Karnataka HC Quashes Criminal Proceedings in KVAT Fraud Case Against Co-Accused

J. Ramesh Kumar Jain Vs State of Karnataka (Karnataka High Court)

The Karnataka High Court considered a criminal petition challenging the proceedings in C.C. No.35173 of 2014 arising out of Crime No.67 of 2012, in which the petitioner was facing prosecution for offences punishable under Sections 465, 468, 471 read with Section 34 of the IPC. The petitioner approached the Court as the trial court was scheduled to frame charges.

The petitioner submitted that the proceedings against Accused No.5 had already been quashed by a co-ordinate Bench of the High Court in Criminal Petition No.8041 of 2018 by order dated 23-06-2025 and contended that he was similarly placed and therefore entitled to identical relief.

The High Court examined the earlier order passed by the co-ordinate Bench. That order referred to the proceedings before the Deputy Commissioner of Commercial Taxes following an appellate order passed by the Joint Commissioner of Commercial Taxes (Appeals-5). The appellate authority had allowed the dealer’s appeal against the reassessment order relating to the financial year 2011-12 under Sections 39(1), 36(1), and 72(2) of the KVAT Act, 2003. It held that the disallowance of input tax credit was not justified and, consequently, the levy of tax, interest, and penalty was also unsustainable. The appellate authority directed deletion of the tax, interest, and penalty levied under the reassessment order and issuance of a revised demand notice. Pursuant to that appellate decision, the tax liability for the relevant period was recomputed.

The co-ordinate Bench had observed that the only allegation against Accused No.5 concerned non-payment of KVAT, and since the issue had attained finality by virtue of the order dated 18-05-2019, continuation of the criminal proceedings against that accused was unwarranted. Accordingly, the proceedings against Accused No.5 were quashed.

Relying on that earlier decision, the High Court held that the present petitioner, being a co-accused who was similarly placed, was also entitled to the benefit of the same order. The Court concluded that the criminal proceedings against the petitioner likewise required to be obliterated.

Accordingly, the High Court allowed the criminal petition and quashed the proceedings in C.C. No.35173 of 2014 arising out of Crime No.67 of 2012 pending before the I Additional Chief Judicial Magistrate, Bengaluru, insofar as they related to the petitioner. The connected interlocutory application was also disposed of.

Cases Discussed

• J. Ramesh Kumar Jain Vs State of Karnataka (Karnataka High Court)

Five Alternative SEO Titles

HC Quashes Criminal Case Against Co-Accused Following Earlier Identical Relief

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HC Sets Aside Criminal Proceedings After KVAT Liability Attained Finality

HC Quashes IPC Prosecution Based on Final KVAT Appellate Order

HC Extends Earlier Quashing Order to Similarly Placed Co-Accused in KVAT Case

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

The petitioner calls in question the proceedings in C.C.No.35173 of 2014 for the offences punishable under Sections 465, 468, 471 r/w Section 34 of the IPC. The petitioner is before the Court on the score that the concerned Court is framing charges tomorrow.

2. Heard Sri Sharan L Jain, learned counsel appearing for petitioner, Sri B. N. Jagadeesha, learned State Public Prosecutor-I appearing for respondents.

3. Learned counsel for petitioner submits that the proceedings against accused No.5 are quashed by the co­ordinate bench of this Court in CrI.P.No.8041 of 2018 and since petitioner is also similarly placed, proceedings against him also requires to be quashed.

4. The co-ordinate Bench of this Court in W. P.No.8041 of 2018 by order dated 23-06-2025 has quashed the proceedings as against accused No.5, by the following order:

“…. ….. ….

6. The order dated 18.05.2019 passed by the Appellate Authority is as under:

“PROCEEDINGS OF THE DEPUTY COM-MISSIONER OF COMMERCIAL TAXES (AUDIT 5.6) DGSTO-5, KORAMANGALA, BENGALURU.

(In pursuant to the order passed by the JCCT(Appeal-5) order dtd. 17/11/2018)

Present: Dr. H.R. Shivakumar

Deputy Commissioner of Commercial Tax-es,

(Audit-5.6), DGSTO-5, Bangalore -47.

Dated: 18.05.2019

M/s Sri Radhakrishna Alloys Pvt. Ltd, No. 43/1, 8^th Cross, 4^th Main, 2^nd Block, R.T.Nagar, Bangalore- 560032 is a Private Limited Company registered under the KVAT Act 2003. The said assessee company is dealing in purchase and sale of iron and steel and also manufacturing activity and have a registered office at Bangalore as noted above. They have their factory at Plot No.52, APIIC growth Centre, Thumukunta Checkpost, Hindupur A.P. They have also a Depot at Shop No.2, Opp. Aruna Saw Mill, B.H.Road, Gowribidanur- 561208, wherefrom the sales and purchases are effected in the state. The company has been a registered dealer under the provisions of the KVAT Act, 2003 holding TIN 29260734256 and is on the files of GSTSO 183, Chickaballapur.

The re-assessment order in respect of the above asses company for the tax periods falling in the financial year 2011-12 under section 39(1) and Read With Section 36(1) and 72(2) of the KVAT Act, 2003 was concluded on 28-03-2018 vide CAS No. 284447222, wherein levied the tax of Rs.73,69,391/-Penalty at Rs.7.36,839/- and interest of Rs.87,91,229/- and the total liability at Rs.1,68,97,559/- vide demand No.111580800.

On receipt of this order, the assessee company has preferred an Appeal before the JCCT (Appeals-5), Bangalore as per the appeal order No.VAT:AP:07/2018-19 dated 17-11-2018 vide CAS No. 206757353APP. Wherein the appellate has passed the following or-der:

35. The contentions of the appellant regarding levy of interest and penalty are acceptable for the reasons as stated above i.e., when the disallowance of the input tax credit as claimed by the appellant is not in order, the consequential levy of interest and also penalty is also not in order. Therefore, the act of the respondent in levy of consequential interest and penalty on the net additional tax liability as determined by the respondent for disallowance of input tax credit related to bogus dealer purchases as claimed by the appellant for the reasons as stated in the said re-assessment order needs to be set side.

36. In view of the reasons, the re-assessment order dated: 28.03.2018 passed the respondent is here by set aside to meet the ends of justice and equity.

37. Hence, the following order:

ORDER

38. The appeal filed by the appellant for the tax periods of the financial year 2011-12 ” Allowed.”

39. The respondent is directed to delete the tax, interest and penalty levied vide re-assessment dated: 28.03.2018 passed under section 39(1), 36(2) and 72(2) of the KVAT Act 2003 and to issue the revised demand notice accordingly in term of this order

In view of the order passed by the JCCT (Appeal-5), the tax payable for the period 2011-12 is re computed as below.

xxxx”

7. As stated supra, the only allegation made against the petitioner is regarding non-payment of KVAT, which has attained finality vide aforesaid order dated 18.05.2019. Under these circumstances, the question of continuing the impugned proceedings qua the petitioner would not arise.”

5. The petitioner herein being the co-accused, is also entitled to the benefit of the said order and the proceedings against the petitioner as well requires to be obliterated.

6. For the aforesaid reasons, the following:

ORDER

(i) Criminal Petition is

(ii) Proceedings in C.C.No.35173 of 2014 arising out of Crime No.67 of 2012 pending on the file of I Additional Chief Judicial Magistrate, Bengaluru stands quashed qua the petitioner.

Consequently, I.A.No.1 of 2026 also stands disposed.