Court No. - 49
Case :- APPLICATION U/S 482 No. - 13923 of 2021 Applicant :- Sri Sanjay Garg Opposite Party :- Union Of India And Others.
Counsel for Applicant :- Srijan Mehrotra,Abhinav Mehrotra Counsel for Opposite Party :- Dileep Chandra Mathur,Amit Mahajan
Hon'ble Vivek Agarwal,J.
1. Heard Sri Abhinav Mehrotra, learned counsel for applicant, Sri D.C. Mathur, learned counsel for opposite party nos. 1, 2 and 4 and Sri Amit Mahajan, learned counsel for opposite party no. 3.
2. This Application U/S 482 has been filed seeking quashing/setting aside of the order dated 27.04.2021 passed by learned Chief Judicial Magistrate, Meerut whereby Magistrate has taken cognizance of Complaint Case No. 9691 of 2021 under Sections 132(1)(b), 132(1)(c) and 132(1)(i) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as 'Act of 2017') and has summoned the applicant.
3. Learned counsel for applicant submits that applicant is seeking quashing of entire criminal proceedings of the aforementioned complaint on two grounds that firstly, sanction order has been issued by the Additional Director General, Meerut Zonal Unit, Meerut, on the ground that said sanction order has not been issued by a competent authority.
4. Applicant/accused is the Managing Director of M/s Maiden Forgings Private Limited. He is a permanent resident of Ghaziabad and his Unit is operational since 2005 involved in manufacturing of Steel, Bright, Bars and Wires. It is submitted that company purchases raw materials from its suppliers/vendors and perform manufacturing operations thereon and remove the finished goods. There are about 140 persons involved directly and indirectly in the company and it has been making payment of GST over a turnover of approximately Rs. 200 crores since 2018 and income tax around Rs. 43.77 lakhs. It is submitted that allegations on the present applicant is that according to the revenue, applicant has illegally claimed and taken benefit of input tax credit.
5. It is submitted that input tax is defined in Section 2(62) and input tax credit in Section 2(63) of the Goods and Services Act. Allegation is that applicant has availed input tax credit on the basis of fictitious invoices, generated for the said purpose. In the aforesaid backdrop, it is submitted that evidence sought to be produced is that of claiming fraudulent input tax credit is in the shape of invoices, claimed to have been issued by some of its suppliers i.e., M/s Shiv Metals (proprietor-Sri Nikhil Goyal), M/s R.K. Steel and Alloys (proprietor-Sri Ashish Jain) and M/s R.K. Steel and Alloys (proprietor-Sri Ashwini Goyal).
6. It is submitted that persons, who have been alleged to have generated forged invoices, have not been impleaded as accused and it is only mentioned that they are non-existing, fake Firms, who have passed on ineligible input tax credit to its customers. It is submitted that firstly, there is no assessment of the liability of evasion of tax or misappropriation of the tax and secondly, the saction order has not been passed by the competent authority.
7. Placing reliance on the provisions contained in Section 132(6), it is submitted that it is provided under the law that a person shall not be prosecuted for any offence under this Section except with the previous sanction of the Commissioner. It is submitted that as per Section 2(24) "Commissioner" means the Commissioner of Central Tax and includes the Principal Commissioner of Central Tax, appointed under Section 3 and the Commissioner of Integrated Tax appointed under the Integrated Goods and Services Tax Act. Reading Section 3, which defines the Officers under this Act, it is pointed out that Additional Director General is not an authorized Officer to accord necessary sanction for launching prosecution under Section 132 of the GST Act, 2017 against the present applicant.
8. It is further submitted that as per the provisions contained in the Scheme, there are several flaws and shortcomings. It is pointed out that as per Section 132(1)(b) and (c), punishment can be given to one who commits any of the following offences, namely:-
"(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) avails input tax credit using such invoice or bill referred to in clause (b)".
9. It is submitted that Section 132(5) makes such offences to be cognizable and non-bailable. It is submitted that without determining the quantum of evasion, as envisaged under Section 74(1) of the Act of 2017, applicant cannot be prosecuted, inasmuch as, determination of the quantum of tax, avoided is sine qua non for inflicting punishment under Section 132(1)(l)(i) to (iv). It is submitted that since there is no determination of the evasion of tax and further Section 138 provides for compounding of offences, therefore, no sanction order could have been passed by the authority, who is not competent and further without determining the quantum of tax, benefit availed in violation of the provisions of the statute, no sanction can be granted.
