Quashing of tax-linked criminal proceedings follows when the assessment and demand basis has already been set aside finally.

Criminal proceedings founded on alleged non-payment of tax under the Bihar Finance Act were treated as unsustainable after the underlying assessment and demand had been set aside by the appellate authority and that decision had attained finality. Once no surviving taxable liability remained, the basis for the FIR and the cognizance order disappeared, and continuation of the prosecution would amount to abuse of process. On that footing, inherent jurisdiction was considered appropriate to prevent the accused from being compelled to face trial without any material constituting the offence, and the proceedings and cognizance order were liable to be quashed.

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Issues: Whether criminal proceedings and the order taking cognizance could be quashed after the tax demand and assessment forming the basis of the prosecution had been set aside by the competent authority.

Analysis: The basis of the prosecution was the alleged non-payment of tax under the Bihar Finance Act. The assessment and demand, however, had already been set aside by the appellate authority, and that decision had attained finality. In such circumstances, continuation of the FIR and the cognizance order would not rest on any surviving taxable liability. Where no material survives to constitute the offence, the criminal process cannot be permitted to continue merely to force the accused to face trial. The situation falls within the category of cases in which interference under the inherent jurisdiction of the High Court is warranted to prevent abuse of the process of law.

Conclusion: The proceedings and the cognizance order were rightly held liable to be quashed, in favour of the petitioners.

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