K.N.WANCHOO - (1.) THESE five appeals on certificates granted by the Madras High Court raise common questions of law and will be dealt with together. We shall give brief facts in one of the appeals (No. 150 of 1967) arising out of writ petition No. 1321 of 1964 in order to understand the questions that fall to be decided in the present appeals. On 19/08/1964, at about 5.00 p. m. the officers of the Commercial Tax Department (hereinafter referred to as the Department) raided the premises of Zenith Lamps and Electricals Ltd., (hereinafter referred to as the Company). It is said that the premises were searched and a suit-case was seized and forcibly removed by the officers who made the raid in spite of the fact that they were informed that the box did not contain any papers or documents belonging to the Company and its contents consisted merely of personal effects of one of the Managing Directors, namely, Shri Ramkrishan Shrikishan Jhaver. The raid and search were made by the authorities concerned on information that Shri Goenka, one of the Directors of the Company had removed a box containing secret accounts relating to it. The main contention of the petitioner in support of his prayer that the articles seized should be returned to him was under three heads. It was first contended that on a proper construction of S. 41 of the Madras General Sales Tax Act, No. 1 of 1959 (hereinafter referred to as the Act), the officers of the Department had no authority to search the premises and seize either the account books or the goods found therein. Secondly, it was contended that if S. 41 (4) authorised seizure and confiscation of goods, it was beyond the legislative competence of the State Legislature, for it could not be covered by item 54 of list II of the Seventh Schedule to the Constitution relating to "taxes on the sale or purchase of goods". Lastly, it was contended that of various provisions in S. 41 were capable of being construed as authorising search and seizure the provision contained therein were unconstitutional in view of Article 19 (1) (f) and (g) of the Constitution.
(2.) IT is not necessary to refer to the facts in the other petitions which have resulted in the other appeals before this Court because in those cases also there was search and seizure by the officers of the Department and their action is being attacked on the same grounds. All the petitions were opposed on behalf of the State Government and its case was firstly, that S. 41 authorised search and seizure; secondly, that the State Legislature was competent to enact S. 41 (4) under item 54 of List II of the Seventh Schedule to the Constitution and thirdly, that the provisions in question did not offend Art. 19 (1) (f) and (g) of the Constitution and were in any case protected by Article 19 (5) and (6). The High Court held that S. 41 (2) did not allow search being made thereunder, as it only provided for inspection, and that search was a different thing altogether from inspection. The High Court further held that if S. 41 (2) provided for search it would be within the legislative competence of the State Legislature. The High Court took the view that the power of seizure and confiscation of goods contained in sub-section (4) could not be said to be ancillary and incidental to the power to tax sale or purchase of goods and therefore this provision was beyond the legislative competence of the State Legislature. Finally, the High Court held that sub-secs. (2), (3) and (4) of S. 4 were unconstitutional as they were unreasonable restrictions on the fundamental rights guaranteed under Article 19 (1) (f) and (g) of the Constitution. Besides the above, the High Court also found with respect to one of the petitions that the search warrant issued for the search of the residential house by the magistrate disclosed that the magistrate had not applied his mind at all to the necessity of the search of the residential house, for columns in the printed search warrant which should have been struck out were not so struck out. Further the gaps in the printed form which should have been filled in before the warrant was issued had not been filled in. From those two circumstances the High Court concluded that the search warrant for the residential house had been issued without the application of mind by the Magistrate to the necessity of the search of the residential house. The High Court further found that S. 41 (4) was not complied with strictly before confiscation was ordered and no proper opportunity was given to the dealer to show that the goods seized and confiscated were not accounted for in his accounts. In the result therefore the High Court allowed all the petitions and directed that the documents, things and goods covered by the petitions should be returned to the petitioners along with photographs, negatives, translations and notes made by the Department from the accounts etc. The State of Madras then applied for and obtained certificates from the High Court to appeal to this Court and that is how the matter has come before us. The same three questions which were raised before the High Court have been raised before us on behalf of the appellant. Before, however, we deal with them we would briefly refer to the provisions of the Act which are material for our purposes. S. 3 is the main charging section which provides that "every dealer whose total turnover for a year is not less than Rs. l0,000 ... shall pay a tax for each year at the rate of 2 per cent of his taxable turnover". The point at which tax has to be paid on single point taxable goods is indicated in the First Schedule to the Act and that will show that in a large majority of cases the tax has to be paid at the point of first sale in the State, though in some cases it has to be paid at the point of first purchase or of last purchase in the State. S. 4 is another charging section in respect of declared goods and the Second Schedule to the Act deals with the point at which tax has to be paid in respect of such goods. That Schedule also shows that in a majority of cases the tax has to be paid at the point of first sale in the State, though in some cases it has to be paid at the point of first purchase in the State or the last purchase in the State. Certain goods are exempt from tax under the Act as provided in the Third Schedule and do not thus form part of the taxable turnover, though they will be a part of the turnover for purposes of calculating the total turnover per year. The Act provides for registration of firms and of dealers for appointment of officers, for collection of tax, for the levy of penalty, and for appeals and revisions. It also casts a duty on dealers to maintain a true and correct account. Then comes S. 41 with which we are particularly concerned. It is in these terms : "(1) Any officer empowered by the Government in this behalf may, for the purpose of this Act, require any dealer to produce before him the accounts, registers, records and other documents and to furnish any other information relating to his business. (2) All accounts, registers, records and other documents maintained by a dealer in the course of his business the goods in his possession and his offices, shops, godowns vessels or vehicles shall be open to inspection at all reasonable times by such officer : Provided that no residential accommodation (not being a place of business-cum-residence) shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction over the area, and all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure, 1898 (Central Act V of 1898). 3. If any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under this Act he may, for reasons to be recorded in writing, seize such accounts, registers, records or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers, records 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 the permission of the next higher authority. 4. Any such officer shall have power to seize and confiscate any goods which are found in any office, shop, godown, vessel, vehicle, or any other place of business or any building or place of the dealer, but not accounted for by the dealer in his accounts, registers, records and other documents maintained in the course of his business. Provided that before ordering the confiscation of goods under this sub-section the officer shall give the person affected an opportunity of being heard and make an inquiry in the prescribed manner : Provided further that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation. (a) in cases where the goods are taxable under this Act, in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater; and (b) in other cases, a sum of money not exceeding one thousand rupees. Explanation -It shall be open to the Government to empower different classes of officers for the purpose of taking action under sub-sections (1), (2) and (3)."