10. Reliance is placed on the judgment of Madras High Court in Jayachandran Alloys (P.) Ltd. vs. Superintendent of GST & C. Ex., Salem, [(2019) 76 GST 329 (MAD)], where in, it is held that power to punish set out in Section 132 of the Act would stand triggered only once it is established that an assessee has committed an offence that has to necessarily be post determination of the demand due from an assessee, that itself has to necessarily follow the process of an assessment. Reliance is also placed on the judgment of Supreme Court in case of Radheshyam Kejriwal vs. State of West Bengal and Another; (2011) 3 SCC 581, where in, aspect of principles of double jeopardy, as narrated in Article 20(2) of the Constitution of India, have been dealt. It is submitted that if during the process of adjudication of tax liability, if an assessee is able to prove that there was no/reduced tax demand, then he cannot be compelled again to prove his case during trial on the basis of complaint filed.
11. It is also submitted that there is uncertainty till now as to who is the culprit in the entire chain of transaction and who has actually played fraud. This can be determined only on the adjudication of the competent authority but Revenue, instead of taking upon the adjudication work, has held applicant to be guilty with a view to extract all possible tax from him.
12. Reliance is also placed on the decision of Supreme Court in case of C. Pradeep vs. Commissioner of GST and Central Excise, Selam; (2020) 77 GST 574 (SC), saying that it is still pending in the Supreme Court and where in, on recording a finding that assessment for the relevant period, was not completed by the department, Supreme Court, prima facie, held that without completing the assessment, invoking provisions contained in Section 132 of the Act of 2017, does not arise.
13. Sri D.C. Mathur and Sri Amit Mahajan, in their turn, submits that as far as authority of the Additional Director General, Meerut Zonal Unit, Meerut is concerned, Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs vide Notification No. 14/2007-
Central Tax, New Delhi, 1st July, 2017 has declared Additional Director General, Goods and Services Tax, Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit to be equivallent to Commissioner and have been authorized to exercise powers of the Commissioner, therefore, one of the arguments that sanction has not been granted by the competent authority, has no basis in the light of the Government Notification, which is taken on record.
14. As far as second argument is concerned, it is submitted that law laid down in case of Jayachandran Alloys (P) Ltd. vs. Superintendent of GST & C. Ex., Salem (supra), has been distinguished at least by two High Courts. In Criminal Writ Petition No. 1715 of 2020 by the High Court of Judicature at Bombay, Bench at Aurangabad, Mr. Tejas Pravin Dugad vs. Union of India and Others, decided on 15.01.2021, as extracted from www.taxguru.in, where in, it is held that special provision shall prevail over the provisions of Code of Criminal Procedure. The Scheme of the GST Act shows that separate chapters are given in the Act for determination of tax not paid or erroneously reduced or input tax credit wrongly availed and for offences and penalties. In view of the Scheme of the Act, Bombay High Court held that in the cases of present nature, both adjudication and prosecution, can be started simultaneously.
15. It is pointed out that the Supreme Court in case of Central Bureau of Investigation vs. Maninder Singh decided on 28.08.2015 in Criminal Appeal No. 1496 of 2009, it is held as under:-
".................10. The allegation against the respondent is 'forgery' for the purpose of cheating and use of forged documents as genuine in order to embezzle the public money. After facing such serious charges of forgery, the respondent wants the proceedings to be quashed on account of settlement with the bank. The development in means of communication, science & technology etc. have led to an enormous increase in economic crimes viz. phishing, ATM frauds etc. which are being committed by intelligent but devious individuals involving huge sums of public or government money. These are actually public wrongs or crimes committed against society and the gravity and magnitude attached to these offences is concentrated at public at large.
