COLLECTOR OF SALES TAX AND CENTRAL EXCISE (ENFORCEMENT) VS Messrs MEGA TECH (PVT.) LTD., 2005 PTD-SUPREME-COURT 1933 (2005)

(On appeal from order of High Court of Sindh, Karachi dated 2-3-2005 passed in C.P. No.D-1152 of 2004).

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

----S. 38---Scope of section 38, Sales Tax Act, 1990---Section 38 empowers an officer authorised by the Central Board of Revenue to have free access to business or manufacturing promises, stocks, business records and documents etc. at any time and the registered person, his agent or any person specified in S.38(1) of the Act shall be bound to answer any question or furnish such information or explanation as may be asked by the authorised officer.

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

----Ss. 40, 40-A & 38---Search without warrant---Scope---Bypassing the statutory provisions contained in S.40, Sales Tax Act, 1990 and straightaway assuming powers under S.40-A of the Act---Validity---Section 40-A, Sales Tax Act, 1990, in the absence of any strong belief to such effect, did not confer unlimited and unbridled powers on the authorised officer to conduct search or to impound any kind of documents without any reasonable cause and obtaining any search warrant from the Magistrate---Anonymous complaint against the company alleging evasion of tax was not a "credible. information"---"Reasonable belief" of an officer must have direct nexus and material bearing on the strong circumstances for formation of such opinion---Requirements of law and procedure to be followed by the Department with regard to search without warrant elucidated.

An officer, duly authorized in this behalf can have free access to the business premises of a registered person. The officer, who inspected the premises, was duly authorized to inspect the goods, stocks etc., as contemplated by law. Nevertheless, from the language employed in sections 40 and 40-A of the Sales Tax Act, 1990, the requirement of law appears to be that where an officer of sales tax has reason to believe that any document or things, which, in his opinion, may be relevant to any proceedings under the Sales Tax Act, are concealed or kept in any place and there is a danger of removal of such documents or records, he may, after obtaining a warrant from the Magistrate, enter that place and cause a search to be made at any time. The mandate of law as enunciated in subsection (2) of S.40 seems to be that search authorized under the above provision of law shall be carried strictly in accordance with relevant provisions of the Code of Criminal Procedure, 1898. Such provisions are contained in sections 96 to 105 of the Code and need not be dilated upon as admittedly the petitioners did not invoke these important provisions of law while seizing the records of the Company. Department, however, attempted to canvass the Supreme Court that upon being asked by authorized officer and, after serving notice on General Manager (Finance) of the Company with a request to provide all the sales tax records, he refused to provide the same on the premise that no record was available with them and when requested to allow access to the premises, he did not allow the same, therefore, Deputy Collector Sales Tax, in exercise of the powers of search, prepared a statement under section 40-A and directed his staff to search the premises for following reasons:

(i)Non-availability of Magistrate.

(ii)Possibility that records will be removed till the availability of Magistrate.

(iii)Denial to allow search and also failure to provide sales tax record.

