Judgment · High Court · 2012

(cid:28) In exercise of the powers conferred u/s 74(3) of the AVAT Act 2003, I Sri D. Khe rsa, Inspector of Taxes, Unit-B found at the godown premises of M/S Dhanani Shoe s Ltd at Amtola Dhirenpara, relating to the business of Sri Adul Kuddus, S/o Lt Sher Ali, Godown Incharge of the said business on today the 6th February 2008 at Seizure List

3.30 pm on the ground stated below in presence of witnesses. Grounds of Seizure:- The godown Incharge misclassified the goods and affected sa le at the lower rate. Goods (footwear) taxable at 12.5% are entered into books o f accounts as 4 pc. Hence taxes are likely to be found evaded payable under the AVAT Act 2003. List of document seized :- 1. 2. 3. 4. 5. Ex1 5(five) Nos note book containing business transactions. Ex2 1(one) bundle of loose slips relating to the business Ex3 18(Eighteen) Nos of chalan books. Ex4 1(one) Rough book containing business transaction Ex5 1(one) purchase file. (cid:29) (cid:28) In exercise of the powers conferred u/s 74(5)(a) of the AVAT Act 2003, I Sri D. Khersa, Inspector of Taxes, Unit-B, do hereby seize the following goods found at Seizure List the godown of M/S Dhanani Shoes Ltd at Amtola, Dhirenpara, Guwahati from the po ssession of Sri Adul Kuddus, S/o Lt Sher Ali, Godown Incharge of the Dhanani Sh oes Ltd on today the 6th February 2008 at 4 pm on the ground stated below in pre sence of witnesses. Grounds of Seizure:- Stock of goods were found not matching with the invoice pro duced. Goods taxable at the higher rate are found shown as taxable at the lower rate of taxes and thereby causing evasion of taxes payable under the AVAT Act 20 03. List of Goods seized:- Stock of goods found in the Stock Register which are show n as 4 pc taxable. (cid:29).

#8. The learned Single Judge as alluded hereinabove, by judgment and order dated 11.4.2008 dismissed the writ petition after hearing the learned cou nsel for the parties at the motion stage. As the text of this decision would dis close, the following arguments were advanced on behalf of the respondent Company to consolidate and bolster its impeachment of the action of seizure: i) There was no material available with the concerned Revenue authority to seize its Books of Accounts and other documents in absence of the necessary pre- conditions prescribed as the sine qua non for invocation of Section 74 (3)(a) of the Act. ii) As the materials on record did not indicate that the goods seized had no t been accounted for, the power of seizure under Section 74(5)(a)(ii) could not have been applied. iii) If it, according to the concerned Revenue authority, had sold goods with out paying the requisite tax, it was at best a case of escaped assessment warran ting steps under Section 40 of the Act and not the seizure thereof in purported exercise of power under Section 74. In refutation, it was insisted on behalf of the Revenue that : i) the writ petition was not maintainable for non-exhaustion of the alterna tive and efficacious remedy available in law as well as for suppression of mater ial facts. ii) as the respondent Company had deliberately misclassified the leather go ods as plastic goods to avoid payment of tax at the prescribed rate of 12%, the seizure of the Books of Accounts, Register etc. under Section 74(3) was valid. iii) as enumerated in the seizure list qua the stock of goods, the same did n ot tally with the corresponding invoices and, thus, those could not have been sa id to be accounted for warranting seizure thereof under Section 74(5) of the Act .

