P LAKSHMANA RAO AND SONS Vs. SPECIAL COMMERCIAL TAX OFFICER EVASIONS

JUDGEMENT

(1.) THIS petition is directed against the action of the Sales Tax Department in keeping a continuous watch over the business of the hotels of the petitioners. The petitioners, who are carrying on business of running hotels in the town of Vijayawada, complain that the respondents who belong to the Special Evasions Circle of the Sales Tax Department embarked upon a whole-time supervision of the actual business activity of the hotels. It is said that respondents 3 to 5 visited the hotels in the early hours of the morning on 22nd November, 1960, and went round all the rooms in the hotel including the kitchen and directed two of the respondents to sit at the counter by the side of the cashier while the other respondents were going round all the rooms and keeping watch and enquiring about the articles of food supplied to the customers, that when the customers came to pay the bill, one of the respondents takes the bill, inquires the customer what articles were consumed by him and then reads out the bill and directs the other to note down the amount of the bill on a paper, and that thereafter the respondents would keep the bill in their custody till the close of the day. This process would continue until the closure of the hotel at 10 p.m. After the end of the day, the respondents would prepare a statement of the amounts of the bills and would coerce the cashier or the accountant, whoever is at the counter, to sign the statement, threatening and intimidating them, in spite of protests by them. It was further stated that, while the customers were taking tiffin or meals, the respondents also keep going round the rooms inquiring the customers as to what menu they were being supplied. The petitioners contend that, in spite of protests in 1958, the same procedure was continued in 1959 from 11th April, 1959, to 17th April, 1959, and from 27th April, 1959, to 7th May, 1959, and that the statements signed by the representatives of the petitioners were got signed by them and were take away and they would not even furnish copies thereof to them. It is stated that just before the filing of the petition the respondents have again started this method of supervision by visiting at 5 a.m. and sitting the whole day. In the circumstances, it is prayed that a writ of mandamus or any other appropriate writ, direction or order be issued to the respondents to forbear from carrying on the continuous supervision of the sales and supplies or other business activities of the petitioners in the three hotels, namely, Welcome Hotel at Gandhinagar, Welcome Hotel at Samarangam Chowk and Welcome Coffee Club at Gandhinagar, Vijayawada town.

(2.) IN the counter filed by the Special Commercial Tax Officer (Evasions), Vijayawada, it was admitted that the sales of these hotels were "intensively" watched on 22nd November, 1960, by the Inspectors named therein in obedience to the programme issued by the Special Assistant Commercial Tax Officer (Evasions) for shop-watch, Sri J. B. Raja Rao. It is stated that the turnover returned by the dealer for 1958-59 was not accepted and the assessment was enhanced, and similarly suppression by way of not accounting certain purchases was noticed for the year 1959-60, during cross-check verification and the assessment for the year is pending finalisation. It was stated that the dealer suppressed his sales during the days of shop-watch, by reducing the preparations and canvassing against the customers entering the hotel, and that if this was taken into consideration the turnover of the dealer would be far more than the sales noticed during the shop-watch. It is contended that this intensive watch or shop-watch was undertaken, "in consonance with the provisions of section 28(2) of the Andhra Pradesh General Sales Tax Act and in order to have effective watch over sales in hotels, shops, etc., a special squad of C.T. Inspectors was formed to intensively watch the sales in them with a view to arrive at the correct turnover of the dealers. The present practice is to watch the sales of the shops and hotels during different days and in different seasons, sometimes for the whole day and at other times for a part of a day. The results achieved so far as a result of shop-watch in respect of hotels are spectacularly high when compared with the sales that were being recorded by the dealers."

(3.) THE respondents also denied the allegation that their shop-watch interfered with the business or that it created a scene. It is clear from the affidavit of the petitioners and the counter that the respondents, officers of the Sales Tax Department, were keeping a continual, intensive watch over these hotels for several days, that this watch continued from 4-30 in the morning to 10 in the night and was undertaken in relays by the respondents. Almost all the allegations made in the petition were accepted, except those relating to the statements of the petitioners being taken under coercion or threat and the allegation that their inspection caused a scene or disturbance in the conduct of the business. The Sales Tax Officer also claimed a right to supervise the business of the hotels. The short question which falls for determination is, whether the Sales Tax Authorities are justified under the provisions of section 28(2) of the Andhra Pradesh General Sales Tax Act (VI of 1957) to keep a continuous watch on the hotels of the petitioners and to supervise the same. Section 28(2) is in the following terms :-