R.V.Poongodi (Rajamanickam Vijayan Poongadi ) vs. State Of Gujarat

Held

The Court held that the FIR was an abuse of the process of law and quashed it. The reasoning was based on the Supreme Court's decision in Hindustan Lever Limited, which established that chicory roots, being tubers, fall under Entry No. 23 of the First Schedule of the Gujarat Sales Tax Act, 1969, and are therefore exempt from sales tax. This exemption was further reinforced by a subsequent circular and the Gujarat VAT Tribunal's decision in the applicants' own Second Appeals, which confirmed that chicory roots are not liable to tax under GST or CST Acts. Consequently, there was no outstanding amount to be recovered, making the prosecution unsustainable. The Court noted that the prosecution was initiated for recovery of an amount that was later deemed not leviable. The issue of whether such a belated prosecution could be maintained for recovery of the assessed amount for the period 1983-90 was expressly left open to be decided in the future, but for the present, the facts and law overwhelmingly supported the applicants. The Court allowed the application, quashing the FIR and all consequential proceedings.

Facts

The applicants, partners of Paglam Chicori Suppliers, were assessed under the Gujarat Sales Tax Act, 1969, for the period 1983-1990. The Commercial Tax Officer demanded Rs. 26,73,522/- including interest, for sales of chicory roots. An appeal was dismissed. The Supreme Court in Hindustan Lever Limited vs. Commissioner of Sales Tax, Gujarat, held that chicory roots, even cut and dried, fall under Entry No. 23 of the First Schedule and are exempt from sales tax. A subsequent circular in 1999 confirmed this exemption. Despite this, an FIR was lodged in 2015 under Sections 406, 420, and 114 of the IPC, over 22 years after the assessment order, for alleged offences related to the unpaid tax demand. The applicants sought quashment of the FIR.

Key Issues

1. Whether the FIR registered under Sections 406, 420, and 114 of the Indian Penal Code is an abuse of process of law and deserves to be quashed, considering the Supreme Court's decision in Hindustan Lever Limited vs. Commissioner of Sales Tax, Gujarat, and subsequent circulars exempting chicory roots from sales tax. Petitioner's arguments: The applicants argued that the Supreme Court's decision directly applies, rendering the tax demand invalid. They contended that the ingredients of Sections 406 and 420 IPC are absent, as there was no intention to deceive and the tax was not legally leviable. They further argued that the prosecution is time-barred and constitutes an abuse of process, especially given the gross delay of over 22 years after the assessment order and the existence of a separate mechanism for tax recovery. They also highlighted that the Gujarat VAT Tribunal, in subsequent Second Appeals, held chicory roots not liable to tax under GST or CST Acts, and that the VAT Commissioner's office communicated for withdrawal of the FIR. Revenue's arguments: The State submitted that the prosecution was initiated because the amount directed by the assessment order was not paid. However, the Additional Public Prosecutor fairly conceded that after the company lost its appeal and the subsequent decisions, the prosecution could not have been initiated or continued. The State also agreed that a communication indicated nothing remained to be recovered.