#9. The learned Single Judge on a conjoint reading of Section 40 and Section 74 of the Act as a whole returned the following findings on an appraisa The writ petition was not liable to be rejected on the preliminary objec l of the recorded facts and the available documents : a) tion as raised. b) Section 74(3)(a) is an enabling provision for the prescribed authority t o collect materials for the purpose of determining if any income of the dealer h as escaped assessment in any manner whatsoever. The exercise of the power of sei zure of the Books of Accounts, Registers, etc., thus, cannot be said to be imper missible for the purpose of ascertaining the income which has escaped assessment . c) On a careful reading of the grounds of seizure of the Books of Accounts, Registers etc., the respondent Company, according to the Revenue authority, had kept in its godown the goods in question by misclassifying them and consequentl y had paid/ been paying tax at a lower rate and, thus, evaded payment of tax as due from it. d) The seizure of goods is permissible only when the statutory authority ha s reason to believe that those found lying at the place of business belonged to the dealer but have not been accounted for by it in its accounts, registers and other documents maintained in the ordinary course of business. The jurisdiction to effect seizure of the goods is acquired only when those have not been account ed for. e) A bare perusal of the grounds of seizure of the goods makes it transpare nt that those were allegedly found to be not matching with the invoices produced . f) The grounds of seizure disclosed that the entry in the Books of Accounts allegedly had been made in such a manner that the leather goods taxable at the rate of 12.5% have been shown as plastic goods and taxed at the rate of 4%. g) These allegations may or may not be true but have to be assumed (cid:28)at this stage (cid:29) to be true and, if so, the inescapable inference would be that by miscla ssifying the goods those taxable at the rate of 12.5% have been made liable to b e taxed at the rate of 4% resulting in evasion of tax or at least in an attempt to evade tax. Section 74(3) in such a case did empower the respondent authority to seize the Books of Accounts, Registers etc. The respondent Company had evaded or was attempting to evade payment of h) tax as due from it and was keeping or has kept the accounts in such a manner as was likely to cause evasion of tax. If these accusation are true, the revenue au thority had good reasons to believe that the respondent Company had evaded or ha d been attempting to evade payment of tax due from it and was keeping or had kep t its accounts in such a manner as was likely to cause evasion of tax. In such c ircumstances, the exercise of power under Section 74 (3) and the seizure of the Books of Accounts, Registers etc. cannot be said to be without jurisdiction or a ny authority of law. i) The allegations may or may not be true but this Court in the present cas e has to proceed on the basis that those were true and examine and test if the g rounds assigned for the seizure of the stock are sustainable in law. When the goods lying in the godown of the Company were allegedly found n j) ot tallying with the invoices produced by its representative it cannot be said t hat the goods had been accounted for by it in its Books of Accounts, Registers e tc. and in such circumstances those cannot be said to have been accounted for in terms of Section 74(5)(a)(ii). k) The conditions precedent for the exercise of power under Section 74(5)(a )(ii) did exist and it cannot be said that the seizure of the goods was without jurisdiction or without any authority of law. l) The ground of seizure was valid as the goods concerned consisted of two parts -i) stock of goods not found matching with the invoices produced, (ii) go ods taxable at the higher rate were shown as taxable at a lower rate thereby cau sing evasion of tax payable under the Assam Value Added Tax Act, 2003. m) The Revenue authorities were required to complete the process of verific ation or enquiry under Section 74(5)(b) within a week and to permit the responde nt Company to obtain release of the seized goods in terms of the provisions cont ained in Section 74(5) and other provisions of the Act. Admittedly, though the respondent Company’s oppugnment of the se 10. izure of its Books of Accounts and the goods in particular was for all practical purposes negated in the writ proceeding, no appeal therefrom was preferred by i t.

#11. The respondent No.4, Inspector of Taxes, Unit-B, Guwahati on 16 .4.2008 thereafter issued a notice under Section 74(5)(b) of the Act proposing i mposition of penalty of Rs. 1,99,41,570/- on the amount of Rs. 66,47,190/- alleg ed to be the tax evaded by the respondent Company and it was asked to offer its reply within the date as stipulated therein. The notice disclosed that in course of the inspection of the godown-cum-business premises of the respondent Compay on 6.2.2008 some consignments of taxable goods were seized due to its failure t o furnish evidence in support of proper accounting thereof. It recited further t hat subsequent verification of the documents produced by it in support of the se ized goods revealed that those had not been properly accounted for in its regula r Books of Accounts and that misclassifying the same which was otherwise taxed a t the rate of 12.5% those were disclosed to be exigible at the rate of 4% for th e year 2007-08, thereby evading payment of tax due from it therefor. The notice mentioned that the respondent Company, therefore, willfully evaded payment of a n amount of Rs. 66,47,190/- which was an intentional contravention of the releva nt provisions of the Act warranting a penal action. That in issuing the notice t he judgment and order dated 11.4.2009 rendered in WP' 1050/08 had been taken not e of was also disclosed therein.

