The Hindu Business Line : Magnetic media at crux of case

The case of Amritsar Beverages Ltd, which came up before the apex court recently, was not about pesticide residues that are currently in hot debate. It was about the remnants of an old tax definition that were apparently causing much difficulty to AB, the company, and the taxman.

The story begins with a raid by the taxman conducted in the premises of AB, a dealer within the meaning of the Punjab General Sales Tax Act, 1948. `A larger number of books and documents were seized' by the officers of `the Sales Tax Department of the State of Punjab.'

The documents were in the form of the cashbook ledger or other registers, and they were contained in a hard disk. The magnetic media lay at the crux of the case.

Tax officials had seized the documents using powers under Section 14 of the Act. This section says that if any officer `has reasonable ground for believing that any dealer is trying to evade liability for tax or other dues under this Act and that anything necessary for the purpose of an investigation into his liability may be found in any book, account, register or document, he may seize such book, account, register or document, as may be necessary.'

Section 14 also states that the officer making the seizure should `forthwith grant a receipt for the same', stipulates time limits for the return of documents as follows: "(a) In the case of book, account; register or document which was being used at the time of seizing, within a period of ten days from the date of seizure; and (b) in any other case, within a period of sixty days from the date of seizure."

The officer may, before returning the book, account, register or document, affix his signatures and his official seal at one or more places thereon.

The tax officers asked AB to appear on several occasions so as to enable them to verify the contents of the disk. "Cooperation from the Respondents was not forthcoming as a result whereof the documents were not returned within the period stipulated thereunder," is a snatch from the text of the apex court's order dated August 8, narrating the facts, as averred by the plaintiff, the State of Punjab.

AB approached the Punjab and Haryana High Court, praying for issuance of a writ of mandamus (which is a Latin legal phrase meaning an order to a public official to perform a specified duty). The order that the company prayed for was the return of seized books, accounts, documents, and computer disk.

The High Court not only issued mandamus as had been prayed for but also imposed costs of Rs 2,500 in each case. Costs were to be paid `by the officers responsible for withholding the books, accounts, etc, personally from their pockets and the same shall not be a burden on the State exchequer,' the High Court said.

Subsequent to this, the taxman returned the hard disk after keeping a copy. Yet the case travelled to the Supreme Court, because it was necessary to interpret how far `situational change' could give rise to `a new interpretation of a statutory provision'.

Justices S.B. Sinha and Dalveer Bhandari of the apex court heard both the sides. Sarup Singh, Additional Advocate General, spoke for the State, while Vikas Mahajan argued for the company. AB said that it was `always willing to cooperate with the Department' and that the only reason for not complying with the notices of assessment or proceedings taken were that in the absence of return of the books it was not feasible or practical to give any statement or verify the entries in the seized documents.

Old laws vs advanced technology

"The Act was enacted in the year 1948. Information technology at that time, far from being developed, was unknown. Constitution of India is a living organ. It had been interpreted differently having regard to different societal situations," said the Supreme Court, referring to the Punjab General Sales Tax Act on the one side, and techniques of modern bookkeeping on the other.

"Creative interpretation had been resorted to by the Court so as to achieve a balance between the age old and rigid laws on the one hand and the advanced technology, on the other," said the Court. "The Judiciary always responds to the need of the changing scenario in regard to development of technologies. It uses its own interpretative principles to achieve a balance when Parliament has not responded to the need to amend the statute having regard to the developments in the field of science."

Paragraph 7 of the judgment speaks of many instances of disconnect between ground reality and technology development, and how the "Internet and other information technologies brought with them issues which were not foreseen by law." Such as, difficulties faced by officers who may not have any scientific expertise, or sufficient insight to tackle with the new situation. Another example is of new developments leading to various different kinds of crimes unforeseen by our legislature. "The Information Technology Act, 2000, although was amended to include various kinds of cyber crimes and the punishments therefor, does not deal with all problems which are faced by the officers enforcing the said Act."

Thankfully, however, there have been amendments, as follows:

Section 464 of the Indian Penal Code deals with the inclusion of the digital signatures.

Sections 29, 167, 172, 192 and 463 of the Indian Penal Code have been amended to include electronic documents within the definition of `documents'.

Section 63 of the Evidence Act has been amended to include admissibility of computer outputs in the media, paper, optical or magnetic form.

Section 73A prescribes procedures for verification of digital signatures.

Sections 85A and 85B of the Evidence Act raise a presumption as regards electronic contracts, electronic records, digital signature certificates and electronic messages.

The challenge of creative interpretation

What about Section 14 of the Punjab General Sales Tax Act, 1948? The procedural laws should be construed to be ongoing statutes similar to the Constitution and, thus, creative interpretation according to the circumstances is permitted, said the judges.

"The Court in view of development of science has to meet and contend with challenges as an intermediary between the litigant and the court."

There have been apex court precedents on similar lines, pointed out the Court. "In SIL, Import, USA vs Exim Aides Silk Exporters, Bangalore (1999), notice in terms of Section 138 of the Negotiable Instruments Act was construed to include notice by fax.

In State of Maharashtra vs Dr Praful B. Desai (2003), the Court opined that recording of evidence through video conferencing is permissible in terms of Section 273 of the Code of Criminal Procedure."

Over time, courts have interpreted various terms and phrases. "`Stage carriage' has been interpreted to, include `electric tramcar'; `steam tricycle' to include `locomotive'; `telegraph' to include `telephone'; `banker's books' to include `microfilm'; `to take note' to include `use of tape recorder'; and `documents' to include `computer databases'."

The Court sympathised with the officers of the Sales Tax Department of the State of Punjab that they must have faced immense difficulties in giving effect to the provisions of Section 14 of the Act, which mandates the authorities to return to the dealer all documents after examination or after having such copies or extracts taken therefrom.

"In case of a hard disk, literal compliance of the said provision was impossible. Recourse to scientific method, therefore, was necessary," observed the Court.

"Even in absence of cooperation from the Respondents nothing prevented the authorities of the Sales Tax Department to make out copies of the said hard disk or obtain a hard copy and fix their signatures or official seal in physical form thereupon and furnish a copy thereof to the Respondents.

However, the High Court failed to notice that, as problem arose for the first time, the officers of the Sales Tax Department might not have been able to formulate or lay down their own procedure as indicated hereinbefore or otherwise," reads a snatch of the apex court verdict, benignly for the taxman.Provisions of Section 14 are imperative, said the Court.

However, to avoid in future `complications arising out of seizure of hard disk' the Court said that the authorities could obtain from the company signed hardcopies.

"We, however, set aside that portion of the impugned judgment whereby and whereunder personal costs have been imposed upon the officers," ruled the Court.

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