2016 (12) TMI 566 - HC - VAT and Sales Tax

Court denies petition to quash FIR under Section 482, emphasizes need for trial examination

The court dismissed the petition seeking to quash the FIR, stating that inherent jurisdiction under Section 482 of CrPC should not be exercised at this ... Prosecution proceedings for Evasion of tax - business of purchase and sale of iron scrap - Quashing of First Information Report being C.R. No.II 382/2008 lodged before Bhavnagar “A” Division Police Station, Bhavnagar - Section 85(2) of the VAT Act, 2003 - Section 409 of Indian Penal Code - Section 482 of Code of Criminal Procedure - exercise of jurisdiction - Held that: - the Court is of the opinion that this is not a fit case to exercise inherent jurisdiction and in view of consistent propositions of law on exercise of inherent jurisdiction, the Court is declining to interfere at this stage of the proceedings and therefore, without examining merit or demerit at length of the allegation in the present stage of the proceeding, the petition being devoid of merit, does not call for any interference and accordingly the same is dismissed, at this stage. Rule is discharged. Issues Involved:1. Quashing and setting aside the First Information Report (FIR).2. Allegations of tax evasion under the Gujarat Sales Tax Act, 1969, and the VAT Act, 2003.3. Addition of Section 409 of the Indian Penal Code (IPC) to the FIR.4. Remand order by the VAT Tribunal and its implications.5. Exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure (CrPC).Issue-wise Detailed Analysis:1. Quashing and Setting Aside the First Information Report (FIR):The applicant filed a petition to quash and set aside the FIR being C.R. No.II 382/2008 lodged before Bhavnagar “A” Division Police Station. The FIR was initially filed under Section 85(2) of the VAT Act, 2003, and later included Section 409 of the IPC. The applicant argued that the FIR should be quashed because the original order by the Deputy Sales Tax Commissioner was quashed by the VAT Tribunal, leaving nothing substantial in the matter.2. Allegations of Tax Evasion:The prosecution alleged that the applicant, under the business name 'Shri Bhavani Ispat,' evaded tax by engaging in irregularities in the purchase and sale of iron scrap and rods. The firm was granted a registration certificate on 26.09.2005, which was later canceled as ab initio void by the Deputy Sales Tax Commissioner. This cancellation led to the registration of the FIR.3. Addition of Section 409 of the IPC:Section 409 of the IPC, which pertains to criminal breach of trust by a public servant, banker, merchant, or agent, was added to the FIR upon further inquiry by the investigating agency. The applicant contended that the inclusion of Section 409 was unjustified as the ingredients of the offense were not satisfied. The prosecution, however, argued that the ingredients of Section 409 were prima facie found during the inquiry, justifying its inclusion in the complaint.4. Remand Order by the VAT Tribunal:The VAT Tribunal remanded the matter for fresh consideration, quashing the original order of the Deputy Sales Tax Commissioner. The applicant argued that this remand order nullified the basis of the FIR. However, the prosecution pointed out that after the remand, the first appellate authority and the Tribunal again passed orders against the applicant, confirming the original order of cancellation of registration.5. Exercise of Inherent Jurisdiction under Section 482 of CrPC:The court considered whether to exercise its inherent jurisdiction under Section 482 of CrPC to quash the complaint. The court noted that inherent jurisdiction should be exercised sparingly and only in the rarest of rare cases. The court referred to several precedents, emphasizing that the powers under Section 482 should not be used to stifle legitimate prosecution and that the allegations in the complaint should be taken at face value without delving into the merits of the case at this stage. The court concluded that the complaint should not be quashed at this initial stage, as the prosecution should be given a fair chance to establish its case during the trial.Conclusion:The court dismissed the petition, stating that this was not a fit case for exercising inherent jurisdiction under Section 482 of CrPC. The court emphasized that the allegations of tax evasion and the addition of Section 409 of IPC warranted a detailed examination during the trial. The inherent jurisdiction could not be exercised to quash the complaint at this stage, and the prosecution should be allowed to proceed with its case. The rule was discharged, and any interim relief granted was vacated.