1. The background to the present petitions by Larsen & Toubro Ltd. under Article 226 of the Constitution, aggrieved by the sealing by the Department of Trade and Taxes (DT&T) Government of the National Capital Territory of Delhi (GNCTD) of its three offices in Delhi in purported exercise of the powers under Section 60 of the Delhi Value Added Tax Act 2004 (‘DVAT Act’), is set out in the order passed on 19th March 2013, the relevant portion of which reads as under:

“These writ petitions are directed against the order dated 16.03.2013 purportedly issued under Section 60 of the Delhi Value Added Tax Act, 2004 whereby the three separate premises of the petitioner at Nehru Place, Moti Nagar and Peera Garhi were sealed by the Value Added Tax Officer (Special Zone). It may be pointed out that the survey was conducted on 15.03.2013 (Friday) when the Value Added Tax Officer arrived at the said premises of the petitioner at about 5.30 p.m in the evening and demanded important documents. The representative of the petitioner stated that he would provide those documents but that would require some time as information had to be culled out, collated and reconciled before the same could be presented to the department. It was also pointed out that the office of the petitioner had shifted from Okhla Industrial Estate to Nehru Place and that the bulk of documents were lying in boxes. The photographs of the said office were also shown to us which indicate that the process of shifting was going on. Further, the computer systems had also not been connected to their main server in Chennai in order to enable them to collect all the details. The learned Senior Counsel for the petitioner submitted that they would fully cooperate with the respondent in providing any information that they require which they are entitled to seek under the law. For this purpose, they only sought time which the VATO was not willing to grant them. It is, as a consequence of this, that the sealing order dated 16.03.2013 came to be passed in respect of each of the three premises.

The petitioner moved applications for de-sealing of the said premises on 18.03.2013 (Monday), which was the next working day. Apparently those applications have been disposed of by an order dated 18.03.2013 itself by the said VATO in which he has permitted de-sealing but as a precondition to de-sealing under Section 60(4) of the DVAT Act, 2004, he has required the petitioner to deposit a sum of Rs. 600 crores.

The learned Senior Counsel for the petitioner pointed out that the demand for Rs. 600 crores was preposterous and cannot be sustained in law. Prima facie, we agree with the submission made by the learned senior counsel for the petitioner, the security that is required for de-sealing in terms of Section 60(4) has, prima facie, no reference to the expected tax demand.

We are told that the petitioner pays between Rs. 25 to 30 crores by way of value added tax annually. This year, they have already been paid a sum of about Rs. 24 crores for a period of 10 months. The payment for February is to be made in March and the payment for March is to be made on 21st April, 2013.

Mr. Sandeep Sethi, learned Senior Counsel appearing on behalf of the petitioner states that in order to demonstrate its bona fides, the petitioner is willing to deposit a sum of Rs. 5 crores with this Court as security for desealing the premises.

We have also heard Mr. Parag Tripathi, learned Senior Counsel appearing on behalf of the respondent. Taking a prima facie view of the matter and considering the balance of convenience, we feel that the premises belonging to the petitioner ought to be de-sealed immediately. The petitioner shall, however, deposit a sum of Rs. 5 crores within two days with the Registrar General of this Court who shall keep the same in a fixed deposit for a period of 60 days initially.

The respondents are directed to de-seal the said three premises of the petitioner forthwith.

The counter affidavit be filed by the respondents within three weeks. The rejoinder affidavit be filed within one week thereafter.

Renotify on 29.04.2013, when the issue with regard to ‘security’ for de-sealing under sections 60(4) of the said Act shall be taken up for hearing amongst other issues raised in these petitions.”

2. Thereafter on 22nd January 2016, while hearing the petitions, when the Court was told that the relevant files of the case were not traceable, the following order was passed:

“1. The Court is today informed by Mr. D.R Meena, Special Commissioner Trade & Tax Department who is present in court that the files of the present case are not traceable. He will file an affidavit by the next date explaining the circumstances under which the files of this case which is sub judice could have gone missing. The Special Commissioner shall remain present on the next date. In the meanwhile every effort will be made to trace the files.

2. List on 3rd February, 2016.”

3. Pursuant to the order dated 22 January 2016, an additional affidavit has been filed by Mr. P.R Meena, Special Commissioner (Special Zone), DT&T, GNCTD. He states that efforts were made to trace “the other related file in this case” and that “despite best efforts the said file could not be traced, although the main survey file and court case file was always available with the Department.” It is then stated that “in this regard the then Officer-in-charge was also contacted and as per his statement each and every deployment for survey was made with the consent of and on the directions of the then Commissioner VAT. Formal approval on a case to case basis was not being taken so as to maintain the secrecy of the survey while the file being in the movement for approval of Commissioner, VAT as well as it being not required as already a delegated power. As such there was no file other than the main survey file and court case as available with the Department.”

