rules laying down the procedure for taking up the proceedings for disposal of the seizure proceedings are silent on the subject or against it, and denial of such documents, which are necessary to prepare his case, will cause prejudice to him and will, ipso facto, be violative of the principles of natural justice. to buttress his contentions, he relies on the following decisions of the apex court: (i)indu bhushan dwivedi v. state of jharkhand, (2010) 11 scc 278; (ii) sahara india (firm), lucknow v. cit, (2008) 14 scc 151; (iii) union of india & ors. v. mohd. ramjan khan, (1991) 1 scc 588; (iv) k.i. shephard & ors. v. uoi, (1987) 3 scc 431 and (v) city corner v. personal assistant to collector and addl. district magistrate, nellore, (1976) 1 scc 124. 6. it is the common ground of the counsel for both the parties that there is no express provision under the sales tax act or the rules made thereunder prescribing the supply of a copy of the preliminary verification report in respect of the seized books of accounts and copies of the seized documents. the question which, therefore, falls for consideration in this appeal is whether denial of such copies will render the impugned proceeding vitiated even when the statutory rules laying down the procedure for holding the proceedings of seizure proceedings are silent in this behalf or not? the learned single judge is of the view that the preliminary verification report as regards the extent of evasion of tax by the appellant is really on the basis of the seized books of accounts as well as the documents seized from him; that if the seized documents have been retained by the respondents legally and lawfully, as already held by him, the position emanating from such seized documents need not have been furnished to him along with the notice dated 8-11-2001; that any such action demanded by the appellant would be to virtually nullify the seizure and retention of the documents belonging to him and he would be entitled to the said verification report as well as the seized documents only when he produces the books of accounts as required to do by the notice dated 8-11-2001. 7. we have carefully gone through the impugned judgment and the materials on record. with respect, we have no reason to interfere with the impugned judgment though on a different ground. in our opinion, the law with respect to observance of rules of natural of natural justice, even in the absence of statutory provision in this behalf, is no longer res integras. this is so be it a disciplinary proceeding or otherwise. if any authority is needed, we may refer to the decision of the apex court in the recent case of indu bhushan dwivedi case (supra). this is what it said: "22. as a general rule, an authority entrusted with the task of deciding lis between the parties or empowered to make an order which prejudicially affects the rights of any individual or visits him with civil consequences is duty-bound to act in consonance with the basic rules of natural justice including the one that material sought to be used against the person concerned must be disclosed to him and he should be given an opportunity to explain his position. this unwritten right of hearing is fundamental to a just decision, which forms an integral part of the rule of law. this right has its root in the notion of fair procedure. it draws the attention of the authority concerned to the imperative necessity of not overlooking the cause which may be shown by the other side before coming to its decision. 23. when it comes to taking of disciplinary action against a delinquent employee, the employer is not only required to make the employee aware of the specific imputations of misconduct but also disclose the material sought to be used against him and give him a reasonable opportunity of explaining his position or defending himself. if the employer uses some material adverse to the employee about which the latter is not given notice, the final decision get vitiated on the ground of violation of the rule of audi alteram partem. even if there are no statutory rules which regulate holding of disciplinary enquiry against a delinquent employee, the employer is duty-bound to act in consonance with the rules of natural justice d u.p. warehousing corpn. v. vijay narayan vajpayee. 24. however, every violation of the rules of natural justice may not be sufficient for invalidating the action taken by the competent authority/employer and the court will refuse to interfere if it is convinced that such violation has not caused prejudice to the affected person/employee." 