Statement prepared by this officer within the contemplation of section 40-A commences with the expression ^"whereas on the basis of credible information" that the Company was involved in the evasion of sales tax, he along with the staff of sales tax, duly authorized by Collector of Sales Tax under section 38 of the Act, visited the premises. Department had received an anonymous complaint against the Company. Authorization from the Collector of Sales Tax was obtained on 23-9-2004, on which date the entire exercise was undertaken in the purported exercise of powers conferred under section 40-A of the Act. In the face of admitted position that there was no definite information much less credible report against the Company alleging evasion of sales tax, it is hard to accept the statement of the Department that the authorized officer in fact acted on receipt of a credible information within the meaning of the term. On the other hand, there appears to be force in the reasons recorded by the High Court for declaring the impugned action without jurisdiction because the same was undertaken after the lapse of two days, which period was adequate enough to obtain a search warrant from a Magistrate if the Department believed that complaint otherwise was true and genuine. High Court appears to be justified in doubting the bona fides of the Department in bypassing the statutory provisions contained in section 40 of the Act and straightaway assuming extraordinary powers under section 40-A. The authorized officer had full powers and authority to inspect the premises of the Company under section 38 of the Act with a view to satisfy himself that proper records under the provisions of the Act, rules and regulations were maintained, nevertheless, in law, he is expected to act fairly, justly and reasonably. It is difficult to believe that on being called upon to provide necessary records, General Manager (Finance) of the Company would point blank refuse to lay the same on the so-called premise that records were not maintained. One would be justified in drawing this inference from the letters placed on record by the Department themselves relating to the audit for year 2002-2003 and the positive and prompt response made by ` Senior Manager (Accounts) of the Company. If the Company had fairly allowed the auditors of the Department to audit their monthly returns for the year 2002-2003 in 2004, Court would be legally justified in holding that reasons recorded in the statement prepared by the authorized officer do not hold the ground. Likewise, undue haste and anxiety with which authorized officer acted and impounded a large number of files, statements, computers, diskettes and CDs of the Company, prima facie, tend to show lack bona fides and reasonable belief on the part of the departmental officers. At any rate, it is not apparent from the statement prepared by the authorized officer that it was his genuine belief that there was reasonable danger of removal of records, which may be relevant to any proceedings under the Act. In the absence of any strong belief to such effect, it is difficult to agree with the submission that section 40-A confers unlimited and unbridled powers on the authorized officer to conduct search or to impound any kind of documents without any reasonable cause and without obtaining any search warrant from the Magistrate.

Reasonable belief of an officer must have direct nexus and material bearing on the strong circumstances for formation of such opinion. Indeed the legislature has used the expression `reasonable belief' and not a mere suspicion in the mind of an authority with a view to authorise the search of premises without obtaining a search warrant from a Magistrate. Sections 40 & 40-A of the Act appear to be neither overlapping nor in conflict with each other. While section 40 caters for search where a sales tax officer has reason to believe that any documents or things, which may be useful or relevant to any proceedings under the Act kept at any place are apprehended to be removed, he may enter the place and cause a search after obtaining search warrant from the Magistrate, Section 40-A was enacted to meet an emergent situation where a sales tax officer has reason to believe that documents or things useful for or relevant to any proceedings under the' Act, kept at any place are apprehended to be removed, he may proceed to make a search without obtaining any warrant. It would, however, appear that every word used by the Legislature must be given its true meaning and the provisions construed together in a harmonious manner. It would not be legal and proper to apply one provision of law in isolation from the other provision as no surplusages or redundancy can be attributed to the legislative organ of the State.

High Court, after a threadbare and in-depth examination and analysis of the record have recorded a finding of fact that the only course available to the Department was, as contemplated under section 40 of the Act, and thus, bypassing of such course and direct invocation of powers under section 40-A in the garb of access to the office premises of the respondent in terms of section 38 of the Act was not warranted by law. On careful consideration of the record and analyzing the submissions of the parties, Supreme Court agreed with the view taken by the High Court as, apparently, action taken by the Department smacked of lack of bona fides and acting on personal whims.

S. M. Yousof v. Collector of Customs PLD 1968 Kar. 599; Collector of Customs v. S.M. Yousaf 1968 SCMR 603; Collector of Customs v. Muhammad Mehfooz PLD 1991 SC 630; Federation of Pakistan v. Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Ihsan Yousaf Textile Mills (Pvt.) Ltd. v. Federation of Pakistan .2003 PTD 2037; Megna Textile Mills v. Collector of Customs 2004 PTD 1339; Food Consults (Pvt.) Ltd. v. Collector (C.E. & S.T.) 2004 PTD 1731 and N.P. Water Proof Textile Mills (Pvt.) Ltd. v. Federation of Pakistan 2004 PTD 2952 ref.

(c) Interpretation of Statutes-

----Every word used by the Legislature must be given its true meaning and the provisions construed together in a harmonious manner---Not legal or proper to apply one provision of law in isolation from the other provision as no surplusages or redundancy can be attributed to the legislative organ of the State.

Raja Muhammad Irshad, Deputy Attorney General and Akhlaq Ahmed Siddiqui, Advocate-on-Record for Petitioners.

