The Rajasthan High Court has upheld the validity of search and seizure proceedings conducted by the Commercial Taxes Department at the residential premises of proprietors linked to multiple sugar candy manufacturing firms accused of large-scale tax evasion. 

The bench of Justice Arun Monga and Justice Sunil Beniwal has observed that the Department had sufficient material to form a reasonable belief regarding possible tax evasion and avoidance of tax liability, thereby justifying action under Section 75 of the Rajasthan Value Added Tax Act, 2003. 

A batch of writ petitions were filed challenging search orders dated November 3, 2012, along with consequential search and seizure proceedings. 

The petitioners contended that the searches conducted at residential premises were illegal as there was no material suggesting that business activities were being carried out from the residences or that books of accounts were maintained there. They argued that Section 75 of the RVAT Act only permits inspection of business premises or places where authorities have reason to believe business operations or maintenance of accounts are taking place. 

According to the petitioners, the proceedings originated from an anonymous complaint alleging tax evasion by six firms belonging to the same business family engaged in manufacturing sugar candy, rewari, toast, biscuits and related products. The complaint alleged misuse of tax exemptions and wrongful classification of products to evade tax liability running into crores of rupees. 

The complaint specifically alleged that products taxable at higher rates were being sold under the guise of tax-exempt or lower-taxed goods. It further alleged suppression of turnover, use of benami firms, manipulation of interstate C-Forms, and concealment of raw material purchases to evade mandi tax, entry tax and VAT. 

The petitioners argued that the Department failed to comply with Rule 51 of the Rajasthan Value Added Tax Rules, 2006, which mandates recording of reasons before conducting searches and seizures. They also submitted that the search memos and seizure memos did not disclose any valid “reason to believe” as required under the statute. 

Reliance was placed on earlier Rajasthan High Court judgments including Hira Lal Chhagan Lal vs State of Rajasthanand Nathu Lal Fatehpuria vs State of Rajasthan, where courts had emphasized that search powers cannot be exercised arbitrarily and must be founded on reasonable suspicion supported by material evidence. 

On the other hand, the State defended the searches by pointing out that all six firms belonged to members of the same family and were engaged in similar businesses from different units in the same industrial area. The Department submitted that internal inquiries conducted after receipt of the complaint revealed that several tax disputes and proceedings involving substantial demands were already pending against these firms at various judicial and administrative forums. 

The Department further argued that the residential addresses searched were disclosed in the firms’ registration certificates as residences of the proprietors. Authorities also claimed that documents relating to the firms were visible inside one of the residential premises through a glass window, and despite repeated opportunities, the proprietors failed to cooperate or produce alleged tenancy documents regarding one premises claimed to have been rented out. 

After examining Section 75 of the RVAT Act and Rule 51 of the Rules, the High Court observed that the law permits inspection not only at business premises but also at “any other place” where authorities reasonably believe business activities are being carried on or accounts are being maintained. 

The Court noted that the authorities were aware that six firms engaged in similar businesses were being operated by members of the same family and that previous tax evasion disputes and proceedings were already pending against them. The Court held that these facts were sufficient to create suspicion regarding possible tax evasion and justified further investigation. 

The Bench also rejected the explanation that one residential premises had been rented out. The Court observed that no rent agreement was produced during the search and documents related to the firms were recovered from the premises, making the tenancy claim doubtful. 

While reiterating that tax authorities cannot undertake “roving and fishing inquiries” without valid grounds, the High Court emphasized that confidentiality is inherent in search and seizure operations and the requirement is only to ascertain whether some supporting material existed to form reasonable suspicion or belief. 

The Court ultimately concluded that the Department possessed adequate material to justify the searches and that the proceedings were conducted within the scope of Section 75 of the RVAT Act. Consequently, the writ petitions challenging the search orders and seizure proceedings were dismissed.

Case Details

Case Title: M/s. Anil Sugar Candy Works Versus The State Of Rajasthan 

Citation: JURISHOUR-1173-HC-2026(RAJ) 

Case No.: D.B. Civil Writ Petition No. 12887/2012

Date: 05/05/2026 

Counsel For Petitioner: Lokesh Mathur

Counsel For Respondent: Mahaveer Bihsnoi, AAG

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