4. What has been produced before the Court today was the same file which was produced on the previous date i.e, 22 January 2016. On the outer cover of the file is written “Court Case file”. It mentions “Ward No. 107 (Special Zone)” and gives the name of the dealer as “M/s. Larsen & Toubro Ltd.” There is just one note sheet in the front inner cover of the file. It contains notes dated 25 April 2013 and 29 April 2013, i.e after orders were passed in the present writ petition. There is no other noting. There is no file number as such. The file contains the pleadings of this case, copies of some correspondence between the DT&T and its counsel, photocopy of a handwritten order passed by the VATO (Special Zone) at 1.35 am on 15/16 March 2013 sealing the premises under Section 60 of the Delhi Value Added Tax Act, 2004 (‘DVAT Act’), the representation dated 16 March 2013 of the Petitioner for de-sealing and the desealing memo dated 19 March 2013. The last document in the file is a photocopy of the deployment order dated 15 March 2013 issued by the Joint Commissioner (Special Zone). Significantly, the notings on the file (if any) preceding the deployment order and the notings, if any, following the survey and preceding the sealing action are not to be found.

5. Mr. Gautam Narayan and Mr. Naushad Ahmed Khan, learned Additional Standing Counsel for the GNCTD, handed over a general order dated 15 October 2014 issued in Form DVAT-50 by the Special Commissioner (HR) setting out the ‘Grant of Authority by the Commissioner’ authorising several officers of the DT&T for carrying out ‘audit, investigation and enforcement functions’ under the DVAT Act. The said order does not answer the question whether such a specific authorisation in Form DVAT 50 existed at the time the sealing action under Section 60, and the preceding survey action under section 59 of the dvat act was undertaken by the Joint Commissioner (Special Zone). In any event it does not answer the question whether a conscious decision was taken by the Commissioner undertake a survey to inspect the records of the Petitioner under section 59 of the dvat act and further whether a conscious decision was thereafter taken by the Commissioner to proceed to seal the three premises of the Petitioner under section 60 of the dvat act. This can be known only if there are notings on the relevant file. As it transpires, the relevant file itself is unable to be traced.

6. In response to a pointed question posed by the Court, the two officers who present in Court viz., Mr. P.R Meena, Special Commissioner (Special Zone) and Mr. Manish Verma, Assistant Commissioner (Special Zone), state that apart from the file produced today before the Court, there is no other file concerning this case.

7. The Court is at a loss to understand how the files in respect of the present case which is sub judice, could go missing. Despite the Court requiring the DT&T to explain the circumstances under which the files went missing, the affidavit filed is silent on this aspect. The DT&T officers present in Court are also unable to explain the circumstances.

8. The Court is, in the circumstances, constrained to direct the Commissioner, DT&T, GNCTD to himself personally enquire into the matter of the relevant files of the case going missing and fix responsibility on the officers who may have been entrusted with the task of preparing and maintaining the relevant files in respect of the survey conducted on the Petitioner under section 59 of the dvat act followed by the sealing action under section 60 of the dvat act. If the Commissioner finds that the relevant files are indeed untraceable, he should immediately register a first information report in the concerned police station for a proper investigation to be undertaken into the matter which will be carried to its logical end. Simultaneously, the Commissioner will, if he considers appropriate, have a vigilance enquiry ordered so that the necessary disciplinary action can be taken against those found responsible for the serious lapse.

9. An affidavit by way of compliance with the above direction shall be filed by the Commissioner, DT&T at least three days prior to the next date with an advance copy to learned counsel for the Petitioner. In the said affidavit the Commissioner shall also explain the system followed in the DT&T for maintaining files including whether there is a master/control file; whether a file is maintained for every Assessee/Dealer; whether there is a register maintained for the movement of files and the instructions issued (copies to be enclosed) for preparing and maintaining files. The Court hardly need impress on the Commissioner that this is a matter of grave concern and the Court will take a strict view of the lapses of the DT&T if the explanation furnished is not convincing.

10. The other aspect of the matter is the validity of the sealing order dated 16 March 2013. The Court observed in its order dated 19 March 2003 that it prima facie agreed that that the demand for Rs. 600 crores was ‘preposterous and cannot be sustained in law’ and that “the security that is required for de-sealing in terms of Section 60(4) has, prima facie, no reference to the expected tax demand.”

11. Indeed, an examination of the order passed by the Value Added Tax Officer (VATO) at 1.35 am on dated 16 March 2013 reveals that the sealing the three premises of the Petitioner was only on account of the failure to produce the records as demanded by the notice dated 15 March 2013 issued under section 59 of the dvat act. This certainly was not in accordance with the requirements of section 60 of the dvat act.