Dr. Farogh Naseem, Advocate Supreme Court and M.A. Zaidi, Advocate-on-Record for Respondent.

Date of hearing: 7th April, 2005.

JUDGMENT

RANA BHAGHWANDAS, J.---Petitioners being aggrieved by the order dated 2-3-2005, of a learned Division Bench of the Sindh High Court allowing Constitutional Petition No.D-1152 of 2004 filed by the respondent, seek leave to appeal.

2. Respondent Messrs Mega Tech (Pvt.) Ltd. is a ' company registered with the Sales Tax Department under section 14 of the Sales Tax Act, 1990 (hereinafter referred to as the Act, 1990) as service providers/stevedores. On 21-9-2004, upon receipt of anonymous complaint disclosing evasion in the payment of sales tax against respondent, authorised officer of the Sales Tax Department along with his subordinate officials visited the premises of respondent on 23-9-2004 and purportedly desired the officials of the Company to submit for his inspection various records reflecting their commercial activities, which was allegedly refused. Accordingly, Dr. Mubashir Baig, Deputy Collector Sales Tax prepared a statement in terms of section 40-A of the Act. He handed over a copy thereof to an officer of the Company and proceeded to secure a large number of box files, bank statements, annual statement files etc. A resumption memo. to this effect was prepared under the signature of Mr. Irfanul Haq Siddiqui, Inspector Sales Tax and Central Excise (Enforcement) in presence of two witnesses, a copy whereof was also delivered to a representative of the Company. It further appears that on the next day i.e. 24-9-2004 various documents, computers, diskettes CDs etc_.. were impounded from the godown of the Company situated at West Wharf, Karachi. As the entire action was taken by the Sales Tax Department without any prior notice and obtaining any search warrant from a Magistrate, respondent assailed the action as being arbitrary, illegal,. mala fide and in utter violation of law before the High Court.

3. After inviting parawise comments from the petitioners and taking into consideration view-point of both the parties, Sindh High Court, through its judgment dated 2-3-2005 allowed the petition and declared the impugned action as prayed with a direction to restore all the seized records of the respondent within two weeks, hence this petition for leave to appeal.

4. Raja Muhammad Irshad, learned Deputy Attorney-General espousing the cause of the petitioners vehemently assailed the correctness and that validity learned of the Judges impugned High the judgment Court of the High Court on the premise that learned judges of the high court failed to make a harmonious interpretation of sections 38, 40 and 40-A of the Act in accordance with law and this being a question of first impression, a fit case for the grant of leave to appeal is made out.

5. Conversely, learned counsel for the respondent, while defending the impugned judgment seriously criticized the aforesaid action of the petitioners as being arbitrary, contrary to law and mala fide on variety of grounds.

6. Section 38 of the Act, inter alia, empowers an officer authorized by the Central Board of Revenue or the Collector of Sales Tax to have free access to business or manufacturing premises, stocks, business records and documents etc.^, at any time and the registered person, his agent or any person specified in subsection (1) shall be bound to answer any question or furnish such information or explanation as may be asked by the authorized officer. Sections 40 and 40-A of the Act being crucial to the determination of question involved in this petition may be reproduced hereunder:--

"40. Searches under warrant.--(1) Where any officer of sales tax has reason to believe that any document or things which in his opinion, may be useful for, or relevant to, any proceedings under this Act are kept in any place, he may after obtaining a warrant from the Magistrate, enter that place and cause a search to be made at any time.

(2) The search made under subsection (1) shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure 1898 (V of 1898)."

"40-A. Searchwithout 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 reason to believe that any documents or things which, in his opinion, may be useful for, or relevant to, any proceedings 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 be made for such documents or things in that place.

