Prosecution under a fiscal statute cannot stand where sanction was absent and the underlying penalty adjudication failed.

Criminal prosecution under the Bihar Finance Act, 1981 was found unsustainable where the accused was only a transporter, not the dealer liable for sales tax, the adjudication linked to the penalty had already been interfered with, and prior sanction of the competent authority was absent before cognizance. The Court accepted that a prosecution dependent on a special fiscal adjudication cannot survive once its underlying foundation fails. On those facts, the criminal proceeding lacked legal basis and the order taking cognizance was quashed.

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Issues: Whether the criminal proceeding and the order taking cognizance under the Bihar Finance Act, 1981 could be sustained when the penalty-related adjudication had been interfered with and prior sanction of the competent authority had not been obtained.

Analysis: The application was under Section 482 of the Code of Criminal Procedure, 1973 for quashing of the criminal proceeding arising from alleged violations under Sections 31, 33 and 49 of the Bihar Finance Act, 1981. The factual basis of the prosecution was the alleged seizure of unaccounted goods and the alleged evasion of tax by the transporter. The Court noted that the petitioner was a transporter and was not the dealer liable for sales tax on the goods. It also recorded that no prior sanction of the Commissioner of Commercial Taxes had been obtained before cognizance. Further, the prosecution was linked to proceedings under the special fiscal statute, and the Court accepted that where the adjudication or penalty foundation does not survive, the consequential prosecution cannot stand. On those facts, the criminal proceeding lacked legal foundation.

Conclusion: The prosecution was held to be unsustainable in law, and the order taking cognizance was quashed in favour of the appellant.

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