(3.) IT will be seen from the above brief review of the provisions of the Act that it mainly deals with sales tax to be levied at the point of first sale in the State though there is also provision for purchase tax in certain cases. IT empowers any officer, empowered by the Government in this behalf, to require any dealer to produce before him the accounts, registers, records and other documents and to furnish any other information relating to his business. IT may be mentioned here that the Government has empowered all officers of the Department not lower in rank than the Assistant Commercial Tax Officer, all officers of the Revenue Department not lower in rank than an Inspector and all officers of the police Department not lower in rank than a Sub-Inspector to act under S. 41, sub-sections (2) to (4). Presumably so far as sub-s. (1) is concerned only officers of the Department can act under the provision. However, there is no dispute with respect to that sub-section as the power has to he exercised for the purpose of the Act i.e., with reference to assessment proceedings at all stages including recovery of tax and prosecution for offences. IT is not disputed that the power under sub-s. (1) can only be exercised to require a dealer to produce accounts etc., relating to his business and not that of anybody else. The main dispute centres round the interpretation of sub-s. (2) of S. 41. The contention on behalf of the respondents is that that provision did not authorise search of premises but merely provided for inspection thereof at all reasonable times by the empowered officer. We shall first deal with the main part of sub-s. (2) to see what it provides without reference to the proviso. Clearly sub-s. (2) provides for three things, namely- (i) all accounts, registers, records and other documents maintained by a dealer in the course of his business shall he open to inspection at all reasonable times, (ii) the goods in the possession of the dealer shall also be open to inspection, and (iii) the dealer's offices, shops, godowns, vessels or vehicles shall also be open to inspection. There is no doubt that there are no specific words in sub-s. giving power of search. But if we read the three powers conferred by sub-s. (2) it should not be difficult to hold that search is included therein. It will he seen that sub-s. (2) differs from sub-s. (1) in one respect. In sub-s. (1) the dealer is required to produce his accounts etc., and to furnish other information relating to his business and it is left to the dealer to produce what accounts he may say he has. The legislature was however cognizant of the fact that a dealer may not produce all accounts or furnish all information even though required to do so under sub-s. (1). Therefore, sub-s. (2) provides that all accounts etc., of the dealer shall be open to inspection. It also provides that the dealer's offices, shops, godowns, vessels or vehicles shall be open to inspection. It is true that generally speaking a power to inspect does not necessarily give power to search. But where, as in this case, the power has been given to inspect not merely accounts, registers, records and other documents maintained by a dealer but also to inspect his offices, shops, godowns, vessels or vehicles, it follows that the empowered officer would have the right to enter the offices etc., for purposes of inspection. Naturally his inspection will be for purposes of the Act i.e., for the purposes of seeing that there is no evasion of tax. If therefore during his inspection of offices etc., the empowered officer finds any accounts, registers, records or other documents in the shop, those accounts etc., will also be open to inspection. Reading therefore these two provisions together, it is clear that the empowered officer has the right to enter the offices etc., and to inspect them, and if on such inspection he finds accounts etc., he has also the power to inspect them and to see if they relate to the business. These two powers taken together in our opinion mean that the empowered officer has the power to search the office etc., and inspect accounts etc., found therein. Though therefore the word "search" has not been used in sub-s. (2) these two powers of entering the offices etc., for inspection and of inspecting every kind of account maintained by a dealer with respect to his business together amount to giving the officer concerned the powers to enter and search the offices etc., and if he finds any account in the offices, shops etc., to inspect them. Otherwise we can see no sense in the Legislature giving power to the empowered officer to enter the offices etc., for the purpose of inspection as the officer concerned would only do so for the purpose of finding out all accounts etc., maintained by the dealer and if necessary to inspect them for the purposes of the Act. We cannot therefore agree with the High Court that there is no power of search whatsoever in sub-s. (2) because the sub-section in terms does not provide for search.;