Sri Rajesh Agarwal vs. The State Of Telangana

Facts

The petitioner, Sri Rajesh Agarwal, was arrayed as Accused No. 2 in a complaint filed by the Assistant Commissioner, Central Tax, GST Commissionerate, Hyderabad, against M/s. B.S. Limited (Accused No. 1). The complaint pertained to alleged evasion of service tax across various categories, including 'Transport of Goods by Road' (GTA), 'Manpower Recruitment and Supply Service' (MRA), 'Erection, commissioning and Installation Service' (ECIS), 'Works Contract Service' (WCS), 'Commercial or Industrial Construction Services', 'Cab Services', 'Legal Consultancy Service', and 'Director's Sitting Fee'. The total alleged service tax liability amounted to Rs. 2,41,83,878. Notably, the company had paid the entire service tax amount prior to the issuance of any show-cause notice. The prosecution was launched based on a sanction order dated July 17, 2019, which granted sanction only against M/s. B.S. Limited (A1) and not against the petitioner, who is a Director.

Held

The Court held that the proceedings against the petitioner/A2 in C.C. No. 7 of 2021, pending on the file of the Special Judge for Economic Offences, Hyderabad, are liable to be quashed. The primary reasoning was based on the sanction order dated July 17, 2019, which clearly indicated that sanction was granted only for launching prosecution against M/s. B.S. Limited (A1). There was no sanction granted in favour of the petitioner, who was arrayed as Accused No. 2. The Court found that the absence of a specific sanction for the petitioner rendered the proceedings against him void ab initio. The Special Counsel for the revenue conceded to this fact. Therefore, the Court quashed the proceedings against the petitioner. The ratio decidendi is that a prosecution launched without the requisite sanction, where sanction is a mandatory prerequisite, is invalid and unsustainable. The operative direction was to quash the proceedings against the petitioner.

Key Issues

1. Whether the proceedings against the petitioner, arrayed as Accused No. 2, are liable to be quashed due to the absence of a specific sanction order for his prosecution, as required by law? (Question of law turning on the interpretation of sanctioning provisions for prosecution under service tax laws). Petitioner's Contention: The petitioner argued that the sanction order dated July 17, 2019, explicitly granted sanction only against M/s. B.S. Limited (A1) and did not include any sanction to prosecute the petitioner, who is a Director. Therefore, the proceedings against him are void ab initio, as sanction is a sine qua non for prosecution in this case. Revenue's Contention: The respondent revenue did not record any specific argument against the petitioner's contention regarding the lack of sanction. The Special Counsel conceded to the fact that there was no sanction granted in favour of the petitioner.