Anil Kumar and Company vs Union of India And Others

We have heard Sri J. K. Mittal and Sri C. K. Rai for the petitioner. Sri S. P. Kesarwani, appears for the Central Excise Department. The petitioner is a partnership firm, engaged in providing electrification work of underground cabling, lightning work, external electrification, shifting work and electrification of roads, and in that process wherever required, electrical sub-stations are also installed under the agreement with Ghaziabad Development Authority and Greater Noida Development Authority. It is alleged that the petitioner is registered under the State law, for payment of VAT, and since no taxable services are provided, the petitioner is not registered with the Service Tax Department.

In this writ petition, the petitioner has prayed for the following reliefs :

issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondents declaring that search conducted on October 13, 2010 by respondent No. 2 on the premises of the petitioner is illegal.

issue a writ of certiorari/mandamus or any other appropriate writ/ order/direction against the respondents by declaring that summons issued by respondent No. 3 to the petitioner are unwarranted and arbitrary exercise of power.

issue a writ of certiorari/mandamus or any other appropriate writ/ order/direction against the respondents by declaring that the petitioner is not liable to pay service tax in respect of the services provided by the petitioner to the Government authorities.

A search u/s 82 of the Finance Act 1994, was carried out at the office/premises of the petitioner for which authorization was issued by the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad, after gathering intelligence from the Ghaziabad Development Authority that there are several contractors, who have provided services relating to construction of residential complexes/houses and electrification work in Madhuban Bapudham Scheme of Ghaziabad. These activities are liable to service tax under the category of "construction of residential complex services", "works contract services" and "erection, commissioning and installation services" as defined u/s 65(105)(zzzh), 65(105)(zzzza) and 65(105) (zzd), respectively, of the Finance Act, 1994.

In paras 7, 8, 9, 10, 11 and 12 of the counter-affidavit of Sri Jagmohan, Deputy Commissioner, Customs, Central Excise and Service Tax Division V. Ghaziabad, it is stated as follows :

That as per list the contractors have been paid a substantial amount as mentioned against each such contractor in the information provided by Ghaziabad Development Authority. Accordingly with reasonable belief searches were conducted under the authority of search authorization issued by the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad, u/s 82 of the Finance Act, 1994, in the office/residential premises of large contractors/ service providers on October 13, 2010. A true copy of search authorization dated October 13, 2010 issued by the Commissioner of Central Excise and Service tax, Ghaziabad is annexed herewith and is marked as annexure No. CA2 to this counter-affidavit.

That after the said search conducted by the Department, most of the contractors have got themselves registered with the Department and paying service tax on the table amount received by them in lieu of taxable services rendered to various Government authorities or private service recipients.

That amongst the said large contractors the petitioner was also one of them, who had been awarded contractors worth Rs. 89.72 crores by Ghaziabad Development Authority (as per S. No. 58 to S. No. 64 of list provided by GDA) and before the search operation of their premises on October 13, 2010 under the power conferred upon the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad u/s 82 Of the Finance Act, 1994 the said M/s. Anil Kumar and Company had received an amount of Rs. 46.84 crores from Ghaziabad Development Authority for various taxable/non-taxable service rendered to the said authority. From the very time of the search on October 13, 2010, the petitioner had adopted a non-cooperative attitude and hindrance was created by collecting the mob on the spot. The search party could not collect all the documents required for further investigation in the matter due to interference created by the mob on October 13, 2010 in the office of M/s. Anil Kumar & Company.

That as soon as the officers started to initiate the search proceedings some unruly throng arrived at the scene and started obstructing the proceedings. The officers with great caution handled the mob and sensitized them of the requirement of law. However, provocative display of high pitched noises continued, threatening the officers while the search continued. The local police also arrived at the scene to control the unruly mob. The search proceedings were summarized in a panchanama dated October 13, 2010 drawn at the spot. A true copy of panchanama dated October 13, 2010, is annexed herewith and is marked as annexure No. CA3 to this counter-affidavit.

That an incident report dated October 20, 2010 in this regard was also submitted by the Assistant Commissioner (the officer in charge of the team of officers who conducted the search) wherein all the hindrances caused were summarized. A true copy of the incident report is annexed herewith and is marked as annexure No, CA4 to this counter-affidavit.

