2004 P T D 1339

[Lahore High Court]

Before Ali Nawaz Chowhan, J

MEGNA TEXTILE MILLS

Versus

COLLECTOR OF CUSTOMS

Writ Petition No.5150 of 2003, decided on 27/02/2004.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 40, 40‑A & 38‑‑‑Criminal Procedure Code (V of 1898), Chap. VII, (Ss. 94 to 105), Ss.96 & 97‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Search with or without warrant‑‑ Procedure for carrying on search and seizure‑‑ Principles‑‑‑Action under S.40 Sales Tax Act, 1990 had to be carried on under the provisions of Chap. VII, Criminal Procedure Code pertaining to search and seizure‑‑ Search without warrant was possible provided a Sales Tax Officer not' below the rank of an Assistant Collector of Sales Tax had reasons to believe that a document which was required for investigational purposes or proceedings may be concealed or likely to be removed before a search could be effected under S.40, Sales Tax Act, 1990‑‑‑After expressing his such belief through a statement in writing, said officer could cause search to be made for documents or things in that place‑‑‑Copy of the statement with respect to the place of search was to be delivered to the occupier as provided by S.40‑A(2) of the Sales Tax Act, 1990‑‑‑No material was shown, in the present case, which would reflect the basis for the belief of Assistant Collector of Sales Tax for adopting the extraordinary remedy of search without warrant and the apprehension he might have for an action under S.40‑A‑‑‑Effect‑‑‑Lightening action under S.40‑A of the Sales Tax Act, 1990 was to be taken on the basis of said belief to be transcribed in the shape of a written statement which was the prelude to the action initiated‑‑‑Search and seizure by Government functionaries which was required to be done in a particular way having not been done in accordance with law, had no legal value.

According to the Sales Tax Act, 1990, there were provisions pertaining to the accessibility of the record and the powers of the Department for its procurement in case action under section 38 was not sufficient. The other two sections are 40 and 40‑A of the Sales Tax Act, 1990. The latter having been incorporated by Finance Act, 1994. Both are relevant sections for purposes of search with or without warrant.  

Action under section 40 of the Sales Tax Act, 1990 has to be carried on under the provisions of Chapter VII of the Cr.P.C. pertaining to search and seizure.

Section 96 of the Cr.P.C. lays down the procedure for issuance of a search warrant. Section 97 of the Cr.P.C. allows power to restrict warrant and requires the intervention of a Court for initiating the action. Whereas, according to section 40‑A, Sales Tax Act, 1990 search without warrant was possible provided a Sales Tax Officer not below the rank of an Assistant Collector of Sales Tax Department has reasons to believe that a document or thing which is required for investigational purposes or proceedings and which may be concealed or likely to be removed before a search can be effected under section 40 after expressing his belief through a statement in writing and cause search to be made for documents or things in that place. According to section 40‑A(2), after a search is made, a copy of the statement with respect to the place of search is to be delivered to the occupier.

The question, in the present case is, were these provisions of law followed. The Department in their statement challenged the maintainability of the Constitutional petition calling it premature and without showing a cause of action and sought for its dismissal also on the ground that proceedings were pending adjudication before a Collector and statutory remedy more efficacious than the writ jurisdiction was available.

The scrutiny of notice under section 40‑A, Sales Tax Act, 1990 shows that it is only signed by the Superintendent Sales Tax. However, the resumption memo on scrutiny shows that it is signed by the Assistant Collector with signatures of others.  

Nothing explicitly has been stated with respect to the factum of raid.  

No notice is shown to have been given to the petitioner under section 38 of the Sales Tax Act for making the alleged concealed record accessible to the Department.  

The Assistant Collector in his reply has categorically stated that as he had to conduct plural raids, it was not possible for him personally to conduct the raid at the premises of the petitioners and, therefore, he caused the search to be conducted through the Deputy Superintendent to resume the record.  

No material has been shown which would reflect the basis for the belief of Assistant Collector of Sales Tax for adopting the extraordinary remedy of search without warrant and the apprehension he may be having for an action under section 40‑A. The lightening action under section 40‑A is to be taken on basis of such a belief to be transcribed in the shape of a written statement which is the prelude to the action to be initiated.

Search and seizure by Government functionaries which is required to be done in a particular way and was not done in accordance with law, has no legal value.  

The seizure of the documents, in the present case, had not taken place in the presence of the Assistant Collector which is an admitted position. The words `search or cause search to be made" appearing in section 40‑A, obviously imply in the right spirit of this section that either the Assistant Collector be physically present during the search or causes search in his presence. But this cannot be achieved through proxy while he himself is away somewhere.

The intention of the Legislature in empowering the Assistant Collector or person only above him has a rationale and this is to protect the rights of the citizens and their privacy guaranteed by the Constitution, otherwise there would be anarchy and a perennial threat to the citizens.