(2)Any officer or person who makes search or causes a search to be made under subsection (1) shall leave a signed copy of the statement 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, "

7. There can be no cavil with the proposition that an officer, duly authorized in this behalf can have free access to the business premises of a registered person. It is also not disputed that the officer, who inspected the premises, was duly authorized to inspect the goods, stocks etc., as contemplated by law. Nevertheless, from the language employed in sections 40 and 40-A reproduced hereinabove, the requirement of law appears to be that where an officer of sales tax has reason to believe that any document or things, which, in his opinion, may be relevant to any proceedings under the Act, are concealed or kept in any place and there is a danger of removal of such documents or records, he may, after obtaining a warrant from the Magistrate, enter that place and cause a search to be made at any time. The mandate of law as enunciated in subsection (2) seems to be that search authorized under the above provision of law shall be carried strictly in accordance with relevant provisions of the Code of Criminal Procedure, 1898. Such provisions are 4 contained in sections 96 to 105 of the Code and need not be dilated upon as admittedly the petitioners did not invoke these important provisions of law while seizing the records of the respondent-Company. Petitioners, however, attempted to canvass of this Court that upon being asked by authorized officer and, after serving notice on Syed Anwar Ali, General Manager (Finance) of the respondent-Company with a request to provide all the sales tax records, he refused to provide the same on the premise B that no record was available with them and when requested to allow access to the premises, he did not allow the same, therefore, Dr. Mubashir Baig, Deputy Collector Sales Tax, in exercise of the powers of search, prepared an statement under section 40-A and directed his staff to search the premises for following reasons:--

(i) Non-availability of Magistrate.

(ii) Possibility that records will be removed till the availability of Magistrate.

(iii) Denial to allow search and also failure to provide sales tax record.

8. Statement prepared by this officer within the contemplation of section 40-A commences with the expression "whereas on the basis of credible information" that M/s. Mega Tech were involved in the evasion of sales tax, he along with the staff of sales tax, duly authorized by Collector of Sales Tax under section 38 of the Act, visited the premises. On a query by the Court, learned Deputy Attorney-General was obliged to concede that in fact on 21-9-2004 department had received an anonymous complaint against the respondent. It may, however, be observed that authorization from the Collector of Sales Tax was obtained on 23-9-2004, on which date the entire exercise was undertaken in the purported exercise of powers conferred under section 40-A of the Act.. In the face of admitted position that there was no definite information much less credible report against the respondent alleging evasion of sales tax, it is hard to accept the statement of the petitioners that the authorized officer in fact acted on receipt of a credible information within the meaning of the term. On the other hand, there appears to be force in the reasons recorded by the High Court for declaring the impugned action without jurisdiction because the same was undertaken after the lapse of two days, which period in our opinion was adequate enough to obtain a search warrant from a Magistrate if the Department believed that complaint otherwise was true and genuine. Learned High Court appears to be justified in doubting the bona fides of the petitioners in bypassing the statutory provisions contained in section 40 of the Act and straightaway assuming extraordinary powers under section 40-A. There may be no cavil with the submission that the authorized officer had full powers and authority to inspect the premises of the respondent-Company under section 38 of the Act with a view to satisfy himself that proper records under ^.the provisions of the Act, rules and regulations were maintained, nevertheless, in law, he is expected to act fairly, justly and reasonably. It is difficult to believe that on being called upon to provide necessary records, General Manager (Finance) of the respondent- _B Company would point blank refuse to lay the same on the so-called premise that records were not maintained. One would be justified in drawing this inference from the letters placed on record by the petitioners themselves relating to the audit for year, 2002-2003 and the positive and prompt response made by Senior Manager (Accounts) of the respondent. One of such letters being letter, dated 15-9-2004 latest in point of time enclosing therewith photocopies of the documents required by the Department vide letter, dated 13-9-2004, is available at page 63 of the Paper Book. If the respondent-Company had fairly allowed the auditors of the Department to audit their monthly returns for the year, 2002-2003 in 2004, we would be legally justified in holding that reasons recorded in the statement prepared by the authorized officer do not hold the ground. Likewise, undue haste and anxiety with which authorized officer acted and impounded a large number of files, statements, computers, diskettes and CDs of the Company, prima facie, tends to lack bona fides and reasonable belief on the part of the departmental officers. At any rate, it is not apparent from the statement prepared by the authorized officer that it was his genuine belief that there was reasonable danger of removal of records, which may be relevant to any proceedings under the Act. In the absence of any strong belief to such effect, we are not inclined to agree with the submission that section 40-A confers unlimited and unbridled powers on the authorized officer to conduct search or to impound any kind of documents without any reasonable cause and without obtaining any search warrant from the Magistrate.

