Rakesh Garg vs. State Of Haryana And Another

Held

The Court held that the FIR registration does not constitute 'prosecution' as defined under the law. It clarified that prosecution commences only when a Magistrate or Court takes cognizance of the charge-sheet/final report filed under Section 173 of the Cr.P.C. The Court found that the investigation was still underway and no charge-sheet had been presented. Therefore, the requirement for prior sanction from the Commissioner under Section 132(6) of the CGST Act was applicable only at the stage of presenting the charge-sheet, not at the FIR lodging stage. The Court distinguished between the lodging of an FIR and the initiation of prosecution, stating that the former is a preliminary step preceding investigation and cognizance. Consequently, the Court found no merit in the petitioner's contention that the complaint was filed beyond the jurisdiction of respondent No. 2 due to the absence of prior sanction. The Court also did not delve into the merits of the petitioner's resignation or the company's financial transactions, as these were matters for investigation. The inherent powers under Section 482 Cr.P.C. were not invoked to quash the FIR.

Facts

The petitioner, Rakesh Garg, sought to quash an FIR registered under the Central Goods and Services Tax (CGST) Act, 2017, and the Indian Penal Code. The FIR alleged that his company, M/s Moksh Alloys Pvt. Ltd., claimed Input Tax Credit (ITC) of Rs. 5,49,68,735/-. The petitioner argued he resigned as Managing Director on January 5, 2018, and had no role in the company's affairs thereafter. He also contended the company claimed 'NIL' transactions for FY 2017-18 and that the Excise Taxation Officer (respondent No. 2) filed the complaint without proper verification or prior sanction. The State countered that the petitioner supervised the company's business in Haryana during FY 2017-18 and 2018-19, that the company was fake, procured bogus invoices, and that the petitioner's name remained on the GST portal even after his alleged resignation.

Key Issues

1. Whether the FIR registration and consequential proceedings are liable to be quashed on the grounds that the petitioner had resigned as Managing Director of the company prior to the alleged commission of offences and had no role in its affairs thereafter, and that the company's financial records showed no transactions for the relevant period, as argued by the petitioner. 2. Whether the complaint leading to the FIR was filed beyond the jurisdiction of respondent No. 2 due to the alleged lack of prior sanction from the Commissioner as required under Section 132(6) of the CGST Act, as contended by the petitioner. Petitioner's arguments: The petitioner claimed he resigned on January 5, 2018, and communicated this to the Ministry of Corporate Affairs, thus absolving him of responsibility for subsequent company actions. He asserted that the company had 'NIL' transactions in FY 2017-18, contradicting the ITC claim. He further argued that respondent No. 2 acted without proper verification, without issuing a show cause notice, and crucially, without obtaining prior sanction from the Commissioner as mandated by Section 132(6) of the CGST Act, relying on the Supreme Court judgment in Union of India Vs. Ashok Kumar Sharma and others. Revenue's arguments: The State argued that the petitioner supervised the company's business during FY 2017-18 and 2018-19, that the company was fake, procured bogus invoices, and that the petitioner's name remained on the GST portal as of the FIR registration date. They contended that the claim of resignation was an 'eye wash' and that the petitioner's involvement in claiming ITC worth Rs. 5,49,68,735/- for FY 2018-19 was evident. They also argued that the requirement for prior sanction under Section 132(6) of the CGST Act applies only after the conclusion of investigation and at the stage of presenting a charge-sheet, not at the FIR registration stage.