2018 (10) TMI 519 - HC - VAT and Sales Tax

Levy of Sales Tax - Chicory Roots - whether the chicory roots sold by the partnership firm were falling under entry No.23 of the First Schedule of the Gujarat Sales Act, 1969 or whether the same were exempted from levy of sales tax? - Held that - Entry No.23 refers to that which may germinate. The entry refers to flower, fruit, vegetable seed, lucerne grass and hemp and bulbs which all fall in the same category. This would also mention tubers and plants other than orchids and therefore, since the chicory roots are tubers they would fall within the ambit of Entry No.23 and must be subjected to tax accordingly. The essential character of chicory roots does not change by reason of slicing, cutting and drying and hence they are not liable to tax either under the GST Act or under the CST Act and therefore, no outstanding amount remain. The prosecution which has been initiated for the recovery of the amount in absence of any adjudication in form of the department and in wake of the said outcome even otherwise is no longer sustainable. Application allowed.

Summary

Issues:
Quashment of FIR under Section 482 of the Code of Criminal Procedure for offenses under Sections 406, 420, and 114 of the Indian Penal Code related to the sale of chicory roots under the Gujarat Sales Tax Act, 1969.

Detailed Analysis:
The applicants, partners of a partnership firm selling chicory roots, sought quashment of the FIR filed for offenses under the Indian Penal Code. The firm purchased chicory from farmers and sold it without processing. An assessment order under the Gujarat Sales Tax Act demanded a recovery amount of ?26,73,522 for the period 1983-1990. An appeal was dismissed, leading to the applicants' challenge based on a Supreme Court ruling exempting chicory roots from sales tax. A circular confirmed this exemption, yet a delayed FIR was filed without explanation, alleging offenses under Sections 406 and 420 of the IPC.

The applicants argued that the FIR lacked merit as per the Supreme Court's decision and lacked ingredients of the alleged offenses. They contended that the civil proceedings were time-barred, making the FIR an abuse of process. The applicants highlighted successful Second Appeals and a communication indicating no amount was due for recovery. The court considered the Supreme Court's interpretation of the sales tax entry covering chicory roots as tubers, exempting them from tax.

The court noted the Tribunal's decision aligning with the Supreme Court's interpretation, finding chicory roots not liable for tax. The initiation of prosecution without an adjudication and the lack of outstanding dues rendered the FIR unsustainable. The court allowed the application, quashing the FIR and its consequential proceedings. The decision supported by legal precedents favored the applicants, with no opposition from the Public Prosecutor.

In conclusion, the court allowed the application, quashing the FIR and all related proceedings. The ruling was in favor of the applicants, supported by legal arguments and precedents, with no costs imposed.