2025 (4) TMI 749 - HC - Indian Laws

Conspiracy / Bribery - VAT officers - Initiation of prosecution against the accused - Whether barred under the Kerala Value Added Tax Act (KVAT Act) due to statutory limitations or prior proceedings? - materials produced by the prosecution are sufficient to establish a prima facie case against the accused particularly accused Nos. 1 and 8 under the Prevention of Corruption Act 1988 (PC Act) and Indian Penal Code 1860 - illegal gratification in the absence of direct evidence of bribery - HELD THAT - The prosecution has a definite allegation that following payment of such an illegal gratification the compounding tax of Rs. 13, 06, 29, 613/- was reduced to Rs.7, 00, 68, 469/-. More conspicuously on payment of that amount all documents and the account statements pertaining to the transactions of M/s. Nano Excel company were returned to the company without retaining even copies. When the prosecution alleges that such an act disabled the department from checking even the correctness of the action of fixing the compounding tax that certainly is another circumstance pointing to the conspiracy. The circumstances mooted by the prosecution which are mentioned above if proved would establish payment of illegal gratification. Whether there occurred infraction from law while imposing compounding tax on M/s. Nano Excel company has only a secondary importance being one of the circumstances proposed to be proved. In the above circumstances it is unable to accept the contentions of the 1st accused in support of his plea to quash the final report in C.C. No. 7 of 2022 as against him. Car bearing registration No. KL 08 AN 8081 belongs to accused No.8 is not disputed. Sufficient evidence is proposed to prove that the said car was used to carry Rs. 1.5 crores from the office of M/s. Nano Excel company to Pearl Regency hotel for being handed over in terms of the instructions of accused No. 7. But no evidence has been collected to establish that accused No.8 knew that his car was availed for the purpose of carrying such a sum and also that he was a party to the conspiracy of bribing accused Nos. 1 to 4. In the statement filed by the investigating officer also no such evidence has been pointed out. Therefore prosecution of accused No.8 for the offences punishable under Section 13 (1) (d) r/w Section 13 (2) of the PC Act and Section 120 B of the IPC cannot be justified. Such an exercise will end only in futility. Conclusion - i) The contentions regarding statutory bars under the KVAT Act were previously considered and dismissed and cannot be revisited at this stage. ii) The prosecution s materials while lacking direct evidence of bribery present sufficient circumstantial evidence to justify proceeding against accused No. 1 under the PC Act and IPC. iii) The use of accused No. 8 s car in the alleged crime without evidence of his knowledge or involvement does not justify prosecution under the conspiracy charges. Applcation dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

(1) Whether the prosecution initiated against the accused is barred under the Kerala Value Added Tax Act (KVAT Act) due to statutory limitations or prior proceedings.

(2) Whether the materials produced by the prosecution are sufficient to establish a prima facie case against the accused, particularly accused Nos. 1 and 8, under the Prevention of Corruption Act, 1988 (PC Act) and Indian Penal Code, 1860 (IPC).

(3) Whether the accused can be prosecuted based on the alleged conspiracy and illegal gratification in the absence of direct evidence of bribery.

(4) Whether the use of accused No. 8's car in the alleged crime implicates him in the conspiracy.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Bar under KVAT Act

The petitioners contended that the prosecution is barred under Sections 79 and 80 of the KVAT Act, arguing that the proceedings are time-barred and that previous proceedings on the same facts preclude the current prosecution. The Court previously considered these arguments in a related writ petition and found them insufficient to quash the FIR. The Court noted that the materials available at the time of the writ petition and the current proceedings are the same, and thus, these contentions cannot be reconsidered at this stage.

Issue 2: Sufficiency of Prosecution Materials

The Court examined whether the prosecution's materials suffice to make out a prima facie case against the accused. The Supreme Court's guidelines in State of Haryana v. Bhajan Lal were referenced, which outline scenarios where proceedings may be quashed, such as when allegations do not prima facie constitute an offence or are inherently improbable. The Court found that the prosecution's evidence, including witness statements and circumstantial evidence, could potentially establish the alleged conspiracy and illegal gratification, thus justifying the continuation of proceedings against accused No. 1.

Issue 3: Prosecution Based on Alleged Conspiracy

The prosecution alleged that a conspiracy existed to reduce the tax liability of M/s. Nano Excel Enterprises Pvt. Ltd in exchange for illegal gratification. The Court noted that while direct evidence of bribery was lacking, circumstantial evidence, such as the reduction of tax liability and the return of documents without retaining copies, supported the conspiracy claim. The Court emphasized that the prosecution's case rests on proving these circumstances, and thus, the proceedings against accused No. 1 should continue.

Issue 4: Implication of Accused No. 8

The prosecution alleged that accused No. 8's car was used to transport the bribe money. However, the Court found no evidence that accused No. 8 was aware of or involved in the conspiracy. The absence of evidence linking accused No. 8 to the knowledge or participation in the crime led the Court to quash the proceedings against him, as prosecuting him would be futile.

SIGNIFICANT HOLDINGS

The Court held that:

- The contentions regarding statutory bars under the KVAT Act were previously considered and dismissed, and cannot be revisited at this stage.

- The prosecution's materials, while lacking direct evidence of bribery, present sufficient circumstantial evidence to justify proceeding against accused No. 1 under the PC Act and IPC.

- The use of accused No. 8's car in the alleged crime, without evidence of his knowledge or involvement, does not justify prosecution under the conspiracy charges.

The final determinations were:

- Crl. M.C No. 8095 of 2022 was dismissed, allowing proceedings against accused No. 1 to continue.

- Crl. M.C 2621 of 2023 was allowed, quashing proceedings against accused No. 8.