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Ganpatrai Rawatmull v. Collector Of Land Customs, Calcutta And Another

Calcutta High Court

Feb 18, 1960

Judgment

Subsequent
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Structured Summary of the Provided Opinion

Factual and Procedural Background

The petitioner conducted business at 10th Mile, Kalimpong, West Bengal. On or about 10 November 1956 the Collector of Land Customs, Calcutta (respondent No. 1), caused searches at the petitioner's business premises under Section 172 of the Sea Customs Act. Various articles, books of account and documents were seized. The petitioner objected, the Collector issued a show cause notice (on or about 3 January 1958), the petitioner showed cause, and on 4 June 1958 the Collector ordered the return of the articles. The Collector, however, informed the petitioner that the books and documents were under examination and would be returned when done.

In April 1957 summons was served on the Land Customs Department by the Income-tax Officer, Jalpaiguri-Darjeeling, for production of the seized books and documents in connection with the petitioner's income-tax assessment, and compliance followed. On or about 27 March 1957 the Sub-Divisional Officer, Kalimpong, ordered that seized books and documents be handed to the Special Police Establishment; they were so handed over. In July 1958 the Special Police Establishment returned the books and documents, and the Land Customs authorities communicated with the Commissioner of Income-tax, West Bengal that they had no further use and were prepared to hand them over to the petitioner.

The Income-tax authorities applied to the Sub-Divisional Magistrate, Kalimpong, requesting that the books and papers be made over to them for a limited time. On 29 December 1958 an order directed the Collector of Customs, Calcutta, to make over the papers to the Income-tax Officer, Siliguri, to retain custody for three months and thereafter return them to the party from whom they were seized. This was amended on 7 January 1959 to direct the Collector of Land Customs to make over the papers in terms of the 29 December order.

An application (a Rule) was made (the present proceeding) because the Land Customs authorities had not handed back the books and documents even after a long time. An interim order maintaining status quo restrained the Collector of Land Customs from making over the papers to the Income-tax authorities. The Income-tax authorities were not originally made parties; after service they appeared and were represented by Mr. Pal. The petitioner was represented by Mr. Roy. The search and seizure itself was not challenged; the principal dispute concerned whether the Income-tax authorities could be permitted possession of the books for a limited period and whether the Magistrate had jurisdiction to order the papers to be handed to the Income-tax authorities.

Legal Issues Presented

Whether the learned Magistrate had jurisdiction to direct that books and documents seized under Section 172 of the Sea Customs Act be handed over to the Income-tax authorities for a limited period.
Whether the Income-tax authorities were entitled to take possession of the seized books and documents (i.e., whether Section 37 of the Income-tax Act empowered such a request and the legal effect of an Income-tax Officer's powers analogous to a civil court).
Whether delay had caused the earlier Magistrate's order (which permitted the Income-tax Officer to retain the papers for three months commencing 29 December 1958) to have "expired" — specifically, how the three-month custody period should be calculated in light of an interim injunction preventing handover.

Arguments of the Parties

Petitioner's Arguments (Mr. Roy)

The Income-tax authorities were not entitled to make the application they had made for possession of the seized books and documents.
The books and documents could not lawfully be handed over to the Income-tax authorities.
Even if the Income-tax Officer had some power to request production, the proper method should be circuitous: the Magistrate should first order the books returned to his court and then direct delivery to the Income-tax authorities (i.e., Mr. Roy insisted on a return-to-court approach rather than direct handover to Income-tax authorities).

Income-tax Authorities' Position (Mr. Pal)

The Income-tax authorities sought to take possession of the books and papers for a limited period in connection with income-tax assessment proceedings. (The opinion records that Mr. Pal addressed the Court on their behalf but does not set out detailed arguments.)