The documents which were required, could have been asked for under the provisions of section 38 or search could have been effected under section 40 or action followed strictly in accordance with the provisions of section 40‑A.

(b) Constitution of Pakistan (1973)‑‑ -

‑‑‑‑Art.199‑‑‑Constitutional jurisdiction of High Court‑‑‑Scope‑‑‑High Court has jurisdiction to look into the question of abuse of power on the part of public functionaries and where mala fides are alleged, through the exercise of its Constitutional jurisdiction‑‑‑Such powers can be exercised in spite of the fact that there exists statutory bodies having appellate or revisional or review jurisdiction.

(c) Sales Tax Act (VII of 1990)---

‑‑‑‑S.40‑A‑‑‑Search without warrant‑‑‑Words "search or cause search to be made" imply that either the Assistant Collector be physically present during the search or causes search in his presence but this cannot be achieved' through proxy while he himself is away somewhere.

Shafqat Mahmood Chohan for Petitioner.

A. Karim Malik for Respondent.

Dates of hearing: 10th and 13th February, 2004.

JUDGMENT

Messrs Magna Textile Industries (Pvt.) Ltd. is the petitioner in this case. Who assailed a notice under section 40‑A of the Sales Tax Act, which is Annexure `A' attached with this writ petition.

2. The factual story is that on 13‑9‑2001 a raid was conducted by the Sales Tax Officials at the business premises of the petitioner under section 40‑A of the Sales Tax Act, 1990, and the record lying in the premises was taken into possession through a resumption memo (Annexure‑B). On the basis of which, contravention report of the petitioner was prepared. Wherein, it was held that the petitioner Industry violated the provisions of sections 3, 6, 22, 23, 26 and 2(37) of the Sales Tax Act, 1990, and was asked to pay such tax as was reflected in the contravention report, which was recoverable under the provision of sections 34 and 36 of the Sales Tax Act. A threat was also advanced for penal action under the provisions of section 33 of the Sales Tax Act.

3. The whole emphasis of the petitioner side is directed against the raid, the seizure and search of the premises. According to the petitioner, all these aforementioned actions on the part of the Department were illegal and, therefore, the notice under section 40‑A, the resumption note and the contravention report had no basis. That anything based on illegal search and seizure has no consequence in law.

4. The matter was also taken to the Federal Ombudsman, who had to look, into the proposition whether any "maladministration" had taken place at the end of the officials. It was not only the petitioner who agitated its grievances before the Federal Ombudsman, two of its associate companies also went there. It appears, therefore, that multiple acts came up before the Honourable Tax Ombudsman. The Federal Ombudsman was also of the view on information that the matter being fixed before the Collector for adjudication, the legalities could be discussed there. But ultimately he came to the conclusion that no "maladministration" had been committed. But as far as the legality or illegality of the seizure is concerned, the matter remained open for purposes of adjudication. Because these issues obviously were distinct and separate from "mar‑administration".

5. We were told that a writ petition had also been filed before this Court bearing No. 18897 of 2001 and it was disposed of after it was held that it was premature. This Court has been shown a copy of the order, dated 18‑10‑2001. It appears that this has been filed by Messrs Rehmat Poultry Farm and Messrs Magna International, to pre‑empt action on the part of the Sales Tax Department as the one being pursued against the petitioner. But admittedly the petitioner was not a party in that. The two petitioners m the said writ petition may be the associates but are said to be independent entities.

6. The question for determination is whether the raid, the search and the seizure of record were legal or illegal?

7. According to the Sales Tax Act, 1990, there were provisions pertaining to the accessibility of the record and the powers of the Department for its procurement in case action under section 38 was not sufficient. The other two sections are 40 and 40‑A of the Sales Tax Act, 1990 The latter having been incorporated by Finance Act, 1994. Both are relevant sections for purposes of search with or without warrant. Section 40 reads as follows:‑‑

"Searches how to be made.‑‑‑All searches made under this Act or the rules made thereunder shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (Act V of 1898)."

Whereas, section 40‑A reads as follows:‑‑

Search without warrant.‑‑‑(1) Notwithstanding the provisions of section 40, where any Officer of Sales Tax not below the rank of an Assistant Collector of Sales Tax has reasons to believe that any documents or things which, in his opinion, may be useful for, or relevant to, any proceeding under this Act are concealed or kept in any place and that there is a danger that they may be removed before a search can be effected under section 40, he may, after preparing a statement in writing of the grounds of his belief for which search is to be made search or cause search to the made for such documents or things in that place.

(2) Any officer or person who makes a search or causes a search to be made under subsection (1) shall leave a signed copy of the statements referred to in that section in or about the place searched and shall, at the time the search is made or as soon as is practicable thereafter, deliver a signed copy of such statement to the occupier of the place at his last known address.

