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TMI Blog2006 (1) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecution in case of chronic defaulters, etc. Section 29 of the Act is one such provision which has provided for meeting situations where dealers or persons roped within the net of the Act, can be charged if they have committed an offence as provided therein and also provided for penalties to be levied in respect of such offences. The present writ petition involves a situation wherein provisions of section 29(1)(e) of the Act which provides for punishing any person who fails to keep true and complete accounts; and section 29(2)(e) of the Act which provides for any person who fraudulently evades the payment of any tax or other amount payable by him under this Act being prosecuted and shall on conviction be made to undergo simple imprisonment which may extend to twelve months or with a fine which shall not be less than Rs. 5,000 or with both, but which may extend to Rs. 25,000 or with both in addition to recovery of any tax that could have been evaded. Section 31 of the Act is a palliate for the rigour of section 29 of the Act whereunder the erring dealer instead of being subjected to prosecution and possible imprisonment is offered an olive branch by giving him an option to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, etc. However, in terms of the order dated March 23, 2002, the writ petitions were dismissed as one not warranting interference whereafter, the petitioner filed Writ Appeal Nos. 2657-59 of 2004 which was disposed of after notice to the respondent in terms of the order dated November 3, 2004 (copy at annexure G), inter alia, directing the respondent to offer an opportunity of hearing to the petitioner and permitting the petitioner to file objections to the notice treating it as the show cause notice and to pass orders with regard to the course of action that is required to be taken thereafter depending upon the outcome of such consideration of the objections of the petitioner and that the prosecution case is to be deferred pending such action. Thereafter, the petitioner did file his objections dated November 10, 2004, copy at annexure H, and the respondent passed the order dated November 22, 2004 whereunder the objections raised have all been rejected and the respondent opined that the petitioner in fact has committed an offence punishable under section 29(1)(e) that is leading to section 29(2)(e) of the Act during the periods 1999-2000, 2000-01 and 2001-02. The portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, is a clear abuse of the provisions; that it is a case of misuse of the power; that the first respondent could not have used these powers as a substitute for a power which was required to be exercised in terms of section 12-A of the Act, i.e., provision for reopening concluded assessment in the case of any escapement of tax liability and such proceedings having in fact not been taken against the petitioner, the present proceedings are nothing but a clear abuse of the provisions and therefore, entire proceedings including the notice deserve to be quashed. Per contra, learned Government Advocate has vehemently contended that the respondents are well within their powers in invoking these provisions, when the petitioner had indulged in suppression and misrepresentation; that the petitioner had, in fact, mislead the authorities by indicating the product that was being marketed by them to be a chemical product whereas it was a petroleum product and it should have been subjected to tax under entry No. 5(ii), Part P of the Schedule II of the Act and not under entry 10-A of Part C, Schedule II of the Act. The significance is, whereas the petroleum products were subjected to tax in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n definitely hold good in the case of maintenance of false accounts as the act of maintaining of the false account can be made good by itself and not necessarily linked to the amount of tax sought to be evaded though ultimately the purpose may be only to evade or lessen tax liability but when an offer for composition is made, the offer should be in terms of the precise amount, which is the actual tax liability of the dealer on payment of which the dealer or the assessee is provided the relief from prosecution. If the amount is not mentioned then there is no scope for composition in the eye of law. Also, the prosecution under section 29(1)(e) and 29(2)(e) is not in any way linked to an offer for composition and they work independently. If the proposition notice under annexure E, dated July 10, 2003 is examined in the light of such statutory background, it is obvious that the notice by itself does not mention any precise amount on payment of which composition of the offences could have been made. In such a situation there is no offer at all for composition in the eye of law. The notice does not make any sense for the purpose of putting the assessee on notice that he is likely to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted an offence under section 29(1)(e) and 29(2)(e) of the Act. In my view, this is not only a clear case of abuse of the powers but is even a case of colourable exercise of power as the power available under section 12-A is sought to be used in the guise of invoking provisions of sections 29 and 31 of the Act, by an officer not competent to reopen the assessment. Here again, when the actual tax liability has not been determined in a manner provided under the Act, calling upon the assessee in the guise of giving him an option for compounding the offence by making good the liability is also a case of colourable exercise of power as what is resorted to, in fact, amounts to resorting to recovery proceedings even before quantification of the tax liability. A recovery proceeding begins only after the conclusion of the assessment proceeding and after the crystallisation of the tax liability and not, even before that liability is determined unless any provision of the Act expressly provides for the same. The prosecution launched on such erroneous presumption is obviously a harassment to an assessee or dealer and not for any bona fide purpose. Though normally this court does not exa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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