11. The inherent power of the High Court under Section 482 Cr.P.C. should be sparingly used. Only when the Court comes to the conclusion that there would be manifest injustice or there would be abuse of the process of the Court if such power is not exercised, Court would quash the proceedings. In economic offences Court must not only keep in view that money has been paid to the bank which has been defrauded but also the society at large. It is not a case of simple assault or a theft of a trivial amount; but the offence with which we are concerned is a well planned and was committed with a deliberate design with an eye of personal profit regardless of consequence to the society at large. To quash the proceeding merely on the ground that the accused has settled the amount with the bank would be a misplaced sympathy. If the prosecution against the economic offenders are not allowed to continue, the entire community is aggrieved.
13. In this case, the High Court while exercising its inherent power ignored all the facts viz. the impact of the offence, the use of the State machinery to keep the matter pending for so many years coupled with the fraudulent conduct of the respondent. Considering the facts and circumstances of the case at hand in the light of the decision in Vikram Anantrai Doshi's case, the order of the High Court cannot be sustained."
16. Reliance is also placed on Para-20 of the judgment delivered by the Supreme Court of India in case of Standard Chartered Bank vs. Directorate of Enforcement, (2006) 4 SCC 278, where in, it is held in relation to the provisions contained in Foreign Exchange Regulation Act, 1973 that the provisions of the said Act provides that criminal prosecution is not required to follow adjudication and can be launched/pursued either during pendency of latter or simultaneously or precede it.
17. Sri Mathur also places reliance on the judgment of Supreme Court in case of Radheshyam Kejriwal (supra), which is again a judgment in respect of Foreign Exchange Regulation Act, 1973 where in, in Para-38, ratio which has been culled out, is as under:-
" 38. The ratio which can be culled out from these decisions can broadly be stated as follows :-
(i) Adjudication proceeding and criminal prosecution can be launched simultaneously;
(ii) Decision in adjudication proceeding is not necessary before initiating criminal prosecution;
(iii) Adjudication proceeding and criminal proceeding are independent in nature to each other;
(iv) The finding against the person facing prosecution in the adjudication proceeding is not binding on the proceeding for criminal prosecution;
(v) Adjudication proceeding by the Enforcement Directorate is not prosecution by a competent court of law to attract the provisions of Article 20(2) of the Constitution or Section 300 of the Code of Criminal Procedure;
(vi) The finding in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceeding is on technical ground and not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on the same set of facts and circumstances can not be allowed to continue underlying principle being the higher standard of proof in criminal cases."
18. After hearing learned counsel for the parties and going through the record, it is evident and as admitted by Sri Mathur that the authority concerned had issued summons to the applicants on 26.02.2021 (Annexure No. A-07). In terms of the summons, applicants had appeared before the summoning authority and had answered various questions, put-forth to him, and had signed the statement on 27.02.2021. Though, learned counsel for applicants submits that subsequently, by filing an affidavit, applicants had retracted his statement and copy of this affidavit dated 02.06.2021 is available on record. It is evident that applicant was given an opportunity to appear and explain the circumstances appearing to the appropriate officer under the Act to give evidence and produce documents. Retraction of this statement, after about more than three months, is not the subject matter of the adjudication in an Application U/S 482 Cr.P.C. and therefore, for the present, I am restraining myself to deal with these issues, but the fact of the matter is that there is already an assessment, as is evident from the complaint filed by the department before the learned Special Chief Judicial Magistrate, Meerut, showing amount of input tax credit passed on to M/s M.F.P.L., as per the G.S.T.R.-2A of M/s M.F.P.L., to the extent of Rs. 31.64 crores, which has been fraudulently availed and utilized by the applicant-Sanjay Garg, even this argument that there has been no assessment and prosecution has been launched without any assessment, is not made out.
19. Coupled with the fact that when the ratio of the law laid down in case of Radheshyam Kejriwal (supra) and Mr. Tejas Pravin Dugad (supra) is taken into consideration, then ratio of law being that adjudication and prosecution can be started simultaneously under fiscal statutes under the Scheme of the Central Goods and Services Tax Act, 2017, coupled with the fact that Additional Director General has been vested with the powers of the Commissioner, I do not find any substance in the present application, calling for interference in either the complaint case or the order of cognizance or the order of the summoning, therefore, the application fails and is dismissed.
Order Date :- 13.8.2021 Vikram/-Shalini Digitally signed by Justice Vivek Agarwal Date: 2021.09.10 13:57:50 IST Reason: Document Owner Location: High Court of Judicature at Allahabad