That since all the records could not be found during the search operations, therefore, summons dated October 27, 2010, November 19, 2010, December 7, 2010, January 19, 2011, February 2, 2011, February 9, 2011 and February 13, 2011, were issued to the petitioner to submit the relevant documents to the Department for the purpose of inquiry u/s 83 of the Act read with section 14 of the Central Excise Act, 1944 with regard to non-payment of service tax. But till date no documents have been provided by the petitioner. Thus the petitioner is not cooperating and withholding important documents necessary for proper inquiry. The petitioners are continuously committing breach of the provisions of section 83 of the Act read with section 14 of the Central Excise Act, 1944. True copies of summons dated October 27, 2010, November 19, 2010, December 7, 2010, January 19, 2011, February 2, 2011, February 9, 2011 and February 13, 2011 are annexed herewith and are collectively marked as annexure CA5 to this counter-affidavit.

The Learned Counsel for the petitioner submits that there is a difference between "reason to suspect", and "reason to believe", on the material available on record to authorize search. No notice or summon was issued to the petitioner before conducting the search. There was no material, nor any reason was recorded before carrying out the search u/s 82(1), (2) of the Act. At the time of search, the Deputy Commissioner, who was authorised to conduct the search, was not present. The search party took away the entire documents, and thereafter notices have been issued by the Superintendent (A. E.), Central Excise, Ghaziabad, to the petitioner to appear in person and produce the documents/records which are in his possession, and for recording statement in the inquiry for non-payment of service tax by the petitioner.

It is submitted that the entire search operations are illegal, and invalid. The authorities are in possession of the entire documents, and thus, the notice, demanding details of documents/records is bad in law. The petitioner has cited judgments in AJIT JAIN Vs. UNION OF INDIA and Others, .

In AJIT JAIN Vs. UNION OF INDIA and Others, , the Department ordered search on a mere intimation by the CBI to the income tax authorities about the recovery of cash from the petitioner. It was held that on the basis of such information, without, anything more, the Director of income tax, in charge of investigation, as a reasonable person, could not entertain a belief that the said amount in the possession of the petitioner represented his undisclosed income, which had not been and would not be disclosed by him for the purposes of the Act. The mere possession of the amount could hardly be said to constitute information, which could be treated as sufficient by a reasonable person, leading to an inference that it was income which had not been disclosed by him, particularly when the petitioner as well as the company, of which he was claiming to be the Managing Director, were regular assessees with the income tax Department.

In Mapsa Tapes''s case (2006) 201 ELT 7 (P&H), the Punjab and Haryana High Court allowed the writ petition, and declared the search and seizure to be illegal on the ground that nothing was produced to show as to whether reasons were recorded or not, before search was authorised or seizure took place. All that has been relied upon was the report of Directorate of Revenue Intelligence, Delhi Zonal Unit, which was much prior to the date of seizure. The goods were cleared u/s 47 of the Act, after the report was available with Director of Revenue and Intelligence. Even after clearance of the consignment, seizure of which was in question, a number of consignments were cleared by the respondents.

In the present case, it is not denied that the petitioner had entered into contracts, and had carried out work/service for the Ghaziabad Development Authority for constructions of 11 KV sub-stations and external electrification work. The details of six contracts awarded by the authority reveal that the petitioner has received an amount of Rs. 46.84 crores from the GDA for various taxable/non-taxable services rendered to the authority. The activities were liable to service tax under the category of "construction of residential complex services", "works contract services" and "erection, commissioning and installation services" as defined u/s 65(105)(zzzh), 65(105)(zzzza) and 65(105)(zzd), respectively, of the Finance Act, 1994. Since the petitioner was not registered, and was not paying service tax, the material collected by the Department was sufficient for authorization by the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad to search the premises u/s 82(1), (2) of Chapter V of the Finance Act, 1994. Since all the records could not be found during search operation, summons were issued on October 27, 2010, November 19, 2010, December 7, 2010, January 19, 2011, February 2, 2011, February 9, 2011 and February 13, 2011, in respect to which, the petitioner did not produce the documents. The petitioner has adopted a non-cooperative attitude and collected mob on the spot and sensitized them of the requirement of law and threatened the officers, while the search continued. At the time of search only two files were resumed, namely, file relating to balance sheet of the company, and file containing copies of contract agreement with various development authorities. The search party, on account of hindrance created by collecting mob, could not collect documents, required for further investigation.

We have gone through the record, and find that there was sufficient material with the Department, to authorize carrying out the search. The Department made preliminary enquiries by gathering information, and found that the petitioner has engaged in the services, which are taxable, in respect of contracts from Sl. No. 58 to 64. So far as the argument that other contractors have been left out, and no search was conducted on them, it is stated in para 8 of the counter-affidavit that most of the contractors have got themselves registered with the Department, and were paying service tax on the taxable amount received by them in lieu of taxable services rendered by them to various Government authorities or private service recipients. There is no merit in this writ petition. It is accordingly dismissed.