APPEAL from the Circuit Court of Cook County; the Hon. DAVID
CERDA, Judge, presiding.
MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:
The defendants, Center Liquors, Inc., and Leonard Floom, president of the corporation, were separately charged with having wilfully violated a regulation of the Illinois Department of Revenue, in contravention of section 13 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1975, ch. 120, par. 452) (hereinafter referred to as the R.O.T. Act or the Act). Article VII of the Department's Retailers' Occupation Tax Rules and Regulations, as amended, which requires retailers to make their business books and records available for inspection and audit by Department personnel during regular business hours, was alleged to have been violated. The defendants moved to dismiss the charges, which motion was denied. Following a stipulation of facts, the circuit court found both defendants guilty of violating section 13 of the R.O.T. Act and fined each defendant in the amount of $400. The cases were consolidated for appeal. In a separate case, also consolidated for appeal, defendant, Sam Haas, treasurer of Arem, Inc., was charged with the same offense. His motion to dismiss the charge was denied. Following a stipulation of facts, he was found guilty of the offense by the circuit court and fined $400. The defendants appeal the orders of the circuit court of Cook County finding them guilty of these offenses.
Defendants Floom and Center Liquors, Inc., stipulated the following facts. In May and June 1975, an auditor for the Illinois Department of Revenue, during regular business hours, visited the store operated by defendant Center Liquors, Inc., on five occasions. On each occasion, the auditor asked defendant Floom to produce the books and records of Center Liquors, Inc. Each time Floom said he would not produce these items.
On July 17, 1975, an investigator from the Department of Revenue visited the store during regular business hours and asked Floom to produce the books and records for inspection and audit as required by article VII of the Department's rules and regulations. Floom said he would discuss the request with his attorney and asked the investigator to return for a final answer on July 21. The investigator returned on the designated day and Floom told him that on advice of counsel, he would not produce the requested books and records for inspection and audit. On August 22, the investigator and auditor returned to the store, read article VII to Floom, advised him of the criminal sanctions provided for in section 13 of the Act (Ill. Rev. Stat. 1975, ch. 120, par. 452), and then asked him to produce the books and records of the corporation. Floom refused to produce the materials.
The stipulated facts of the companion case are similar. Two agents from the Illinois Department of Revenue visited defendant Haas at his place of business on June 12, 1975, during regular business hours, and requested him to produce the books and records of Arem, Inc., for inspection and audit. The defendant read a prepared statement which said: "Upon advice of counsel and based on pending matters involving Sam Haas and company, I am showing you our books and records of Arem, Inc. for a period of three years. You may inspect them but no notes, pencils, and no pictures." One of the agents told Haas that the books and records must be made available for audit, not merely for their physical inspection. Haas said they could not audit them. The agents left.
On July 15, 1975, the agents returned to the store, read article VII to the defendant and requested that the books and records of the corporation be produced for inspection and audit. The defendant said that they could inspect the materials, but he would not allow them to take notes, make ledger sheets, or copy the materials. The agents then left.
The issues presented for review are (1) whether article VII of the Retailers' Occupation Tax Rules and Regulations, as amended on June 1, 1975, is invalid because it is inconsistent with the statutory provisions under which it was purportedly promulgated, and (2) whether section 13 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1975, ch. 120, par. 452) applies to an individual who is not a taxpayer under the Act.
In June 1975, the Illinois Department of Revenue, pursuant to its rule-making authority under section 12 of the Act (Ill. Rev. Stat. 1975, ch. 120, par. 451), amended article VII of the Retailers' Occupation Tax Rules and Regulations to provide that books and records which are required to be kept are subject to "inspection and audit" by the Department. The article previously provided that the books and records would be subject to inspection.
Relating to the first issue, the defendants argue that the Department exceeded its rule-making authority by adopting a rule which contravenes the statutory authority of section 7 of the Act (Ill. Rev. Stat. 1975, ch. 120, par. 446). Section 7 of the Act provides that:
"All books and records * * * shall, at all times during business hours of the day, be subject to inspection by the Department or its duly authorized agents and employees."
Defendants would have us construe "inspection" in section 7 to mean a cursory physical examination. They argue that section 7 does not authorize inspection and audit. They conclude that the amendment to article VII of the Retailers' Occupation Tax Rules and Regulations is invalid because an administrative agency cannot adopt rules which contravene statutory provisions, and the amendment here contravenes the authority granted to the Department under section 7.
The People argue that the word inspection, used in section 7, includes the power to audit, and conclude that article VII does not contravene the statutory authority granted to the Department under section 7 of the Act.
• 1, 2 The prime consideration in construing a statutory enactment is to give effect to the intent of the legislature. (People v. Bratcher (1976), 63 Ill.2d 534, 543, 349 N.E.2d 31, 35.) First, the word or words in question must be examined, as the specific words of the statute are the best indicators of the legislative intent behind the enactment. (Illinois Bell Telephone Co. v. Powell (1971), 48 Ill.2d 375, 378, 270 N.E.2d 25, 26.) The word inspection has a broader meaning than just looking. It means to examine carefully or critically, investigate and test officially, especially a critical investigation or scrutiny. (Martin v. Reynolds Metals Corp. (9th Cir. 1961), 297 F.2d 49, 57.) The dictionary defines "inspection" as a close or strict examination. (Webster's Third New International Dictionary (1976).) The power to inspect also includes the power to copy records. (See In re Becker (1922), 200 App. Div. 178, 180, 192 N.Y.S. 754, 756.) It is clear that the construction of the word inspection suggested by defendants is too narrow.
• 3 Next, when construing a statute, in order to give effect to the intent of the legislature, it is important to know the object and purpose of the act which embodies the statute. The object and purpose of the Retailers' Occupation Tax Act is to indirectly tax sales of tangible personal property by imposing a tax on the privilege of selling. (Modern Dairy Co., Inc. v. Department of Revenue (1952), 413 Ill. 55, 65, 108 N.E.2d 8, 14.) It follows that the legislature intended the Department to be able to verify the amount of the tax and to be able to collect the tax. To construe the power to inspect books and records to mean a cursory physical inspection alone would render the object and purpose of the Act meaningless, and would distort the power intended to be given the Department under the questioned provision. When the language employed in the statute admits of two constructions, one of which makes the enactment mischievous if not absurd, and the other renders it reasonable and wholesome, the construction leading to an absurd result should be avoided. (People ex rel. Simpson v. Funkhouser (1944), 385 Ill. 396, 403, 52 N.E.2d 1014, 1017; see Community Consolidated School District Number 210 v. Mini (1973), 55 Ill.2d 382, 388, 304 N.E.2d ...