2023 (10) TMI 1102 - HC - VAT and Sales Tax

Criminal proceedings quashed after VAT tribunal exonerated parties on identical tax evasion allegations

Dharam Pal Goyal and others Versus State of Punjab

The HC allowed the petition and quashed the criminal proceedings against the petitioners. The case involved allegations of VAT Act contraventions through ... Validity of continuing the criminal proceedings on the same set of facts, which the Adjudicating Authorities declared that the allegations against the petitioners of having contravened the provisions of the VAT Act with an intent to evade tax cannot be sustained - Purchase of new vehicles from secret routes to avoid the barriers established by the Punjab Govt. on the basis of fake papers with an intent to evade tax - HELD THAT:- In view of the ratio of law laid down in Radheyshyam Kejriwal's case [2011 (2) TMI 154 - SUPREME COURT] this Court is of the view that the twin test prescribed for determining the effect of the orders passed by Adjudicating Authority/Tribunal on the criminal proceedings is : (i) Whether the allegations in the adjudication proceedings as well as the proceedings for prosecution are identical? and (ii) Whether the exoneration of the person concerned in the adjudication proceedings is on merits ? The afore-prescribed twin test when applied to the present case, this Court finds that the case of the petitioners is fully covered by the ratio of law laid down in Radheyshyam Kejriwal's case and thus merits acceptance. Keeping in view the fact that the Tribunal has already quashed the penalty against the Firm and has found that there was no case of tax evasion as being alleged by the Revenue, this Court finds that the FIR on the same set of allegations cannot be allowed to continue. Petition allowed. Issues Involved:1. Quashing of FIR No. 132 dated 26th March 2011.2. Validity of criminal proceedings post-adjudication under VAT Act.3. Reliance on previous judicial decisions for quashing criminal prosecution.Summary:Issue 1: Quashing of FIR No. 132 dated 26th March 2011The petitioners sought quashing of FIR No. 132 dated 26th March 2011, registered under Sections 420, 465, 468, 471, and 120-B of the Indian Penal Code at Police Station Sadar Patiala, District Patiala. The FIR alleged that the petitioners, in connivance, brought cars into Punjab using fake papers to evade taxes, causing significant loss to the state exchequer.Issue 2: Validity of criminal proceedings post-adjudication under VAT ActThe petitioners argued that the VAT Act is a complete code and does not provide for FIR registration. They cited the Value Added Tax Tribunal's order, which quashed the penalty imposed on them, stating that the vehicles were covered by valid documents and there was no intention to evade tax. The Tribunal found discrepancies in the statements recorded by the Excise and Taxation Officer, casting doubt on the allegations.Issue 3: Reliance on previous judicial decisions for quashing criminal prosecutionThe petitioners relied on the Supreme Court rulings in 'Radheyshyam Kejriwal vs. State of West Bengal' and 'M/s. Videocon Industries Ltd. vs. State of Maharashtra,' which held that criminal prosecution cannot continue if an adjudicatory tribunal finds no case of evasion. The court reiterated that adjudication proceedings and criminal prosecution are independent, but if the adjudication exonerates the accused on merits, criminal prosecution should not continue.Judgment:The court concluded that since the VAT Tribunal had quashed the penalty and found no tax evasion, the criminal proceedings on the same set of allegations could not continue. The court applied the twin test from 'Radheyshyam Kejriwal's case' to determine the effect of the adjudication on criminal proceedings, finding the petitioners' case fully covered by the ratio of law laid down. Consequently, the court quashed FIR No. 132 dated 26th March 2011, and all subsequent proceedings, including the charge sheet/order framing charge dated 4th May 2019 and the order dated 16th November 2019.