S.75 RVAT Act does not distinguish between business & residential premises for search or seizure: Raj HC

Jaipur: The Rajasthan High Court has held that Section 75 of the Rajasthan Value Added Tax Act, 2003 read with Rule 51 of the Rajasthan Value Added Tax Rules, 2006 does not draw any distinction between business and residential premises for the purposes of search and seizure, and that the residential premises of a dealer can be lawfully searched where tangible material exists giving rise to a reasonable belief of tax evasion or concealment of business records.

A division bench of Justice Arun Monga and Justice Sunil Beniwal was dealing with a batch of three writ petitions filed by M/s Anil Sugar Candy Works, M/s Tulsani Food Industries and M/s Nagad Narayan Agro Food — proprietorship concerns of the Tulsiyani family of Bikaner — challenging an order dated 03.11.2012 of the Deputy Commissioner (Administration), Commercial Taxes Department, Bikaner, by which search and inspection of the firms’ business premises and the residential premises of the proprietors had been authorised, along with the consequential search memo and seizure memos drawn up the same day.

The proceedings had their origin in an anonymous complaint dated 09.09.2011 addressed to the Deputy Secretary (Tax), Government Secretariat, Jaipur, alleging that six firms of the Tulsiyani group were engaged in tax evasion of crores of rupees through misclassification of sugar candy and other goods, misuse of C-Forms for inter-state purchases, and unaccounted cash transactions. The complaint was forwarded to the Deputy Commissioner (Administration), Bikaner, who, after internal inquiry, submitted reports dated 09.12.2011 and 23.12.2011 recording that the six firms belonged to the same business family, were carrying on substantial operations and were already facing pending tax-evasion proceedings at various forums. Acting on this material, the Deputy Commissioner passed the impugned common order dated 03.11.2012 authorising survey and inspection of the business premises as well as the residential premises of the proprietors at A-13 and A-27, Karni Nagar, Pawanpuri, Bikaner. By interim order dated 14.01.2013, further proceedings before the assessing authority had been stayed.

Counsel for the petitioners, Mr. Lokesh Mathur and Mr. Prakash Kumar, principally relied on Section 75(1)(a) and Section 75(4) of the RVAT Act, 2003 read with Rule 51(1)(a) of the Rules of 2006. It was contended that under Section 75(1)(a), inspection or survey could be conducted only at the place of business of the dealer or “any other place” where the authorised officer “believes” business is being carried on or accounts are being kept; that the registered place of business of each firm was at Bichhwal Industrial Area, as reflected in the VAT registration certificates; and that, in the absence of any material suggesting that business activities were being conducted from the residence or that books of account were kept there, the search of the residential premises was without jurisdiction. It was further submitted that recording of reasons under Rule 51(1)(a) was a condition precedent and that neither the search memo nor the seizure memo dated 03.11.2012 disclosed any reasons justifying the search or the satisfaction required under Section 75(1) and (4); the action, it was urged, proceeded on mere suspicion and not on a legally sustainable “reason to believe”. Reliance was placed on Hira Lal Chhagan Lal v. State of Rajasthan; AIR 1968 Raj 188, Chandran v. State of Madras; AIR 1978 SC 1574, and Nathu Lal Fatehpuria v. State of Rajasthan; AIR 1968 Raj 151.

Per contra, Mr. Mahaveer Bishnoi, Additional Advocate General, with Mr. Harshwardhan Singh and Mr. Anirudh Singh Shekhawat, submitted that the residential premises at A-13 and A-27 stood declared as the residences of the proprietors in the firms’ own VAT registration certificates and that the Department had at no stage prior to the survey been informed that A-27 had been let out on rent. It was contended that under Section 75(1) of the Act, the authorised officer is empowered to inspect not only the place of business but “any other place” where there exists a reasonable belief that business is being conducted or books of account are kept, and that the inspection of the residential premises was undertaken pursuant to valid authorisation. During the search at A-27, the officers had noticed through a glass window a packet containing documents in the name of “Nagad Narain”, and the proprietor having denied cooperation, the search and seizure were proceeded with in accordance with law and were duly recorded in the order sheet, panchnama and seizure memo, with reasons for seizure stood recorded therein. The scope of seizure under Section 75(4), it was further contended, was not confined to books of account but extended to any documents connected with the business for the purpose of ascertaining the genuineness of transactions and tax liability.

