2007 (7) TMI 611 - HC - VAT and Sales Tax

Cognizance under section 49(1)(g) and (h) of the Bihar Finance Act 1981 - Held that - The prosecution of the petitioner is out and out misuse of process of the court.No case for prosecution under provision of the Bihar Finance Act has been made out. Accordingly this application is allowed and the impugned order as well as the entire criminal proceeding in question is hereby quashed.

Issues:
1. Quashing of order dated September 8, 1995, passed by C.J.M., Patna, and criminal proceeding under section 49(1)(g) and (h) of the Bihar Finance Act, 1981.
2. Prosecution of the petitioner for evasion of sales tax on lottery tickets.
3. Legal status of lottery tickets as "goods" for sales tax purposes.
4. Jurisdiction of police to investigate and launch prosecution under special Acts.
5. Compliance with section 49(5) of the Bihar Finance Act, 1981 regarding prior sanction for prosecution.

Analysis:
1. The application under section 482 Cr. P.C. sought to quash the order and criminal proceeding initiated against the petitioner under the Bihar Finance Act, 1981. The petitioner, a proprietor of M/s. Vijay Agency, was prosecuted for sales tax evasion on lottery tickets. The counsel argued against the prosecution citing a recent Supreme Court decision that clarified lottery tickets are not considered "goods" for sales tax purposes. The court concurred, stating that the prosecution for non-payment of sales tax on lottery tickets was an abuse of the court process, especially in light of the Constitution Bench's ruling on the matter.

2. The prosecution of the petitioner for sales tax evasion on lottery tickets was based on a fard-bevan lodged by the Deputy Commissioner of Commercial Taxes, Investigation Bureau. The court noted the petitioner's argument regarding the non-assessability of sales tax on lottery tickets, emphasizing that lottery tickets are merely actionable claims and not tangible goods. The court found the prosecution for non-payment of sales tax on lottery tickets to be unjustified and illegal, given the legal status of lottery tickets as per the recent Supreme Court decision.

3. The legal status of lottery tickets as "goods" for sales tax purposes was a crucial point of contention in the judgment. The court referenced past Supreme Court decisions, notably distinguishing the 2006 ruling from the earlier case of H. Anraj v. Government of Tamil Nadu. The court reiterated that lottery tickets do not qualify as goods under the Sales Tax Act, as they represent an actionable claim rather than physical merchandise. This clarification was pivotal in determining the illegitimacy of prosecuting the petitioner for sales tax evasion on lottery tickets.

4. The jurisdiction of the police to investigate and prosecute under special Acts, such as the Bihar Finance Act, was raised by the petitioner's counsel. The court agreed that the police lacked the authority to investigate such matters, emphasizing that the prosecution initiated without the prior sanction of the Commissioner was in contravention of the Act. Citing various decisions of the High Court, the court concluded that the prosecution of the petitioner was a misuse of the court process and lacked a valid basis under the special provisions of the Bihar Finance Act.

5. The compliance with section 49(5) of the Bihar Finance Act, 1981, regarding the prior sanction for prosecution, was a significant aspect of the judgment. The court noted that the prosecution had been launched by the Deputy Commissioner without the necessary sanction of the Commissioner, as mandated by the Act. Relying on previous High Court decisions, the court reaffirmed that the prosecution of the petitioner was unjust and lacked a valid legal foundation. Consequently, the court allowed the application, quashing the impugned order and criminal proceeding against the petitioner.

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