M/S Bhima Enterprises vs. The Joint Commissioner
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The petitioner, M/s.Bhima Enterprises, a jewellery business, is challenging the retention of files and documents seized on January 25, 2024. This seizure occurred pursuant to an authorization for inspection issued on January 24, 2024, by the Joint Commissioner. The petitioner contends that this authorization was issued in breach of a status quo order dated November 23, 2023, previously made in other writ petitions. When the earlier writ petition challenging the authorization was heard on February 20, 2024, the department's counsel submitted that the authorization letter dated January 24, 2024, stood withdrawn. The earlier writ petition was then closed. The petitioner now seeks the return of all files and documents taken on January 25, 2024.
Held
The Court held that the respondents are not entitled to retain the files and documents seized from the petitioner on January 25, 2024. The Court reasoned that while the respondents initially relied on an authorization letter for the inspection, this authorization was subsequently withdrawn by the department during the pendency of a prior writ petition. The Court emphasized that the authority to seize files and documents flows from the authorization granted. Once the authorization letter was withdrawn, the entire basis of the department's action on January 25, 2024, was undermined. The Court found the reliance on cases concerning the admissibility of evidence from illegal searches to be misplaced, as the present issue was solely about the entitlement to retain seized documents after the withdrawal of the authorization. The Court directed the respondents to return all files and documents taken from the petitioner on January 25, 2024, immediately and without delay. The ratio decidendi is that if the authorization for seizure is withdrawn, the department cannot retain the seized documents.
Key Issues
1. Whether the respondents are entitled to retain the files and documents seized from the petitioner on January 25, 2024, given that the authorization letter for the inspection was subsequently withdrawn by the department. Petitioner's arguments: The petitioner argues that the authorization letter dated January 24, 2024, was issued in breach of a status quo order. Subsequently, the department withdrew this authorization letter. Therefore, the basis for seizing the documents on January 25, 2024, is nullified, and the documents must be returned. They rely on the principle that a dependent order becomes nugatory if the primary order is set aside, and the department's withdrawal of the authorization renders the seizure invalid. Respondents' arguments: The respondents argued that even if a search is held to be illegal, the evidence gathered can still be used and is admissible, citing SNJ Breweries Private Limited Vs. Principal Director of Income Tax (2024 SCC OnLine Mad 5606) and Poorna Mal V. Director of Inspection of Income Tax (Investigation), New Delhi (1974) 1 SCC 345. They contended that the seizure was made by an authorized official.
Sections Cited
Section 67(2), Section 67(3), Section 67(11)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORDER The writ petitioner is engaged in jewellery business. They are a manufacturer as well as wholesaler. They had registered themselves on the GST portal. While so, on 16.08.2023, a surprise inspection was conducted on the petitioner's business premises. Jewellery and physical stock of gold bullion were seized. The petitioner explained as to why the quantity treated as excess by the department was not included in the book of accounts. The petitioner alleges that they were compelled to pay tax amount of Rs.32,62,640/- on 16.08.2023. 2/8 https://www.mhc.tn.gov.in/judis
Yet another inspection of the petitioner's premises was held on 25.01.2024 on the basis of another authorization letter dated 24.01.2024. During the said inspection, the petitioner's statement was obtained. On the said date, certain files and documents were also taken from the petitioner. Contending that the issuance of the authorization letter dated 24.01.2024 was in breach of the status quo order dated 23.11.2023 made in W.P.(MD)Nos.27734 and 27735 of 2023, the petitioner filed W.P. (MD)No.3770 of 2024. When the said writ petition was taken up for hearing on 20.02.2024, the learned standing counsel for the department submitted that the authorization letter dated 24.01.2024 stood withdrawn. Recording the said submission, the writ petition was closed. 3.There is a category known as “dependent order”. If the primary 3/8 https://www.mhc.tn.gov.in/judis dependent order can be treated as void. It may have to be formally set aside. The doctrine must be applied having regard to the factual matrix obtaining in each case. 4.Relying on the decision of the Hon'ble Division Bench reported doctrine of “excluding the fruit of a poisonous tree” was incorporated in 4/8 https://www.mhc.tn.gov.in/judis the said provision. Thus, it all depends on the statutory framework. 5.In the case on hand, we are not concerned with the admissibility 5/8 https://www.mhc.tn.gov.in/judis
Section 67(2) enables seizure of goods, documents or books or things which shall be useful or relevant to any proceedings under the Act. Section 67(3) states that those documents or books or things that are not relied upon for the issue of notice under the Act or the Rules made thereunder, shall be returned within a period not exceeding thirty days of the issue of the said notice. Section 67(11) further provides that the accounts / registers / documents shall be retained only for so long as may be necessary in connection with any proceeding under the Act or the Rules made thereunder for prosecution. 7.Such retention is permissible provided the seizure was done by an official duly authorized. If the authorization is illegal or withdrawn, the power to retain stands undermined. Sub-Section 11 and Sub-Section 2 of Section 67 of the Act have to be read together. The authority to seize files and documents flows from the authorization granted under Sub-Section 2. Once the authorization letter had been withdrawn, the entire basis of the action taken by the department on 25.01.2024 goes. The statement said to have been taken from the petitioner also cannot have any legal consequence. The department is obliged to return all the files and documents obtained on the said date. 6/8 https://www.mhc.tn.gov.in/judis
In this view of the matter, we direct the respondent to return whatever was taken from the petitioner on 25.01.2024 immediately and without any delay. This writ petition is allowed accordingly. No costs. Consequently, connected miscellaneous petition is closed.
2026
NCC : Yes / No Index : Yes / No Internet : Yes/ No ias/skm To 1.The Joint Commissioner, Office of the Central GST & Excise, Tirunelveli Division, 2nd Floor, Central Revenue Building, Tractor Road, NGO “A” Colony, Tirunelveli – 627 007. 2.The Superintendent, Office of the Central GST & Excise, Tirunelveli Division, 2nd Floor, Central Revenue Building, Tractor Road, NGO “A” Colony, Tirunelveli – 627 007. 3.The Inspector, Office of the Central GST & Excise, Tirunelveli Division, 2nd Floor, Central Revenue Building, Tractor Road, NGO “A” Colony, Tirunelveli – 627 007. 7/8 https://www.mhc.tn.gov.in/judis G.R.SWAMINATHAN, J. ias/skm W.P.(MD)No.14460 of 2024 05.08.2026
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Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.