#12. Stirred by the aforenoted reverses in succession, the respondent Company filed an application seeking review of the judgment and order dated 11. 4.2008 (registered as R.P. No. 47/08) supplementing it by an impugnment of the n otice dated 16.4.2008 by initiating a writ proceeding registered as WP(C) 178/08 . Noticeably, in this endeavour it sought to invoke the writ jurisdiction of thi s Court also for an appropriate direction to declare that the words (cid:28)not account ed for (cid:29) appearing in sub-Section-5(a) of Section 74 of the Act be read in terms of Section 5(b) and 5(c) thereof to signify a default of the dealer in making en tries in respect of the goods in its/ his Books of Accounts, Registers and other documents, as the case may be, in course of his/ its business.

#13. se, the same if paraphrased, projected the following contentions:- i) The learned Single Judge had failed to taking into account the differenc e between Section 74(3) and 74(5) of the Act in the proper perspective resulting As the grounds catalogued in the review application would disclo in an error apparent on the face of the record. ii) The learned Single Judge left out of consideration the distinctly differ ent preconditions for seizure of the Books of Accounts and goods under Section 7 4(3)(a) and 74(5)(a) of the Act resulting in misconception of law. The learned Single Judge did not consider Section 74(5)(a) in the contex iii) t of sub-Section 5(b) and 5(c) resulting in an error apparent on the face of the record. iv) The words (cid:28)not accounted for by the dealer (cid:29) applied in sub-Section 5(a) of Section 74 ought to imply that no entry had been made in respect of the goods in the Books of Accounts, Registers and other documents as contemplated in sub- Section 5(b). v) The learned Single Judge had erred ex facie in concluding that wrong cla ssification of goods would denote absence of any account thereof whereas (cid:28)not a ccounted for (cid:29) would mean that no entry in respect of the goods had been made in the Books of Accounts, Registers and other documents. vi) As misclassification of the goods in the seizure lists as well as in the notice dated 16.4.2008 evinced entry thereof in the Books of Accounts, Register s and other documents, the learned Single Judge erred in concluding that wrong c lassification of goods did connote that those were not accounted for. vii) As apparently the goods concerned had been entered into the Books of Acc ounts, Registers and other documents, the learned Single Judge ought to have iss ued a direction to return the same and the omission to do so is an error apparen t on the face of the record. Vis-à-vis the notice dated 16.4.2008, the same was denounced to be bereft of jur isdiction inasmuch as Section 74(5)(a)(ii) was not attracted to the facts of the case. Moreover, as the impugned notice demonstrated that the Revenue authority had abandoned the ground that the goods seized did not tally with the invoices p roduced, the demand of penalty on the plea of misclassification thereof for alle ged evasion of tax was patently flawed and misconceived.

#14. It would, thus, be hyaline clear that the respondent Company sou ght the review of the judgment and order dated 11.4.2008 essentially on the plea of erroneous interpretation of Section 74(3) and 74(5) of the Act in the backgr ound of the contextual facts and the related documents.

#15. The Revenue in its affidavit contended that none of the grounds urged constituted one for review of a judicial decision as contemplated in law a nd that the learned Single Judge having pronounced the conclusions on a thorough examination of all material facts and the relevant records in the context of th e existing provisions of the statute involved, the review application was unsust ainable in and was liable to be rejected in limine. Vis-à-vis the challenge to t he notice dated 16.4.2008, the Revenue contended that it was only a dilatory mov e and prematured as well inasmuch as a demand notice would follow only after due consideration of the reply filed by the assessee in response thereto. That the release of the goods in accordance with the stipulations contained in Section 74 (5) (d) of the Act would ensue only in compliance thereof was also underlined.