8. the theory of reasonable of hearing and principles of natural justice have been evolved to uphold the rule of law and to assist the individual to vindicate his rights. they are not incantations to be invoked or rites to be performed on all and sundry occasions. in state bank of patiala v. s.k. sharma, (1996) 3 scc 364, the apex court also held: thus, breach of rules of natural justice alone is no."33.3.... violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. except in cases falling under d notice', 'no opportunity' and 'no hearing' categories, the complaint of violation of procedural provision should be examined from the point of view of prejudice viz. whether such violation has prejudiced the delinquent officer/employee in defending himself properly and effectively." (underlined ours) 9. it may now, therefore, be taken to be the law that violation of principles of natural justice cannot, per se, be sufficient to vitiate a proceeding or enquiry. it is further incumbent upon the petitioner to plead and prove the prejudice caused by the non-compliance with the rules of natural justice. this is abundantly made clear by the apex court in sbi v. bidyut kumar mitra, (2011) 2 scc 316: "40. these observations are not relevant in the facts and circumstances of the present case. the respondent herein is merely trying to make capital out of his own lapse in not submitting the list of documents in time and also not stating the relevance of the documents required to be produced. by now the legal position is well-settled and defined. it was incumbent on the respondent to plead and prove the prejudice caused by the non-supply of the documents. the respondent has failed to place on record any facts or materials to prove what prejudice have been caused to him." in the instant case, the pleadings of the appellant with regard to prejudice are found at paragraph 13 of the writ petition, which is reproduced below: "13.that the petitioner begs to state that the impugned notice dated 08-11-2000 is equally violative of the principles of natural justice in as much as the copies of the alleged preliminary verification report of the seized books of account had not been supplied along with the impugned notice to meet out effectively the allegations of evasion of the alleged tax. further, the actions of initiating further proceedings is equally vitiated for non-supply of the photostat copies of the seized documents in spite of request to that effect was made by the petitioner vide his letter dated 03-12-2001." 10. we have gone through the letter dated 3-12-2001 wherein the appellant stated that "the said book of account/documents is being forwarded to you and on 08.11.01 you called upon us to produce our books of account before you for your verification." the letter further requested the respondent no. 4 to release the seized books of accounts/documents to enable them to prepare heir final accounts emphasising the importance of these documents for their audit purpose and for their regular day-to-day business work in the absence whereof their business would be greatly affected or alternative to issue the photostat copies of the said documents so that they could finalize their accounts. we have referred to the letter dated 3-2-2001 in detail to ascertain what possible prejudice could have been caused to the appellant by the non-supply of the said documents since no facts or materials were pleaded in the memo of appeal to prove prejudice. however, even after reading and re-reading this letter, we are unable to say that any prejudice is being caused to the appellant by the non-supply of those documents. all that he stated in that letter is that the documents were essential for their audit purpose and for their regular day-to-day business work as otherwise their business was being greatly affected: he did not whisper any statement about his inability reply to the impugned notice dated 8-11-2001 issued by respondent 4 due to non-supply of those documents. the appellant has thus failed to place any facts record to substantiate his case that any prejudice, not to speak of substantial prejudice, is being caused to him for non-supply of those document. even if we assume that rules of natural justice have been violated by the respondent authorities for the non-supply of the copies of the preliminary verification report and the seized documents, on the findings so reached by us, we do not think that any prejudice, ipso facto, could possibly be caused to the appellant. 11. for what has been stated in the foregoing, there is no merit in this writ appeal, which is hereby dismissed but by directing the parties to bear their respective costs.