(3) No suit, prosecution or other legal proceedings shall be instituted, except with the previous sanction in writing of the Federal Government against any person in respect of anything done or purporting to be done in respect of exercise of any powers conferred by subsection (1) or subsection (2). "

8. Action under section 40 has to be carried on under the provisions of Chapter VII of the Cr.P.C. pertaining to search and seizure.

9. Section 96 of the Cr.P.C. lays down the procedure for issuance of a search warrant. Section 97 of the Cr.P.C. allows power to restrict warrant and requires the intervention of a Court for initiating the action.

10. Whereas, according to section 40‑A, search without warrant was possible provided a Sales Tax Officer not below the rank of an Assistant Collector of Sales Tax Department has reasons to believe that a document or thing which is required for investigational purposes or proceedings and which may be concealed or likely to be removed before a search can be effected‑ under section, 40 after expressing his belief through a statement in writing and cause search to be made for documents or things in that place. According to section 40‑A(2), after a search is made, a copy of the statement with respect to the place of search is to be delivered to the occupier.

11. The question, is, were these provisions of law followed. The respondents in their statement challenged the maintainability of the petition calling it premature and without‑showing a cause of action and sought for its dismissal also on the ground that proceedings were pending adjudication before a Collector and statutory remedy more efficacious than the writ jurisdiction was available.

12. On the factual side, the following statement was made:‑‑

"Admitted to the extent that reliable information was received than Messrs Magna Internal (Pvt.) Ltd. P1‑15. Rail Bazar Faisalabad and Messrs Magna Textile (Pvt.) Ltd. Jaranwala Road, Khurrianwala, Faisalabad were involved in massive tax evasion and former had maintained an undeclared godown under the premises of Rehmat Poultry Farm at about 10 K.Ms. Jaranwala Road, Faisalabad. On receipt of this information, the Collector, Sales Tax, Faisalabad, authorized the Assistant Collector, Sales Tax, Faisalabad. Audit Division‑II alongwith audit‑staff under section 38 of the Sales Tax Act, 1990 to visit the premises to examine the records and verify the stocks. The concerned Assistant Collector alongwith other staff visited Messrs Rehmat Poultry Farm (godown of Messrs Magna International Limited) and as it was not possible for the Assistant Collector to conduct search of two different laces simultaneously, be caused search of the premises of Messrs Magna Textile Industries through respondent No 3 under section 40‑A of the Sales Tax Act 1990. Mr. Saleem Akhtar Deputy Superintendent conducted search accordingly and resumed the record. As a counter blast, the petitioner attempted to lodge an F.I.R. against the department failing which it filed a Writ Petition No.18897 of 2001 in this Hon'ble Court (Annex‑A). It was disposed of being premature. The petitioner then filed a reference before the C.B.R. against the respondents which was also decided against the petitioner (Annex‑B). Not satisfied even with this exercise, the petitioner filed three complaints No.584 of 2002, 585 of 2002 and 934 of 2002, before the Honourable FTO, Islamabad which are also decided in favour of the department. The Honourable FTO, categorically stated in his judgment that no act of maladministration had been proved and directed the Collector (Adjudication), Faisalabad to examine the legal aspect of the case. However, it is denied that in effecting search of premises preparing resumption memo, the respondents acted without having authority under section 38 of the Sales Tax Act, 1990. The respondents acted with lawful authority. The case is sub judice before the Collector Customs, Central Excise and Sales Tax Act, Faisalabad, which is the most appropriate forum, and the Honourable Federal Tax Ombudsman has also directed the adjudicating authority to examine certain documents carefully. The petitioner instead of defending its case before the relevant adjudicating authority has filed the present writ petition."

Note:Portion reflected as underlined was highlighted by this Court.

13. The scrutiny of notice under section 40‑A, (Annexure‑A) shows that it is only signed by the Superintendent Sales Tax. However, the resumption memo on scrutiny shows that it is signed by Muhammad Tahir the Assistant Collector, Collectorate of Sales Tax, Faisalabad with signatures of others. The first paragraph of the resumption memo reads as follows:

"Todaythat is 13‑9‑2001 the audit team of Sales Tax Faisalabad visited Messrs Magna Textile Industries (Pvt.) Ltd. Jaranwala Road Khurrianwala at 1800 hours under the supervision of the Assistant Collector Sales Tax Faisalabad. The record was demanded under sections 25 and 38 of the Sales Tax Act, 1990 for audit and inspection purposes. Consequently; recovered and resumed for audit purposes from the office of Registered Person."

Nothing explicitly has been stated with respect to the factum of raid.

14. We have not been shown any notice having been given to the petitioner under section 38 of the Sales Tax Act for making the alleged concealed record accessible to the Department.