#16. The learned Single Judge by the judgment and order assailed here in allowed the review petition and sustained as well the impugnment of the notic e dated 16.4.2008. On an exhaustive survey of the judicial pronouncements on the law defining the review jurisdiction of a Court, the learned Single Judge concl uded that the power of review though statutorily conferred and subject to the li mitations prescribed therefor, it is no longer a rule of universal application t hat the same has to be essentially confined to the two grounds, namely, (i) disc overy of new and important matter or evidence which after the exercise of due di ligence was not within the applicant’s knowledge or could not be produced by him at the time when the decree or order was passed; and (ii) mistake or error appa rent on the face of the record; or any such sufficient ground which is analogous to these two. In the perspective of the doctrine of actus curiae neminem gravab it, it was held that when a Court corrects and rectifies an error what it restor es is the rule of law and does not defeat it. Elucidating that (cid:28)sufficient reaso n (cid:29) under Order 47 Rule 1 of the Code of Civil Procedure, 1908 (for short, herein after referred to as ’the Code’) is compendious enough to include misconception of fact, the learned Single Judge concluded that a misinterpretation of a provis ion of law or misconception of law resulting in an error would be one apparent o n the face of the record and would be a sufficient reason calling for the exerci se of the power of review to obviate miscarriage of justice.

#17. In this premise, the learned Single Judge re-appreciated the sub missions made on behalf of the parties as recorded in the original decision and in the process took note of the following excerpts from the pleadings in the rev iew proceedings: a) It was the specific case of the respondent Company in its writ petition that the goods had not been seized on the ground that those had not been account ed for inasmuch as the entries with regard thereto even according to the seizure list did exist in the Stock Register though those were allegedly made by miscla ssifying the goods to reflect that those were taxable at a lower rate. b) The case of the respondent Company was that contrary to the requirements of Section 74(5)(a)(ii) the seizure of the goods in question had been made not because of the non-existence of any entry in the Books of Accounts, Registers et c. but due to the fact that the Stock Register reflected misclassification of t he goods. c) The Revenue sought to sustain the seizure of the goods on the ground tha t the stock of goods did not tally with the invoices produced signifying that th ere was no entry in existence therefor and, thus, could not be said to have been accounted for justifying invocatin of the power under Section 74(5)(a)(ii). d) Notwithstanding the fact that the grounds of seizure reflected that it w as also due to the alleged misclassification of goods, this was not urged by the Revenue in the writ proceeding. Rather, the same was abandoned.

#18. i) The decision on review was founded on the following deductions : The sole basis for the Court to uphold the seizure of the goods was that those did not tally with the invoices produced signifying the legal inference t hat no entry therefor had existed in the Books of Accounts, Registers, etc. and those were not accounted for within the meaning of Section 74(5)(a)(ii). The sei zure of the goods was not sustained because of the alleged misclassification the reof as it was not a ground pressed by the Revenue. ii) re was on the ground that the goods did not tally with the invoices produced. iii) The Court had not upheld the seizure of the goods in question on the gro und of alleged misclassification thereof by the respondent Company so as to make The impugned notice dated 16.4.2008 does not even suggest that the seizu those taxable at a lower rate. iv) The Revenue’s plea in the review proceeding that the seizure of the good s was made not merely because those did not tally with the invoices produced but also for misclassification and that the same (misclassification) predicated tha t the mere entry thereof in the Stock Register would not imply that those had be en duly accounted for is untenable on a combined reading of Clauses-(a), (b) and (c) of sub-Section (5) of Section 74. v) Clause (a) of Section 74(5) denotes complete absence of entry in the Boo ks of Accounts and the Registers maintained by the dealer in his/ its ordinary c ourse of business and not (cid:28)proper, due or valid entry in the Books of Accounts (cid:29). It is only when the goods are not traceable to any of the entries, if so made , that seizure of such goods is possible and, thus, complete absence of any entr y in respect of the goods sought to be seized has to be the foundation for the s eizure thereof. vi) A conjoint reading of Clauses-(a), (b) and (c) of Section 74(5) clearly conveys that penalty is imposable only when no entry has been made in respect of the seized goods in the Books of Accounts, Registers, etc. and on the dealer’s failure to offer proper justification for not making such entries. vii) It is the non-existence of entry in the Books of Accounts, Registers etc . that can be the ground for the seizure of the goods and it is such absence of entry which is covered by the expression (cid:28)not accounted for (cid:29). ’Non-existence of entry’ cannot be equated to the expression ’non-existe viii) nce of proper or due or valid entry’ or ’absence of proper or due or valid entry , as the case may be’. ix) Having regard to the import of the expression (cid:28)not accounted for (cid:29) appear ing in Section 74(5)(a)(ii), the conditions precedent for effecting seizure of t he goods in the case in hand were absent, rendering the seizure sans jurisdictio n and ought not to have been upheld. x) The decision under review, therefore, suffers from manifest error of law resulting in serious miscarriage of justice which needs to be corrected. xi) isdiction and is, thus, unsustainable. The impugned notice, as a consequence, is wholly vitiated by lack of jur The judgment and order under review as well as the impugned notice were accordin gly interfered with.