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Calcutta Motor Cycle Co. v. Collector of Customs, 60 Cal. W.N. 67; AIR 1956 Cal 253	Discussed the form and effect of search warrants under the Sea Customs Act (reference in that judgment to Section 171A and suggestion that items seized under a warrant need not be produced in court; that warrant could authorise seizure and taking possession).	The Court relied on the discussion to support the proposition that the Magistrate may issue a search warrant and that the Customs authorities may take possession; the Magistrate remains seisin and can later order delivery of seized items to owners or otherwise. The prior view informed the Court's approach to whether items could be taken into possession and later ordered delivered to others.
S.K. Srivastava v. Gajanand Patriwalla, 60 Cal W.N 1073; AIR 1956 Cal 609	Considered Section 172 of the Sea Customs Act and took the view that goods and documents seized must be brought to the Magistrate's court; addressed difficulty with Section 517 CrPC and suggested "tacit consent" as a mechanism to hand documents to Customs authorities.	The Court contrasted that reasoning with its own; while noting the learned judge's opinion that seized materials be produced in court, the present Court rejected reliance on "tacit consent" under CrPC and emphasised that, regardless of differences about production in court, the Magistrate retains seisin and has authority to order delivery of documents to their owners or otherwise. The case was used to show differing judicial views and to justify the present Court's conclusion that handing to the Income-tax authorities was permissible.

Court's Reasoning and Analysis

The Court proceeded step-by-step from the factual and statutory matrix set out in the record:

Statutory foundation: The search and seizure were effected under Section 172 of the Sea Customs Act, which authorises a Magistrate to issue a search warrant on application by a Collector of Customs for articles, books and documents. Such a warrant is to be executed in the same way and have the same effect as a search warrant under the law relating to criminal procedure.
Status of seizure and parties' positions: The search itself was not challenged. The Land Customs authorities stated they had no further use for the books and documents and were prepared to make them over to the petitioner; the Income-tax authorities wished to take possession for a limited period in connection with an income-tax assessment.
Nature of Income-tax Officer's powers: Section 37 of the Income-tax Act confers upon an Income-tax Officer, for purposes of the relevant chapter, powers equivalent to those of a court under the Code of Civil Procedure in respect of production of documents. The Court noted that if an Income-tax Officer is treated as a court in this context, one court is effectively requesting another court (the Magistrate) to produce documents in its custody.
Precedential analysis: The Court reviewed two prior decisions. In Calcutta Motor Cycle Co., a view was expressed that seizure need not necessitate production in court and that Customs could take possession. In S.K. Srivastava, a differing view was recorded that seized goods should be brought to court; that view grappled with Section 517 CrPC and suggested "tacit consent" as a workaround. The present Court rejected reliance on tacit consent and treated both precedents as showing that, while approaches differ on production, the Magistrate retains seisin and has authority to order disposal or delivery.
Application to the present dispute: The Court found no legal objection to the Magistrate directing that the books and documents be handed over to the Income-tax authorities, who in turn would hand them to the petitioner after the limited custody period. Although the petitioner argued for the more circuitous procedure (return-to-court then handover), the Court said that such circuit was not absolutely essential and that direct handover to the Income-tax authorities was legally permissible.
Issue of delay and effect of interim injunction: The petitioner contended that the Magistrate's order had "expired" because the three-month custody period was to commence on 29 December 1958. The Court observed that the Collector of Land Customs had been restrained by an injunction of this Court from acting; consequently the 29 December order could only be operative from the day the interim injunction was vacated. The Court proposed to vacate the interim order and indicated that the three months custody would therefore be calculated from the date of vacatur (i.e., from the day the interim injunction was lifted).
Conclusion and practical directions: The Court discharged the Rule (i.e., declined the petitioner's challenge), vacated the interim order maintaining status quo, and directed that parties act in accordance with the Court's indications. The Court permitted parties to rely on counsel's endorsement countersigned by a court officer while time was pressing, and left open the liberty for parties to make further applications before the learned Magistrate as they might be advised. The Court expressly stated it was not adjudicating other rights the Income-tax authorities may have in relation to income-tax proceedings.

Holding and Implications

Holding: The Rule is DISCHARGED and the interim order (maintaining status quo and restraining the Collector of Land Customs from making over the papers) is vacated.

Direct implications for the parties:

The Magistrate's order directing that the seized papers be made over to the Income-tax Officer for custody for three months is to be given effect, but the three-month period is to be calculated from the date the interim injunction is vacated (i.e., from the date the Court vacated the interim order).
The Collector of Land Customs is to make over the papers in accordance with the Magistrate's order; the Income-tax authorities may retain custody for the limited period directed, and after that period the documents are to be returned to the petitioner.
Parties are at liberty to act on counsel's endorsements countersigned by the Court officer pending formal compliance, and they have liberty to make further applications before the Magistrate for the further conduct of the matter.
The Court did not adjudicate any other rights the Income-tax authorities may have in relation to income-tax proceedings.
There was no order as to costs.