12. Recently this Court had in Shree Ashtvinayak Gems & Stone Pvt. Ltd. v. Commissioner, Trade & Taxes, Delhi (order dated 27 January 2016 in W.P (C) No. 714/2016) referred to the basic jurisdictional requirement for exercising the powers under section 60 of the dvat act. The relevant portion of the said order reads as under:

“5. Section 60 of the Act sets out the jurisdictional requirement for invocation of the power under Section 60(2)(f). It mandates that the Commissioner must have reasonable grounds to believe that “any person or dealer is attempting to avoid or evade tax or is concealing his tax liability in any manner”. This satisfaction of the Commissioner has to be based on materials that are available on record. It ought not to be mechanically exercised, using a cyclostyled form, as has been done in the present case. The notice dated 19 January 2016, the date of the sealing, sets out only one the ground, in a pre-printed form, that the dealer “failed to produce the books of accounts till 7:30 PM in spite of issue of notice under section 59 of the dvat act 2004”. This obviously does not satisfy the statutory requirement under Section 60(2)(f) of the Act.

6. The facts as set out in the petition that the decision reveal that the decision to invoke the powers under Section 60(2)(f) of the Act was taken in undue haste virtually in continuation of invocation of the power under Section 59 of the Act to search the premises for information and documents. Sufficient opportunity was not afforded to the Petitioner to explain why, if at all, it was unable to produce the documents and information sought by the Department. Also, there could not be an automatic presumption that since the Petitioner failed to produce the documents at once it was attempting to avoid or evade tax or was concealing its tax liability.”

13. As far as the present case is concerned, there is nothing in the file which shows what reasons weighed with the Commissioner to order a survey under section 59 of the dvat act and subsequently order sealing of the premises under section 60 of the dvat act. The deployment order sets out three addresses of the Petitioner: at Shivaji Marg, at Okhla Estate and at H-45 Udyog Vihar. The Petitioner was at the time of inspection on 15 March 2013 not functioning at H-45 but from D-4 Udyog Vihar. It had recently shifted from the address at Okhla Estate to Nehru Place. The deployment order was not in respect of the aforementioned two addresses and yet those were sealed. How this was possible without a fresh deployment order being issued is unexplained.

14. Further, there is no indication as to what prompted the extreme step of sealing of the three premises. The order in that behalf has been passed not by the Commissioner but by the VATO. There is nothing to indicate that the VATO was authorised to do so by an order issued in Form DVAT 50 as on 15 March 2013.

15. With the sealing order bristling with so many illegalities, there can be no manner of doubt that the sealing action was undertaken mechanically and only for the reason of failure to produce records as sought by the notice under Section 59 of the Act. There was no satisfaction arrived at by the Commissioner, as mandatorily required by section 60(1) of the dvat act, that there was any deliberate attempt by the Petitioner to avoid or evade tax or to conceal its tax liability in any manner.

16. Turning to the de-sealing order dated 18 March 2013 passed by the VATO, the original of which is in the file, the Court notes that it simply totals up the turnover figures for 2011-12 and 2012-13, deducts 25% therefrom in terms of Rule 3(2) of the DVAT Rules 2005 and arrives at a figure of Rs. 124.11 crores towards tax and approximately Rs. 31.02 crores as penalty. It then adverts to the assessment order for 2008-09 and the challenge thereto by the Petitioner in the Supreme Court and this Court (which is pending as of date) and in terms of the rectified assessment and penalty orders the demand created worked out to Rs. 614.60 crores. Then it seeks to create a demand “on the basis of same proportions” for 20009-10 to 21012-13 and arrives at a figure of approximately Rs. 2190.44 crores! It is on this basis that the VATO has ordered that as a condition for de-sealing the Petitioners three premises, it should deposit Rs. 600 crores. This figure is therefore based entirely on guess work and ‘projections’ without any adjudication. The only description that can fit such a de-sealing order is that it is ‘preposterous’. The Court is of the view that on the face of it the de-sealing order which requires the Petitioner to deposit Rs. 600 crores as a condition for de-sealing is an abuse of the powers under section 60(4) of the dvat act and is unsustainable in law.

17. The Court also notes that the entire action was taken in the background of challenge by the Petitioner to assessment proceedings for the year 2008-09 and a challenge to the validity of Section 5(2) of the DVAT Act. This raises further questions as to the unusual haste with which the DT&T proceeded with the inspection and followed it up, in virtual continuation, with the sealing action.

18. As a result, the Court sets aside the order dated 16 March 2013 passed by the VATO sealing the three premises of the Petitioner at Shivaji Marg, Nehru Place and D-4 Udyog Vihar and the de-sealing order dated 18 March 2013 to the extent that it required the Petitioner to deposit Rs. 600 crores as a condition for de-sealing the aforementioned three premises of the Petitioner.

19. The Court directs that the sum of Rs. 5 crores deposited in this Court by the Petitioner be forthwith released by the Registry to the Petitioner through its authorised representative, on proper verification, together with any interest that may have been accrued thereon.

20. For a further hearing in the matter, for the Commissioner to file the affidavit of compliance in terms of the directions in paras 8 and 9 of this order and to decide the costs that should be awarded to the Petitioner, list on 15 March 2016.

21. Order dasti.