#19. Mr Choudhury has assiduously argued that as none of the grounds enumerated in the review application is apparently recognized in law for review of a judicial decision, the impugned judgment and order is ex facie unsustainabl e and is liable to be interfered with. The learned Addl. Advocate General mainta ined that the assertions in the review application against the original decision though may be envisaged for impugnment thereof in an appeal, those by no means, having regard to the legally circumscribed limits of review jurisdiction, are e ntertainable for the review thereof. Mr Choudhury relying on the relevant portio ns of the original decision emphasized that the same had been rendered on an ind epth scrutiny of all factual and legal aspects and the determination having been made on the merit of such evaluation, the review thereof on an overall reapprai sal of the same facets of the debate was impermissible. While clarifying that th e challenge in the instant appeal vis-à-vis the judgment on review is chiefly fo cused on impermissible exercise of review jurisdiction, the learned Addl. Advoca te General has underlined that expansion of the amplitude of the expression (cid:28)suf ficient reason (cid:29) notwithstanding, a real distinction between the appellate and re view jurisdictions do exist.

#20. Contending that the observation made by the Apex Court in Board of Control for Cricket in India -vs- Netaji Cricket Club & Ors., (2005) 4 SCC 7 41 that subsequent event may also be taken into consideration by the Court for t he purpose of rectifying its mistake so made in the contextual facts is not of g eneral application, Mr Choudhury maintained that in case the frontiers of these two jurisdictions are not strictly maintained, in the guise of review the same f orum would exercise appellate jurisdiction against its decision-an eventuality a ntithetic to the fundamental canons of adversarial dispute resolution. According to Mr Choudhury, permissibility to notice a subsequent development as observed by the Apex Court in Board of Control for Cricket in India (supra) cannot be con strued to open a new vista to invoke the review jurisdiction of a Court in the t eeth of the time tested grounds ordained by Order 47 Rule 1 of the Code authorit atively defining the limits thereof. As the original decision when viewed from a ny aspect did not suffer from an error apparent on the face of the record, the i mpugned judgment on review following an exhaustive re-appreciation of the same l egal and factual determinants for a different view being repugnant to the basic precepts of review jurisdiction, is indefensible in law and is liable to be set aside. According to Mr Choudhury, as the annulment of the notice dated 21. 16.4.2008 as an immediate consequence of the invalidation of the seizure of good s following a review of the original jurisdiction is legally untenable as well, the impugned judgment and order to that extent also calls for interference. The learned Addl. Advocate General submitted that as a corollary, the respondent Com pany must be left to comply with the relevant prescriptions of law and exhaust i ts remedies available under the Act. As in the attendant facts and circumstances the learned Single Judge had exceeded the review jurisdiction as ordained in l aw, the impugned judgment and order on both the counts is liable to be set aside , he urged. The following decisions were relied upon: i) Aribam Tuleshwar Sharma -vs- Aribam Pishak Sharma, (1979) 4 SCC 389