9. Reasonable belief of an officer must have direct nexus and material bearing on the strong circumstances for formation of such opinion. Indeed the legislature has used the expression `reasonable belief' and not a mere suspicion in the mind of an authority with a view to authorise the search of premises without obtaining a search warrant from a Magistrate. Sections 40 & 40-A of the Act in our opinion appear to be neither overlapping nor in conflict with each other. While section 40 caters for search where a sales tax officer has reason to believe that any documents or things, which may be useful or relevant to any proceedings, he may enter the place and cause a search after obtaining search warrant from the Magistrate, section 40-A was enacted to meet an emergent situation where a sales tax officer has reason to believe ' that documents or things useful for or relevant to any proceedings under the Act, kept at any place are apprehended to be removed, he may proceed to make a search without obtaining any warrant. It would, however, appear that every word used by the Legislature must be given its true meaning and the provisions construed together in a harmonious manner. To our mind, it would not be legal and proper to apply one provision of law in isolation from the other provision as no surplusages or redundancy can be attributed to the legislative organ of the State.

10. Learned Judges of the High Court, after a threadbare and in-depth examination and analysis of the record have recorded a finding of fact that the only course available to the petitioner was, as contemplated under section 40 of the Act, thus, bypassing of such course and direct invocation of powers under section 40-A in the garb of access to the office premises of the respondent in terms of section 38 of the Act was not warranted by law. On careful consideration of the record and analyzing the submissions of the learned counsel for the parties, we are in complete agreement with the view taken by the High Court as, apparently, action taken by the petitioner-Department smacks of lack of bona fides and acting on personal whims.

11. Learned counsel for the respondent referred to S.M. Yousaf v. Collector of Customs PLD 1968 Kar. 599 upheld by this Court in Collector of Customs v. S.M. Yousaf 1968 SCMR 603. This was a case under sections 172-A and 178 of Sea Customs Act (VIII of 1878) dealing with search. without warrant and validity thereof. Since the provisions involved appears to be pari materia with section 40-A of the Act, view taken in the precedent case appears to be relevant and lends full support to the case of the^' respondent, which was rightly decided by the High Court. There is another judgment by this Court namely Collector of Customs v. Muhammad Mehfooz PLD 1991 SC 630, which was a case under sections 162 and 163 of the Customs Act (IV of 1969) provisions whereof are in pari materia with the provisions of sections 40 and 40-A of the Act. It was held in this case that statement is to be prepared by the customs officer in writing to include grounds of his belief with regard to danger he apprehended that the goods would be removed before search could be made on the basis of search warrant and secondly, about the apprehended removal of goods, documents or things for which the search was to be made. A reference was also made to Federation of Pakistan v. Master Enterprises (Pvt.) Ltd. 2003 PTD 1034, which was a case involving almost identical circumstances in which the action of the Sales Tax Department was struck down by a Division Bench of the Sindh High Court against which leave to appeal was refused by this Court. In the same series, cases from Sindh and Lahore jurisdiction referred as Ihsan Yousaf Textile Mills (Pvt.) Ltd. v. Federation of Pakistan 2003 PTD 2037; Megna Textile Mills v. Collector of Customs 2004 PTD 1339; Food Consults (Pvt.) Ltd. v. Collector (C.E. & S.T.) 2004 PTD 1731 and N.P. Water Proof Textile Mills (Pvt.) Ltd. v. Federation of Pakistan 2004 PTD 2952 appear to be relevant and to the point. No case to the contrary has, however, been cited by the petitioners before this Court.

12. For the aforesaid facts, circumstances and reasons, we find no merit in this petition, which is without any substance. It is accordingly dismissed.

M.B.A./C-31/SPetition dismissed.