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IN THE HIGH COURT OF CALCUTTA
Harish Tandon, J.
M.R. Nirman Pvt. Ltd. - Petitioner
Versus
Union of India & Ors. - Respondents
W.P. No. 22850 (w) of 2013
Decided On : 19-02-2015
For the Petitioners:Mainak Bose, Kumarjit Das, Advocates
For the Respondents No. 2:Rajarshi Bhardwaj, Subir Kumar Saha, Advocates
For the Respondent Nos. 3, 4 & 5:Shib Shankar Banerjee, Advocate
The authorities must have a "reason to believe" before conducting a search and seizure, but they are not required to give a detailed explanation of their belief. The authorities have no power to collect an amount at the time of a raid unless the same is given voluntarily and without any objection.
Headnote:
SERVICE TAX - SEARCH AND SEIZURE - REASON TO BELIEVE - EVASION OF TAX LIABILITY - COLLECTION OF CHEQUES DURING RAID: 1. The expression "reason to believe" appearing in Section 82 of the Finance Act, 1994 is not synonymous with subjective satisfaction but based on good faith which is opposed to a mere pretence. 2. The belief cannot be formed on mere rumour, gossip, or suspicion but based on something which has a relevance and nexus to the concealment or evasion of the service tax. 3. The authority concerned need not give the reason for the belief, but when the existence of belief is questioned in any collateral proceeding, the authority has to produce relevant evidence to sustain the belief. 4. The authority has no power to collect an amount at the time of raid unless the same is given voluntarily and without any objection.
Fact of the Case:
The petitioner, a construction company, challenged the summons issued during a search and seizure operation conducted by the Central Excise authorities for alleged evasion of service tax. The petitioner argued that the authorities lacked a "reason to believe" for conducting the search and seizure and that the collection of two cheques totaling Rs. 2,00,00,000/- during the raid was illegal and coercive.
Finding of the Court:
The Court held that the petitioner failed to establish that the authorities did not have a "reason to believe" for conducting the search and seizure. The Court also found that the petitioner had voluntarily handed over the two cheques to the authorities after admitting the service tax liability, and that there was no evidence of force or coercion.
Issues: 1. Whether the authorities had a "reason to believe" for conducting the search and seizure. 2. Whether the collection of two cheques totaling Rs. 2,00,00,000/- during the raid was illegal and coercive.
Ratio Decidendi: 1. The expression "reason to believe" in Section 82 of the Finance Act, 1994 does not require the authorities to give a detailed explanation of their belief, but they must be able to produce relevant evidence to sustain their belief if challenged. 2. The authorities are not empowered to collect an amount at the time of a raid unless the same is given voluntarily and without any objection.
Final Decision: The Court dismissed the writ petition, holding that the authorities had a "reason to believe" for conducting the search and seizure and that the collection of the two cheques was voluntary and not coercive.
Harish Tandon, J.
The assessee who allegedly evaded the service tax has taken shelter under the writ jurisdiction of this Court in assailing the order of search and seizure to be in excess of the power prescribed under Section 82 of the Finance Act. It is undisputed that after the incorporation, the petitioner took the registration under Finance (No.II) Act, 1994 under the head "Construction Services" and subsequently amended the same by including the "Works Contract Services" with effect from January 20, 2004. An intimation as to the service tax audit is issued upon the petitioner and the relevant records and documents pertaining to the period for which the tax audit is undertaken is furnished from time to time. Senior Intelligence Officer attached to the Directorate General of Central Excise Intelligence conducted search at the office of the petitioner and seized certain documents upon issuing the summons on the spot on 7th June, 2013. It further appears that two cheques for Rs. 1,00,00,000/- each was handed over to the authorities by the authorised representative of the petitioner towards the service tax liability.
2. By a subsequent letter dated 27th June, 2013, the petitioner requested the Central Excise Officer to release the seized records as the non-availability of the same is creating a tremendous difficulties in operating day to day business activities which includes one pen drive. Immediately thereafter, the writ petition came to be filed before this Court challenging the summons issued on 7th June, 2013 with further direction to hand over all the documents including the pen drive seized at the time of search and seizure. At the time of admission of the writ petition, an objection came from the respondent authorities that the document pertaining to the seizure annexed to this writ petition have been tempered with by incorporating one pen drive which was never seized by the authorities. For such reason, the petitioner was directed to produce the original seizure list handed over at the time search and seizure to ascertain whether there has been any tempering and/or interpolation in the said document.
3. The matter appeared on 12th August, 2013 when the petitioner candidly admits that the pen drive was never seized. An explanation was sought to be offered that the Charter Accountant for the purpose of convenience recorded the word "one pen drive" in the original seizure list having no intention to blame the respondent authorities. The advocate-on-record while annexing the documents inadvertently photo copied the same without any intention to gain out of it.
4. The learned Advocate for the petitioner further submitted that they would not press the prayer for return of the pen drive. However, the petitioner raises the plea that two cheques covering Rs.1,00,00,000/- each was forcibly taken from the officer of the petitioner-company which is beyond the authority and the power enshrined under the statute. The respondent replied that the aforesaid cheques were handed over voluntarily upon admitting the service tax liabilities and, therefore, the allegation as to using of force in collecting the said two cheques are false and have no semblance of truth in it.
5. Recording the aforesaid submissions, this Court passed an interim order on 12th August, 2013 permitting the respondents to exchange the affidavits and further directed the petitioner to deposit a further sum of Rs. 1,00,00,000/- out of Rs. 2,00,00,000/- as Rs.1,00,00,000/- had already been deposited with the respondent authorities through RTGS. Till the time extended by this Court for deposit of an amount of Rs. 1,00,00,000/, the authorities were restrained from taking any coercive steps for realisation of the tax liability and if the compliance is made, the authorities were restrained in similar fashion till the disposal of the writ petition. The Court also recorded the default clause and permitted the authorities to proceed in accordance with law if the default