Judgment:

1. This appeal is directed against the judgment and order dated 30-9-2008 passed by the learned Single Judge of this Court in W.P.(C) No. 423 of 2002 upholding the seizure of certain documents pertaining to the business of the petitioner effected under Section 44(3) of the Assam General Sales Tax Act, 1993 ("the Sales Tax Act" for short), of the retention of the seized document beyond the period of 120 days prescribed by the Act and of the notice dated 8-11-2001 issued by respondent No. 4 requiring the appellant to appear before him and to produce some account books maintained by him.

2. The appellant is the proprietor of the firm under the name and style of M/s. Eastern Drugs and Chemicals, which is registered as dealer under the Sales Tax Act and the Central Sales Tax Act, and is engaged in the business of pharmaceutical products with its registered office at Guwahati. According to the appellant, on 31-7-2001 at about 12.30 P.M., a team of sales tax officials under respondent 3 visited the business premises of the appellant during his absence and issued a notice under Section 44(1) of the Sales Tax Act requiring his employees present to produce the books of accounts of the firm for the year 1998-99 onwards for verification. Thereafter, according to the appellant, the visiting team made a search of the business premises of the petitioner and effected seizure of certain documents which are specifically mentioned in the seizure list dated 31-7-2001 enclosed as Annexure-B to the writ petition. The case of the respondents is that the seizure was made on the ground that the appellant, as the dealer, has been dealing in some taxable goods which are not covered by his registration leading to evasion of taxes and additionally, he could not explain some transactions recorded in loose sheets and exercise books which were detected and seized on the date in question i.e. 31-7-2001.   

3. It would appear that the notice dated 8.11.2001 was subsequently received by the appellant from respondent 4 wherein it was mentioned that the preliminary verification report in respect of the seized documents had indicated evasion of taxes to the extent of Rs.31,43,454/- by him. He was, therefore, asked to appear before respondent 4 on 16-11- 2001 and to produce all relevant books of accounts, etc. and explain the facts revealed by the seized documents. In reply to the notice dated 8-11- 2001, the appellant sent the letter dated 3-11-2001 requesting the respondents to release the seized documents so as to enable him to prepare final accounts and also for running his day to day business or, in the alternative, to furnish him the Xerox copies thereof. Another letter dated 5-12-2001 was sent by him to respondent 4 requesting him to adjourn the case to another on the ground of his absence followed by another letter dated 12-12-2001 for releasing the seized documents but without any tangible result. This prompted him to file the writ petition for appropriate directions.

4.The contentions of the appellant are that the seizure was not based on requisite satisfaction of the seizing authority as required by the Sales Tax Act; that if a dealer is found be engaged in business beyond those enumerated in the registration certificate, there are ample provisions in the Act for amendment of the registration certificate; that the second ground in support of the seizure, as recorded in the seizure list dated 31- 7-2001, is also not tenable as no loose sheets had been specifically mentioned in the seizure list; that the seized documents or photo copies thereof are required by him for the purpose of preparing his books of accounts without which he is not in a position to produce such accounts before the concerned Sales Tax officer; that retention of the seized documents can be for a maximum period of 120 days under the proviso to Section 44(3) of the Sales Tax Act whereafter the reasons for the retention has to be recorded and approved by the Commissioner of Taxes, but in this case, neither any such reasons have been recorded nor has the approval of the Commissioner been obtained; and that the documents seized followed a search operation which, however, was not carried out in accordance with the provisions of the Code of Criminal Procedure. The appellant, therefore, contends that impugned notice cannot be sustained in law from any angle and prays for the intervention of the Court.

4a. The State-respondents contested the writ petition and stated in their counter-affidavit, that on 31-7-2001 at about 12-30 P.M., an inspection was carried out in the business premises of the appellant under Section 44(1) of the Sales Tax Act and in the course of the inspection, some incriminating documents were found, which, when not reasonably explained by the employees of the appellant, were seized under Section 44(3) of the Act. It was submitted by the respondents that the seizure followed an inspection under Section 44(1) of the Act and was not pursuant to any search operation so as to require compliance with the provisions of the Code of Criminal Procedure; that the Commissioner by the order dated 11-2-2002 accorded his approval for retention of the seized documents by the respondents beyond 120 days; that in so far as the notice dated 8-11-2001 is concerned, the books of accounts which he was asked to produce before the authority were required to be produced by him much before the date of seizure of those documents i.e. 31-7-2001 and it was not reasonable on his part to request their return for preparation of the books of accounts and that in any case, if such documents were to be returned as insisted upon by him, that would enable him to rectify the anomalies detected by suitably preparing the books of accounts.