On broader precedent: The opinion did not purport to establish a novel general rule beyond the direct decision; it applied existing statutory provisions and prior decisions to the facts and left broader rights of the Income-tax authorities (in their tax proceedings) to be determined elsewhere. Therefore, the immediate effect is confined to the parties and the handling of the seized papers in this case.

ED/V.B.B

Disposition: Rule discharged.

Show all summary ...

1. The short facts of this case are as follows: The petitioner carries on business at 10th Mile, Kalimpong in the State of West Bengal. On or about the 10th of November, 1956 the Collector of Land Customs. Calcutta, respondent No. 1, caused searches to be made at the petitioner's business premises at Kalimpong. This kind of search is permitted under Section 172 of the Sea Customs Act, whereby the Customs authorities can make an application before the District Magistrate having jurisdiction in the area to issue a search warrant for the search and seizure of articles, books and documents of the kind mentioned in the said section. This is what was done in the present case. It appears that various articles as well as books of account and documents were seized by the Land Customs authorities. The petitioner objected to the seizure and it further appears that the Collector, Land Customs issued a show cause notice upon the petitioner on or about January 3, 1958. The petitioner showed cause and on the 4th of June, 1958 the Collector of Land Customs ordered the return of the articles. With regard to the books and documents, the Collector of Land Customs, Calcutta, informed the petitioner that the books were under examination and would the returned when they were done with. This application has been made on the footing that although a long time had expired, the Land Customs authorities were not making over the books and documents to the petitioner. In the meanwhile, what had happened was that some time in April, 1957 summons was served on the Land Customs Department by the Income-tax Officer, Talpaiguri-Darjeeling, for production of the seized books and documents, in connection with the assessment of income-tax of the petitioner, and the same had to be complied with. On or about the 27th of March, 1957 the Sub-Divisional Officer, Kalimpong, issued an order on the Customs Department, directing that all seized books of account and documents should be handed over to the Special Police Establishment, which was also done. Some time in July, 1958 the books and documents were returned by the Special Police Establishment and the Land Customs authorities communicated the matter to the Commissioner of Income-tax, West Bengal. It appears that thereafter, so far as the Land Customs authorities are concerned, they have no further use for the books and documents and are prepared to hand them over. An application was however made by the Income-tax authorities to the Sub-Divisional Magistrate Kalimpong, to the effect that these books and papers should be made over to the Income-tax authorities for a time. On the 29th of December, 1958 an order was made, directing the Collector of Customs, Calcutta to make over the papers to the Income-tax Officer Siliguri who should retain them in custody for three months and thereafter return them to the party from whom they were seized. This order was slightly erroneous because it is not the Collector of Customs, Calcutta who is in possession but the Collector of. Land Customs, Calcutta a petition was made for amendment of the order, and on the 7th of January, 1959 the Magistrate made an order that the papers should be made over by the Collector of Land Customs in terms of the order dated the 29th of December, 1958. The position now, therefore, is that the learned Magistrate who had ordered the search warrant to issue, has now directed that the papers should be handed over to the Income-tax-authorities for a limited period of time, after which they should be made over to the petitioner. I might mention here that upon this Rule having been issued, there was an interim older, whereby the status quo has been maintained and the Collector of Land Customs could not make over the papers to the Income-tax authorities. In this application, the Income-tax authorities were not made parties. When the application came to be heard, I felt that no satisfactory order could be made without hearing the Income-tax authorities, and directed that a copy of the Rule may be served upon them. The Income-tax authorities have now appeared before me and Mr. Pal has addressed the Court on their behalf. The position, therefore, is as follows: Now, the search and seizure itself by the Land Customs authorities is not challenged. So far as the Land Customs authorities are concerned, they have no further use for the books and documents which they are prepared to make over to the petitioner. The Income-tax authorities however wish to take possession of the books for a limited period. The question is whether this is permissible. Mr. Roy appearing on behalf of the petitioner argues that the Income-tax authorities are not entitled to make the kind of application that they have made, and the books of account and documents could not be handed over to them. Section 37 of the Income-tax Act provides that an Income-tax Officer amongst others, shall for the purposes of the relevant chapter of the Income-tax Act, have the same powers which are vested in a court under the Code of Civil Procedure when trying a suit in respect of inter alia the production of documents. If the Income-tax Officer is considered as a court, then what has happened is that one court has requested another court for the production of certain documents lying in its custody. The question that has been raised by Mr. Roy is as to the jurisdiction of the learned Magistrate to make an order of the nature that he has made.