15. We have seen that the Assistant Collector Mr. Muhammad Tahir in his reply has categorically stated that as he had to conduct plural raids, it was not possible for him personally to conduct the raid at the premises of the Magna Textile Industries and, therefore, he caused the search to be conducted through Mr. Saleem Akhtar, Deputy Superintendent to resume the record.

16. No material has been shown to this Court which would reflect the basis for the belief of Assistant Collector of Sales Tax for adopting the extraordinary remedy of search without warrant and the apprehension he may be having for an action under section 40‑A The lightening action under section 40‑A is to be taken on basis of such a belief to be transcribed in the shape of a written statement which is the prelude before the action to be initiated.

17. Adverting to the legal question raised with respect to the maintainability of the writ petition it is said that even where appeal could be filed before a statutory appellate authority, a writ petition is competent against an illegal action involving abuse of authority. In this connection, reference may be made to the following cases: (1) Begum Nusrat Bhutto v. Income Tax Officer Circle v. Rawalpindi (PLD 1980 Lahore 449); (2) Mrs. Shahida Zahir Abbasi and 4 others v. President of Pakistan and others (PLD 1996 SC 632); and (3) Messrs Julian Hushang Dinsaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others (1992 SCMR 250).

This Court always has the authority even in fiscal matters to look into the allegations of misapplication of law or abuse of power on the part of public functionaries besides looking into the allegation of mala fides.

18. Search and seizure by Government functionaries which is required to be done in a particular way and was not done in accordance with law, has no legal value. Reference may be made to the following cases: (1) Messrs Ehsan Yousaf Textile Mills (Pvt.) Ltd., Faisalabad v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others (2003 PLD 2037); (2) Shaukat Hussain v. Zulfiqar Ahmad and 2 others (PLD 1981 Lahore 13); (3) Federation of Pakistan through Secretary Ministry of Finance, Federal, Secretariat, Islamabad and 4 others v. Messrs Master Enterprises (Pvt.) Ltd. through Managing Director (2003 PTD 1034); and (4) Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz (PLD 1991 SC 630). In the latter case, the following observations of the apex Court provide a guideline:‑‑

"By providing such statutory requirement, the intention of legislature is to provide safeguard against mala fide interference with rights of citizens in respect of property and against violation of right of privacy. In the instant case in the statement of grounds reproduced above, reasons are not stated as to why and what danger was apprehended for removal of goods and it is not enough simply to say that it is not expedient to obtain search‑warrant'. We are, therefore, in agreement with the finding of the High Court on the ground that search and seizure were defective and improper on account of non‑compliance with the provisions of sections 162 and 163 of the Customs Act."

19. Keeping all these facts in mind, this Court is of the view that it has jurisdiction to look into the question of abuse of power on the part of public functionaries and where mala fides are alleged, through the exercise of its Constitutional jurisdiction. This is in spite of the fact that there exists other statutory bodies having appellate or revisional or review jurisdiction.

20. This Court also finds that the seizure of the documents, in the present case, had not taken place in the presence of the Assistant Collector which is an admitted position. The, words "search or cause search to be made" appearing in section 40‑A, obviously imply in the right spirit of this section that either the Assistant Collector be physically present during the search or causes search in his presence. But this cannot be achieved through proxy while he himself is away somewhere.

21. The intention of the Legislature in empowering the Assistant Collector or person only above him has a rationale and this is to protect the rights of the citizens and their privacy guaranteed by the Constitution, otherwise there would be anarchy and, a perennial threat tot the citizens.

22. This Court has been told that there is a massive evasion of sales tax on the part of the petitioner and the industrialists of Faisalabad who have ingenious methods of evading sales tax and that it has become difficult for the department to contain them. This is no excuse for violating the law. The documents which were required, could have been asked for under the provisions of section 38 or search could have been effected under section 40 or action followed strictly in accordance with the provisions of section 40‑A. Why was this not done? Somebody in the department has to enquire into this lapse and for also finding out whether the procedure was discarded to provide a legal defence to a wrong‑doer.

23. The law is obvious. It is for the department to handle its search operation carefully for success of genuine case.

24. The argument that Faisalabad is notorious for tax evasion and people like the petitioner have become rich through tax evasion, is hardly a legal argument. In fact, the department has to be equally smart in trapping them.

25. If this was a genuine case of tax evasion, I am afraid because of its actions against the law. The department today has to face these consequences. It is for the Board of Revenue to ensure that Sales Tax cases are proceeded strictly in accordance with law so that the defaulters are brought to account. Only experienced officials should be appointed for raids and searches in case the provisions of section 40-A are to be followed.

26. As the act of search and seizure in this case was illegal, it will be of no consequence. The department should return the record so seized. But nothing in this order restrains the department from proceeding against the petitioner in accordance with law.

M.B.A./M‑92/L Order accordingly.