5. Though a number of contentions has been urged on behalf of the appellant in the memo of appeal, Mr. O.P. Bhati, the learned counsel for the appellant, has, however, in the course of hearing, confined himself to only one issue, namely, the question of violation of principles of natural justice by the respondent authorities in denying the appellant copies of the alleged preliminary verification report on the seized books of accounts as well as the photo copies of the seized documents despite his request to that effect in his application dated 3-12-2001. According to the learned counsel, the refusal on the part of the respondents to supply those documents has prevented him from making effective reply to the impugned notice dated 8-11-2001, and the impugned notice is liable to be quashed for this reason alone. On the other hand, Mr. R. Dubey, the learned counsel for the respondents, contends that there is no provision under the Sales Tax Act for supplying such documents and report and the request made by the appellant for supply of those documents, in the absence of an enabling statutory provision, is ill-conceived: there is no question of violation of principles of natural justice when the law does not prescribe observance of the principles of natural justice. Countering this submission of the learned counsel for the respondents, Mr. Bhati submits that the appellant is entitled to supply of copies of the report as well as the seized documents even if the statutory rules laying down the procedure for taking up the proceedings for disposal of the seizure proceedings are silent on the subject or against it, and denial of such documents, which are necessary to prepare his case, will cause prejudice to him and will, ipso facto, be violative of the principles of natural justice.

To buttress his contentions, he relies on the following decisions of the Apex Court:

(i)Indu Bhushan Dwivedi v. State of Jharkhand, (2010) 11 SCC 278;

(ii) Sahara India (Firm), Lucknow v. CIT, (2008) 14 SCC 151;

(iii) Union of India & ors. V. Mohd. Ramjan Khan, (1991) 1 SCC 588;

(iv) K.I. Shephard & ors. V. UOI, (1987) 3 SCC 431 and

(v) City Corner v. Personal Assistant to Collector and Addl. District Magistrate, Nellore, (1976) 1 SCC 124.

6. It is the common ground of the counsel for both the parties that there is no express provision under the Sales Tax Act or the rules made thereunder prescribing the supply of a copy of the preliminary verification report in respect of the seized books of accounts and copies of the seized documents. The question which, therefore, falls for consideration in this appeal is whether denial of such copies will render the impugned proceeding vitiated even when the statutory rules laying down the procedure for holding the proceedings of seizure proceedings are silent in this behalf or not?

The learned Single Judge is of the view that the preliminary verification report as regards the extent of evasion of tax by the appellant is really on the basis of the seized books of accounts as well as the documents seized from him; that if the seized documents have been retained by the respondents legally and lawfully, as already held by him, the position emanating from such seized documents need not have been furnished to him along with the notice dated 8-11-2001; that any such action demanded by the appellant would be to virtually nullify the seizure and retention of the documents belonging to him and he would be entitled to the said verification report as well as the seized documents only when he produces the books of accounts as required to do by the notice dated 8-11-2001.

7. We have carefully gone through the impugned judgment and the materials on record. With respect, we have no reason to interfere with the impugned judgment though on a different ground. In our opinion, the law with respect to observance of rules of natural of natural justice, even in the absence of statutory provision in this behalf, is no longer res integras. This is so be it a disciplinary proceeding or otherwise. If any authority is needed, we may refer to the decision of the Apex Court in the recent case of Indu Bhushan Dwivedi case (supra). This is what it said:

"22. As a general rule, an authority entrusted with the task of deciding lis between the parties or empowered to make an order which prejudicially affects the rights of any individual or visits him with civil consequences is duty-bound to act in consonance with the basic rules of natural justice including the one that material sought to be used against the person concerned must be disclosed to him and he should be given an opportunity to explain his position. This unwritten right of hearing is fundamental to a just decision, which forms an integral part of the rule of law. This right has its root in the notion of fair procedure. It draws the attention of the authority concerned to the imperative necessity of not overlooking the cause which may be shown by the other side before coming to its decision.

23. When it comes to taking of disciplinary action against a delinquent employee, the employer is not only required to make the employee aware of the specific imputations of misconduct but also disclose the material sought to be used against him and give him a reasonable opportunity of explaining his position or defending himself. If the employer uses some material adverse to the employee about which the latter is not given notice, the final decision get vitiated on the ground of violation of the rule of audi alteram partem. Even if there are no statutory rules which regulate holding of disciplinary enquiry against a delinquent employee, the employer is duty-bound to act in consonance with the rules of natural justice D U.P. Warehousing Corpn. V. Vijay Narayan Vajpayee.

