Prior Notice Not Mandatory Before Search And Seizure Under Assam VAT Act: Gauhati High Court

On 10 November, the Gauhati High Court held that tax authorities are not required to issue a prior notice directing a taxpayer to produce books of accounts before conducting search and seizure proceedings under Section 74 of the Assam Value Added Tax (VAT) Act, 2003.

Justice Arun Dev Choudhury dismissed a writ petition filed by Sri Krishna Enterprise challenging the search and seizure proceedings conducted by the Assam taxation authorities at its business premises. The Bench observed:

“The power to call for the production of accounts under sub-section (1), in the opinion of this Court, is distinct from the power of seizure under sub-section (3) and power of search under sub-section (4).”

The case arose from a search conducted by the Assam taxation authorities at Sri Krishna Enterprise's business premises on suspicion of unaccounted transactions. During the search, the authorities seized certain books of accounts, documents and goods.

Sri Krishna Enterprise challenged the search, arguing that the authorities should have first issued a notice under Section 74(1) of the Assam VAT Act requiring it to produce its books of accounts. It contended that such a notice was a prerequisite for exercising the powers of search and seizure.

It also alleged that the authorities had failed to follow the procedure prescribed under the Code of Criminal Procedure, 1973.

On the other hand, the State argued that the power to demand documents and the power to conduct search and seizure were independent powers under Section 74. It submitted that the authorities had conducted the search pursuant to an authorisation issued by the Commissioner of Taxes.

The Court agreed with the State and held that Section 74 does not make a prior notice under sub-section (1) mandatory before the authorities exercise their powers of search and seizure under the other provisions.

However, it clarified that the authorities must satisfy the statutory requirements governing the exercise of these powers. They must have sufficient reasons to conduct a search or seizure and record those reasons in writing wherever the law requires.

Further, the Bench observed that Section 74(10) requires the authorities to follow the procedure prescribed under the Code of Criminal Procedure, as far as possible, while conducting search and seizure proceedings.

Examining the procedure followed in the present case, it found that the authorities had conducted the search in the presence of two independent witnesses, prepared an inventory of the seized documents and made arrangements for the safe custody of the seized goods. It held that Sri Krishna Enterprise had failed to establish any procedural violation serious enough to invalidate the proceedings.

Justice Choudhury also noted that Sri Krishna Enterprise had challenged the assessment order and consequential tax demand without approaching the statutory appellate authority. He held that filing an application in an earlier disposed-of writ petition or pursuing subsequent writ appeals could not substitute the statutory appellate remedy or extend the prescribed limitation period.

He clarified that the availability of an alternative remedy does not completely bar the High Court from exercising its writ jurisdiction, particularly where an authority acts without jurisdiction or violates the principles of natural justice.

Accordingly, the High Court dismissed the writ petition, finding no illegality in the search and seizure proceedings and noting that Sri Krishna Enterprise had failed to avail itself of the statutory appellate remedy.

For the Petitioner: Senior Advocate Dr. B.P. Todi, assisted by Advocate P. Das.

For the State of Assam: Additional Advocate General B. Gogoi.