2014 (8) TMI 1244 - HC - VAT and Sales Tax

Court Quashes FIR Alleging Tax Evasion and Forgery Due to Lack of Evidence and Misuse of Legal Process.

Pawan Kumar & Ors. Versus State of Punjab & another.

The HC quashed FIR No. 110 dated 16.08.2012, filed under various IPC sections, against the petitioners for alleged tax evasion and forgery. The court ... Seeking release of vehicle - evasion of tax - creation of fictitious firm with intent to evade tax - HELD THAT:- As per the detailed order passed by the Chairman, VAT Tribunal, Punjab it has been observed that the transaction has been duly recorded in account books and in the original books could have been produced. The petitioner is a registered dealer and the nature of transaction can be decided by the said assessing authority if the matter is referred to him and on referring the matter the assessing authority can assess the matter. Even if the transaction is to get oil from Sangria to Amritsar, even then no attempt to evade the tax due under the Act has been established because in case of interstate transaction, the tax was to be collected by the Rajasthan State. In the present case after going through the orders passed by the Chairman, Value Added Tax Tribunal, Punjab, Chandigarh, the continuation of the proceedings in the FIR would amount to process of Court. Consequently, FIR under Section 420, 406, 467, 468, 471, 201, 120-B of the Indian Penal Code, at Police Station Lambi District Muktsar Punjab are quashed along with subsequent proceedings arising out of the qua the petitioners. Appeal allowed. Issues:Quashing of FIR under various sections of the Indian Penal Code and the Punjab Value Added Tax Act, based on allegations of tax evasion and forgery, along with the dismissal of the application for release of a vehicle by the trial court.Analysis:The petitioners sought the quashing of FIR No. 110 dated 16.08.2012 under multiple sections of the Indian Penal Code and the impugned order dated 06.10.2012 passed by the Sub-Divisional Judicial Magistrate, Malout, related to the release of a vehicle. The FIR was based on information received regarding tax evasion by creating a fictitious firm and using forged documents to transport oil. The petitioners argued that the dispute was civil, as indicated by a notice under the Punjab Value Added Tax Act, and that the FIR was an arbitrary action to falsely implicate them. They presented an order setting aside a penalty as evidence. On the other hand, the respondent contended that the petitioners failed to provide valid documents proving ownership of the oil, and the transaction was an attempt to evade tax. Despite opportunities, the petitioners did not produce necessary documents, and their appeal had been previously declined. The respondent argued that the petition lacked merit and should be dismissed.Upon reviewing the facts and responses, the court noted the order setting aside the penalty imposed on the petitioner. The court observed that the transaction was recorded in account books, and the assessing authority could determine the nature of the transaction. It was highlighted that no attempt to evade tax under the Act was established, especially in interstate transactions where tax collection was the responsibility of another state. The verification conducted by the Excise and Taxation Inspector was deemed insufficient, and the produced documents were found to be genuine and complete. The court referenced a previous judgment where FIRs related to tax evasion were quashed, emphasizing that existing VAT Act provisions were sufficient to address such matters. Consequently, the court quashed the FIR and subsequent proceedings, considering the continuation of the case as a misuse of the legal process.In conclusion, the High Court, under the judgment delivered by Hon'ble Ms. Justice Ritu Bahri, allowed the petitioners' plea and quashed FIR No. 110 dated 16.08.2012 under various sections of the Indian Penal Code, along with subsequent proceedings, based on the lack of evidence supporting tax evasion and the genuineness of the presented documents.