At the outset, the bench identified the only question that called for adjudication: the petitioners had not questioned the competence of the authority that conducted the search; the controversy was confined to the sufficiency of the material on which the authority could have formed the belief or suspicion of tax evasion.

The Court reproduced Section 75 of the Act and Rule 51 of the Rules in extenso before turning to the factual matrix. It noted that the six firms had been registered under different names by three proprietors related to each other as father, son and daughter-in-law; that the two residential premises stood in the names of Narayan Das Tulsani and his wife Deepa Tulsani and were declared as the residence of the proprietors in the registration certificates; that the petitioner-firms were carrying on similar business from separate plots in the same industrial area; and that, per the inquiry reports of 09.12.2011 and 23.12.2011, several legal proceedings on similar allegations of tax evasion were already pending against them.

On the sufficiency of the material, the Court observed:

“In the considered opinion of this Court, these facts were sufficient to raise suspicion regarding the business activities of the petitioner-firms, and there was sufficient reason to believe that there existed a strong possibility of tax evasion or avoidance of tax liability by the petitioner-firms.”

Turning to the search of the residential premises, the bench read Sections 75(1)(a), (d) and (e) of the Act with Rule 51 of the Rules and held:

“Thus, the statute does not prohibit search of residential premises as such, however, the exercise of such power is conditioned upon strict fulfillment of the statutory requirements.”

The bench further held that Rule 51 of the Rules of 2006 only requires reasons to be recorded in writing before search and seizure proceedings, and “does not mandate the passing of a separate order for conducting search and seizure at residential premises.” A common order authorising search at both business and residential premises was therefore permissible, provided reasons were recorded.

On the petitioners’ plea that A-27 stood let out on rent, the bench was unimpressed. It noted that the owner of the house — wife, mother and mother-in-law of the three proprietors — had not produced any rent deed despite being put to challenge, and that documents belonging to the petitioner-firms had in fact been recovered from the very premises. Holding the theory of renting out to be “an afterthought,” the Court observed:

“If the premises had been rented out, there would have been no reason for such documents belonging to the petitioner-firms to be lying therein.”

Distinguishing Hiralal Chhaganlal (supra), the bench held that the said judgment had not imposed a complete bar on the search of residential premises, but had only observed that “a general search of the residential premises apart from the ordinary purposes of the Act, namely, collection of tax or for evasion thereof,” would not be justified. Residential premises could therefore be searched where tax evasion was suspected, as in the present case. The ratio of Nathulal Fatehpuria (supra), the Court further held, “supports the action of the respondent-Department rather than the petitioners”, since the authorities possessed tangible material — a written complaint, two inquiry reports, the existence of multiple firms owned by members of the same family, and prior proceedings alleging tax evasion — which cumulatively furnished a reasonable basis to form the requisite belief.

While acknowledging that “no reasons are reflected in impugned order dated 03.11.2012”, the Court found from the record produced with the State’s reply that the authorities had noted the family-linkage of the firms and the pendency of earlier proceedings, the existence of which had not been denied by the petitioners; it could not therefore be said that the authorities had acted in the complete absence of material. The bench reiterated that since no distinction has been drawn by the legislature between business and residential premises under Section 75 of the Act of 2003 and Rule 51 of the Rules of 2006, the decision to conduct search at both could not be said to violate either provision; mere gossip, rumour or generalised suspicion would not meet the threshold — but on the record before it, the Court was satisfied that the threshold stood crossed.

Holding that the action of the authorities did not suffer from arbitrariness or proceed on mere suspicion, the bench dismissed all three writ petitions. The respondent-authorities were directed to conclude the assessment proceedings for the year 2012-13 on the basis of the survey and search of 03.11.2012 conducted at the business as well as the residential premises of the proprietors; before passing the final assessment order, they were directed to provide copies of the seized documents to the petitioners and to afford an opportunity of hearing. All pending applications stood disposed of.

Case Title: M/s Anil Sugar Candy Works v. State of Rajasthan & Ors. (and connected matters)
Case No.: D.B. Civil Writ Petition Nos. 12887/2012, 12476/2012 & 12888/2012
Citation: [2026:RJ-JD:18562-DB]
Date of Pronouncement: 05.05.2026
Bench: Justice Arun Monga and Justice Sunil Beniwal
Counsel for Petitioners: Mr. Lokesh Mathur, Mr. Prakash Kumar
Counsel for Respondents: Mr. Mahaveer Bishnoi, AAG with Mr. Harshwardhan Singh, Mr. Anirudh Singh Shekhawat