2021 (1) TMI 1318 - HC - VAT and Sales Tax

Parallel proceedings - Seeking grant of bail - Recovery of tax - evasion of tax by not disclosing the details of the transactions - failure to disclose true liability to pay the tax - whether the applicant can be simultaneously prosecuted under the provisions of the VAT Act as well as for the offences punishable under the Indian Penal Code? - HELD THAT - The issue is no longer res integra. One need only refer to the decision of the Supreme Court in the case of STATE OF WEST BENGAL VERSUS NARAYAN K. PATODIA 2000 (4) TMI 777 - SUPREME COURT and the Division Bench judgment of this Court in the case of G.S. OILS LTD. THROUGH ITS M.D. SHRI MANOJ KUMAR SHRIGOVIND AGRAWAL AND ANOTHER VERSUS THE STATE OF MAHARASHTRA THROUGH PSO WANI, DIST. YAVATMAL AND OTHERS AND (UMESHKUMAR NARAYANLAL AGRAWAL VERSUS STATE OF MAHARASHTRA, THROUGH PSO WANI 2012 (10) TMI 1274 - BOMBAY HIGH COURT where it was held that there could be a prosecution under both the VAT Act as well as the Indian Penal Code. As far as the ingredients of offence punishable under Section 406 and 409 of the Indian Penal Code are concerned conceptually, a dealer like the applicant would act as an agent of the Government for recovering the tax and depositing it with the latter. It would thus tantamount to creating a relationship of a principal and an agent between the Government and the dealer. If the dealer is supposed to recover the tax it would come with a consequential liability to credit it to the Government - it is in this manner prima facie the applicant can be said to be entrusted with the money which he was liable to pay to the Government but has failed to do so. The period for which he failed to deposit the VAT and the enormity of the amount is sufficient to disentitle him of any protection in the form of anticipatory bail - bail application dismissed.

Summary

Issues:
Bail application in connection with offences under Indian Penal Code and Maharashtra Value Added Tax Act, 2002.

Analysis:
The applicant sought bail in connection with an FIR alleging offences under Sections 406 and 409 of the Indian Penal Code and Sections 74 of the Maharashtra Value Added Tax Act. The FIR accused the applicant, a dealer, of evading tax intentionally, failing to disclose transactions, and not paying the correct tax amount. The Department assessed his liability to be Rs. 5,09,56,250, significantly higher than what he disclosed. The applicant's advocate argued that the VAT Act offences are bailable, and custodial interrogation is unnecessary as the liability issue is sub judice. A no dues certificate had also been issued to the applicant.

The Assistant Public Prosecutor opposed the bail application, highlighting the seriousness of the offence due to the applicant's repeated failures to file correct assessments and returns. Referring to legal precedents, the A.P.P. argued that prosecution could proceed under both the VAT Act and the Indian Penal Code simultaneously.

The court observed that the offences under the VAT Act were bailable. However, it noted the applicant's substantial tax liability dating back to 2009-2010 and various lapses in filing returns. The court addressed the core issue of simultaneous prosecution under the VAT Act and the Indian Penal Code, citing legal precedents. Conceptually, the court viewed the applicant as an agent of the government for tax collection, creating a principal-agent relationship. Due to the significant amount and duration of tax non-payment, the court concluded that the applicant was not entitled to anticipatory bail, rejecting the bail application and disposing of the case.