24. However, every violation of the rules of natural justice may not be sufficient for invalidating the action taken by the competent authority/employer and the Court will refuse to interfere if it is convinced that such violation has not caused prejudice to the affected person/employee."

8. The theory of reasonable of hearing and principles of natural justice have been evolved to uphold the rule of law and to assist the individual to vindicate his rights. They are not incantations to be invoked or rites to be performed on all and sundry occasions. In State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364, the Apex Court also held: Thus, breach of rules of natural justice alone is No."33.3.... Violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. Except in cases falling under D notice', 'no opportunity' and 'no hearing' categories, the complaint of violation of procedural provision should be examined from the point of view of prejudice viz. whether such violation has prejudiced the delinquent officer/employee in defending himself properly and effectively." (Underlined ours)

9. It may now, therefore, be taken to be the law that violation of principles of natural justice cannot, per se, be sufficient to vitiate a proceeding or enquiry. It is further incumbent upon the petitioner to plead and prove the prejudice caused by the non-compliance with the rules of natural justice. This is abundantly made clear by the Apex Court in SBI v. Bidyut Kumar Mitra, (2011) 2 SCC 316:

"40. These observations are not relevant in the facts and circumstances of the present case. The respondent herein is merely trying to make capital out of his own lapse in not submitting the list of documents in time and also not stating the relevance of the documents required to be produced. By now the legal position is well-settled and defined. It was incumbent on the respondent to plead and prove the prejudice caused by the non-supply of the documents. The respondent has failed to place on record any facts or materials to prove what prejudice have been caused to him."

In the instant case, the pleadings of the appellant with regard to prejudice are found at paragraph 13 of the writ petition, which is reproduced below:

"13.That the petitioner begs to state that the impugned notice dated 08-11-2000 is equally violative of the principles of natural justice in as much as the copies of the alleged preliminary verification report of the seized books of account had not been supplied along with the impugned notice to meet out effectively the allegations of evasion of the alleged tax. Further, the actions of initiating further proceedings is equally vitiated for non-supply of the Photostat copies of the seized documents in spite of request to that effect was made by the petitioner vide his letter dated 03-12-2001."

10. We have gone through the letter dated 3-12-2001 wherein the appellant stated that "the said book of account/documents is being forwarded to you and on 08.11.01 you called upon us to produce our books of account before you for your verification." The letter further requested the respondent No. 4 to release the seized books of accounts/documents to enable them to prepare heir final accounts emphasising the importance of these documents for their audit purpose and for their regular day-to-day business work in the absence whereof their business would be greatly affected or alternative to issue the photostat copies of the said documents so that they could finalize their accounts. We have referred to the letter dated 3-2-2001 in detail to ascertain what possible prejudice could have been caused to the appellant by the non-supply of the said documents since no facts or materials were pleaded in the memo of appeal to prove prejudice.

However, even after reading and re-reading this letter, we are unable to say that any prejudice is being caused to the appellant by the non-supply of those documents. All that he stated in that letter is that the documents were essential for their audit purpose and for their regular day-to-day business work as otherwise their business was being greatly affected: he did not whisper any statement about his inability reply to the impugned notice dated 8-11-2001 issued by respondent 4 due to non-supply of those documents. The appellant has thus failed to place any facts record to substantiate his case that any prejudice, not to speak of substantial prejudice, is being caused to him for non-supply of those document. Even if we assume that rules of natural justice have been violated by the respondent authorities for the non-supply of the copies of the preliminary verification report and the seized documents, on the findings so reached by us, we do not think that any prejudice, ipso facto, could possibly be caused to the appellant.

11. For what has been stated in the foregoing, there is no merit in this writ appeal, which is hereby dismissed but by directing the parties to bear their respective costs.