2022 (3) TMI 586 - HC - VAT and Sales Tax

Seeking grant of Regular bail - fraudulent postings and assessment had been done in relation to the registered traders - HELD THAT - With regard to the allegations of the applicant s connivance with the co-accused, incase of manual challans of four dealers in respect of 2015-2016, is stated to have been produced but the allegations against the present applicant is that those were approved without due verification. The Departmental Circular dated 05.09.2011 referred to, gives direction to the Dealers to adopt the E-payment mode for the tax payment above ₹ 10,00,000/- while option has been given to the tax payment below the level of ₹ 10,00,000/-. Here in the case of assessment of four dealers, the tax so assessed is below ₹ 10,00,000/-. This requires the production of Form No.207 which shows that the duplicate of the Challan is required to sent to the CTU - the triplicate copy is for the treasury and the duplicate is to be sent to the CTU. The information with regard to the payment of the challan would be in the VATis system. Whether there has been a criminal conspiracy or any negligence of the applicant would be a question which is to be examined during the course of trial by adducing evidence. How the challans were manipulated and false postings were made in the VATis system with an intention to defraud by causing losses to the Government exchequer would be a question of fact. Whether any illegal gratification has been received by the present applicant for any manipulated, fraudulent entries with an intention to cause loss to the Government treasury would be a question of evidence which would be required to be examined during the course of trial. Further, since the charge-sheet is filed and considering the facts and circumstances of the case, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant - the applicant is ordered to be released on regular bail - the present application is allowed.

Summary

Issues Involved:
1. Allegations of misuse of login ID and password.
2. Allegations of fraudulent postings and assessments.
3. Responsibility and negligence of the applicant in verifying tax payments.
4. Examination of evidence and trial proceedings.
5. Conditions for granting bail.

Detailed Analysis:

1. Allegations of Misuse of Login ID and Password:
The primary allegation against the applicant, a retired Sales Tax Officer, is that his login ID was used to make 207 entries in the VAT system, resulting in fraudulent acknowledgment receipts worth ?86,22,879/-. The applicant argued that his login credentials were misused by others, as 33 entries were made when he was not present in the office. He emphasized that multiple IP addresses were used for these entries, indicating misuse by other individuals.

2. Allegations of Fraudulent Postings and Assessments:
The applicant was accused of approving manual challans without due verification for four dealers for the financial year 2015-2016. The applicant contended that these entries were based on audit reports submitted by Chartered Accountants and the VATis receipts. He also highlighted flaws in the VATis system, such as the lack of OTP generation and notification, which could have prevented unauthorized access.

3. Responsibility and Negligence of the Applicant in Verifying Tax Payments:
The prosecution argued that the applicant had a duty to periodically assess tax recoverable on sales and ensure that acknowledgment receipts tallied with the IFMS treasury data. The applicant was accused of facilitating the manipulation of challans, leading to a loss of ?5,98,29,881/- to the state exchequer. The applicant's defense was that the alleged fraudulent entries were made without his knowledge and that he had an unblemished career with no prior complaints.

4. Examination of Evidence and Trial Proceedings:
The court noted that whether the applicant was involved in a criminal conspiracy or negligent in his duties would be determined during the trial. The court acknowledged that the manipulation of challans and false postings in the VATis system needed to be examined through evidence. The court also recognized that the recovery of ?1,98,75,998/- had been made, and further recovery was in process.

5. Conditions for Granting Bail:
Considering the facts and circumstances, the court found it appropriate to grant bail to the applicant. The applicant was ordered to be released on a personal bond of ?15,000/- with one surety of the same amount. The conditions for bail included not taking undue advantage of liberty, not acting against the prosecution's interests, surrendering the passport, not leaving India without permission, and furnishing the current address to the court and investigating officer.

Conclusion:
The court allowed the bail application, emphasizing that the allegations and evidence against the applicant would be examined during the trial. The court imposed specific conditions to ensure the applicant's compliance and cooperation with the judicial process.