2007 (8) TMI 682 - HC - VAT and Sales Tax

Criminal proceeding - Cognizance of offences under sections 49, 31(2)(A), 33(5)(A), 31(2)(B) and 33 of the Bihar Finance Act, 1981 - Held that - It is by now well-settled that once the order of adjudication/levy of penalty is set aside or quashed and the assessee s contention is accepted and upheld by the Tribunal, the order of the Tribunal must be taken as the very basis for quashing the proceeding arising from prosecution launched by the Revenue. Due regard being had to the facts and circumstances of the case and the discussions above the prosecution of the petitioner cannot be sustained in law. Accordingly the order taking cognizance is hereby quashed and the application is allowed.

Summary

Issues: Application under section 482, Cr. P.C. for quashing criminal proceeding under Bihar Finance Act, 1981.

Analysis:
The judgment by the High Court of Patna involved a case where the Director of a transport agency filed an application under section 482, Cr. P.C. seeking to quash the criminal proceeding initiated against him under the Bihar Finance Act, 1981. The case stemmed from a surprise inspection conducted at the transport agency's godown premises, which revealed irregularities in maintaining registers and handling goods. The petitioner, being a transporter, argued that he was not involved in the purchase or sale of goods, and therefore, any tax evasion allegations were unfounded as tax liability rested with the buyers or sellers. The petitioner contended that the provisions of the Act related to seizure of goods and imposition of penalties did not apply to transporters, and any prosecution required prior sanction from the Commissioner of Commercial Taxes. The petitioner also highlighted that police investigation into offenses under the Act was illegal, as the Act was a special law. The State counsel defended the proceedings, citing penalties imposed on the petitioner and denying the illegality of police investigation.

The Court noted that the petitioner, as a transporter, was not liable to pay taxes under the Act and that no prior sanction from the Commissioner of Commercial Taxes had been obtained before initiating the criminal proceeding. The Court emphasized that the investigation by the police, without such sanction, was not valid under the special provisions of the Act. The State counsel's argument regarding penalties imposed on the petitioner was countered by the petitioner's submission of a revision case against the appellate authority's decision. The Court relied on established precedents to assert that once penalties were set aside or quashed, the basis for any prosecution must be the order of the Tribunal. The Court, after considering the facts and legal discussions, concluded that the prosecution against the petitioner was not sustainable in law. Consequently, the order taking cognizance was quashed, and the application for quashing the criminal proceeding was allowed.