2. Section 172 of the Sea Customs Act lays down that any Magistrate may, on the application by a Collector of Customs, issue a search warrant inter alia for books and documents of the nature mentioned therein. Such warrant is to be executed in the same way and shall have the same effect as a search warrant issued under the law relating to Criminal Procedure.

3. The issue of a search warrant under Section 172 of the Sea Customs Act, came up for determination in two decisions of this Court in Calcutta Motor Cycle Co. v. Collector of Customs, 60 Cal. W.N 67 : (AIR 1956 Cal 253) I was really dealing with Section 171A of the Sea Customs Act. Coming to Sec. 172, I was of the opinion that in a search warrant issued under Section 173 of the Sea Customs Act, it should not be necessary to produce the things seized in court, because actually speaking no proceedings were pending therein. I suggested that the form of the warrant should be suitably modified to authorise the Sea Customs authorities to seize the articles and take possession thereof, which is exactly what they are intended to do in such eases. Sen, J. in S.K Srivastava v. Gajanand Patriwalla, 60 Cal W.N 1073 : (AIR 1956 Cal 609) came to consider Section 172 of the Sea Customs Act. The learned Judge seemed to think that I had felt some difficulty about the issue of a search warrant because no proceedings were pending before the Magistrate. With great respect, that is not a fact, because the right of issuing a search warrant is especially conferred by the Sea Customs Act. The learned Judge however was of the opinion that the goods and documents seized must be brought to the court of the learned Magistrate. As soon as the learned Judge decided this, he was faced with the difficulty created by Section 517 of the Cr PC, which lays down that it is only when an enquiry or a trial in any criminal court is concluded, that the court may make such order as it thinks fit for the disposal by destruction, confiscation or delivery to any person claiming to be entitled to possession thereof or otherwise of any property or document produced before it or in its custody or regarding which any offence appears to have been committed or which has been used for the commission of any offence. The learned Judge got over this difficulty by stating that the books and documents could be made over to the Customs authorities by “tacit consent”. With great respect I do not see any provision for that in the Code of Criminal Procedure. Be that as it may, I do not think that there is any difference of opinion on the question that the learned Magistrate could issue a search warrant and whether the goods are to be produced in his court or taken possession of by the Customs authorities, the Magistrate continues to be in seisin of the matter and after the conclusion of the proceedings before the Customs authorities, he has authority to order that the books and documents should be delivered to the owner or dealt with in a manner which he thinks fit. In this case, it is not disputed that the learned Magistrate had the power to order that the books and documents should be given back to the petitioner. What is disputed is that he cannot direct that they should be handed over to the Income-tax authorities, who should in their turn hand them over to the petitioner. I do not see any great difficulty in this form of the order. Strictly speaking, the learned Magistrate might have ordered that the books and documents should be returned back to the court and thereafter handed to the Income-tax authorities and then to the petitioner. I do not think that it is absolutely essential in law to follow this circuitous method and I think that it is perfectly legal to say that the books and documents should be handed over to the Income-tax authorities, who should in their turn, hand them over to the proper owners. Mr. Roy has not been able to dispute that Section 37 of the Income-tax Act does confer power upon the Income-tax Officer to ask for the books and documents. As I said, it comes down to this, that he insists on the circuitous method being followed. But I do not see any justification for interfering by a high prerogative writ to assist his client in this fashion.

4. The next point that he has taken is that by reason of delay, the order of the learned Magistrate has expended itself, because it was contemplated that the Income-tax Officer should keep the books and documents for three months commencing from the 29th of December, 1958. As I have said, the Collector of Land Customs was prevented by an injunction of this Court from taking action in the matter, and therefore the order dated the 29th December, 1958 can only be operative from the day that the injunction order is vacated. As I propose to vacate the interim order today, the three months would be calculated from today.

5. The result is that this Rule is discharged and the interim order is vacated. The parties appearing before me will now act as I have indicated above. As time is pressing, parties are at liberty to act on counsel's endorsement countersigned by my officer. I make it clear that parties will be at liberty to make such applications before the learned Magistrate as they may be advised, for the further conduct of the matter. I am not also adjudicating here as to any other right that the Income-tax authorities may have in relation to the income-tax proceedings. There will be no order as to costs.