2013 (10) TMI 345 - HC - VAT and Sales Tax

Offence u/s 13(2) r.w.13(1)(d) of Prevention of Corruption Act Section 120-B of IPC - Offence u/s 25 of the Sales Tax Act Held that - No offence under Section 120-B, I.P.C. was made out against the petitioner, and for that matter no offence under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 was also made out against the petitioner - The prosecution had been launched against the petitioner on the misconceived notion that M/s. Bondia Flour and Oil Mills was liable to pay sales tax on receipt of 21 wagons of wheat, and the petitioner being the agent had conspired to evade tax - The very basis of accusation therefore was misconceived and the prosecution lunched had no legs to stand. The consignment of wheat having been purchased from outside the State of Odisha, the taxable event shall not come till it was sold by the consignee in the of State of Odisha after its receipt by the consignee - If the consignee had brought the consignment of wheat for its own consumption, no Sales Tax shall be leviable on consumption of wheat by the company and Sales Tax can only be leviable on by-product of the wheat when such by-product was dispatched to market for sale - there was no occasion for collection of tax in respect of the consignment of wheat at the Railway Receipt Unit, Jharsuguda on taking delivery of the wheat either by M/s. Bondia Flour and Oil Mills Ltd or their agent - Therefore, the allegation of the Vigilance Department to the effect that Sales Tax had not been collected on consignment of wheat as shown in the entry of Goods incoming Register of Railway Receipt Unit, Jharsuguda, was totally misconceived. K. Neelaveni vrs. State Rep. by Insp. Of Police & Ors 2010 (3) TMI 990 - SUPREME COURT - While considering the application for quashing of charge-sheet, the allegations made in the F.I.R. and the materials collected during the course of investigation were required to be considered - Truthfulness or otherwise of the allegation was not fit to be gone into at this stage, as it was always a matter of trial - Sales Tax Authority was entitled to impose sales tax in accordance with the relevant Act and Rules, upon a person, who carried on the business of selling goods and who had, in the customary course of business, authority to sell goods belonging to the Principal - A clearing or forwarding agent like the petitioner or a person transporting goods on behalf of the dealer does not carry on the business of selling goods and does not have, in the customary course of the business, authority to sell goods belonging to the dealer, whose goods he books or receives - There had to be a reasonable and proximate connection between the transaction of sale and the clearing or forwarding agent or person transporting the goods before the Sales Tax Authority can, in exercise of the power, levy sales tax. There was nothing to show that there was such close and direct connection between the transaction of sale of goods by the dealer and the clearing or forwarding agent or the agent who booked or received such goods or a person, who transports such goods like the petitioner - The petitioner being, therefore, a simple agent acting on behalf of the proprietor, cannot be held to have any sales tax liability and he cannot be held to have conspired with the Sales Tax Authority to transport the goods without complying the relevant provisions, as he was acting under the instruction of the Principal.

Summary

Issues Involved:
1. Liability for Sales Tax on Wheat Consignment.
2. Criminal Conspiracy for Tax Evasion.
3. Applicability of Section 13(2) and Section 13(1)(d) of the Prevention of Corruption Act.
4. Applicability of Section 120-B of the Indian Penal Code (I.P.C.).

Detailed Analysis:

1. Liability for Sales Tax on Wheat Consignment:
The petitioner argued that M/s. Bondia Flour and Oil Mills was not liable to pay sales tax on the wheat consignment received from outside Odisha until its first sale within the state. The court noted that the wheat was purchased and transported from Uttar Pradesh, and the petitioner, as an agent, received the goods at Jharsuguda Railway Goods Shed. The Vigilance Department contended that under the Explanation to Section 8 of the Orissa Sales Tax Act, 1947, the receipt of goods inside Odisha should be treated as the first point of sale, making the petitioner liable for tax. However, the court found that there was no evidence to show whether the wheat was for the firm's own consumption or for onward sale. Therefore, the court concluded that the basis of the prosecution's case was misconceived as the taxable event had not yet occurred.

2. Criminal Conspiracy for Tax Evasion:
The prosecution alleged that the petitioner conspired with sales tax officials to evade tax by not paying the due amount on the wheat consignment. The court observed that the Vigilance Department's allegation was based on a misunderstanding of the taxable event. Since the consignment was received from outside the state, the tax liability would only arise upon its sale within Odisha. The court further noted that there was no occasion for tax collection at the railway goods shed if the wheat was for the firm's own consumption. Consequently, the court found no basis for the conspiracy allegation.

3. Applicability of Section 13(2) and Section 13(1)(d) of the Prevention of Corruption Act:
The court examined whether the petitioner's actions fell under the provisions of the Prevention of Corruption Act. It was argued that the petitioner, as an agent, was not liable for any wrongful act of the firm. The court agreed, stating that the Orissa Sales Tax Act is a self-contained code, and any contravention should be addressed through the provisions for penalty or prosecution under the Sales Tax Act itself, not under the Prevention of Corruption Act. Thus, the court found no grounds for charges under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.

4. Applicability of Section 120-B of the Indian Penal Code (I.P.C.):
The prosecution also charged the petitioner with criminal conspiracy under Section 120-B, I.P.C. The court reiterated that the petitioner, acting as an agent, was not liable for sales tax and had not conspired with the sales tax officials. The court emphasized that there was no direct connection between the petitioner and any alleged tax evasion. Therefore, the court concluded that no offence under Section 120-B, I.P.C. was made out against the petitioner.

Conclusion:
The court quashed the proceedings against the petitioner, finding that no offences under Section 120-B, I.P.C., or Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act were made out. The CRLMC was accordingly allowed, and the petitioner was absolved of all charges.