Case Law Details
Ashwinbhai Kantilal Joshi Vs State of Gujarat (Gujarat High Court)
It is alleged against the present applicant, a Sales Tax Officer, who retired as Tax Superintendent, that in connivance with Advocate Kamlesh Heruwala and others, under the VAT Act, fraudulent postings and assessment had been done in relation to the registered traders.
After hearing The applicant is ordered to be released on regular bail in connection with the First Information Report being C.R. No.11195016210589 of 2021 registered with Deesa North Police Station, Banaskantha on executing a personal bond of Rs. 15,000/- (Rupees Fifteen Thousand only) with one surety of the like amount to the satisfaction of the trial Court and subject to certain conditions.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. This application has been filed under Section 439 of the Code of Criminal Procedure for regular bail in connection with the First Information Report being C.R. No.11195016210589 of 2021 registered with Deesa North Police Station, Banaskantha for the offences punishable under Sections 406, 420, 465, 467, 468, 471, 167 and 120(B) of the Indian Penal Code, under Sections 13(1)(b) and 13(1 )(c) of the Prevention of Corruption Act, 1988 and under Sections 85(1 )(d) of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to in short as the ‘VAT Act’).
2. The allegations in the First Information Report is that without manual challans, false postings were made in the VAT is system and acknowledgment receipts have been generated and by committing offences of misappropriation, there is loss to government treasury of Rs.5,98,29,882/-, out of which an amount of Rs.1,98,75,998/- had been recovered and at present, an amount of Rs.3,99,53,884/- is yet to be recovered from the petrol pump traders. It is alleged that Advocate Kamlesh Heruwala, Accountant Sagar Banawala, Senior Clerk Nareshbhai Savabhai Chowdhury, Senior Clerk Prakashbhai Jagdishbhai Chudi had made the postings from the login ID of other employees. Thus it is alleged against the present applicant, a Sales Tax Officer, who retired as Tax Superintendent, that in connivance with Advocate Kamlesh Heruwala and others, under the VAT Act, fraudulent postings and assessment had been done in relation to the registered traders.
3. The main allegations against the present applicant is to the effect that the Login I.D. of the applicant was used to cause 207 entries in VATis system, out of which 29 dealers generated acknowledgment receipt to the tune of Rs.86,22,879/-. Further, it is alleged that with regard to the assessment of 4 dealers for the financial year 2015 – 2016, manual challans were approved without due verification. The details are as under :-
(i) Jayshree Gabbarwali Petroleum Rs.3,89,000/-
(ii) Sundeshwari Petroleum Rs. 2,89,546/-
(iii) Maan Automobiles Rs.6,21 ,41 4/-
(iv) Shri Saraswati Petroleum Rs.2,70,750/-
4. Learned Advocate for the applicant submitted that it is a case of misuse of Login I.D. and Password of the applicant. He submits that the information was sought for by the applicant. However, it was not supplied and from whatever information was supplied to the applicant, it became crystal clear that the User I.D. and password of the applicant was misused and 207 entries have been posted in the VATis system from four different I.P. addresses which have been used in making the alleged illegal entries. It is further submitted that the four I.P. addresses are as under :-
10.115.93.91, 10.115.93.84, 10.115.93.85 and 10.115.93.93
4.1. It is submitted that from the period 19.07.20 19 to 13.02.2020, 33 entries have been made. It is stated that
these 33 entries have been made while the applicant was not present in his office and on one of the occasion, i.e. on 27.02.2020, the applicant was before the Court for proceedings and on that day, by misusing the login ID and password, five acknowledgment receipts have been generated.
4.2. With regard to the allegations pertaining to the audit assessment of four dealers, i.e. Sundeshwari Petroleum, Maan Automibiles, Jayshree Gabbarwali Petroleum and Shree Saraswati Petroleum, it is submitted that the allegations are mis-founded and for the financial year 2015-2016, the entries have been made long before the applicant joined office and when the assessments were made by the applicant, it was on the strength of the Audit Report submitted by the Chartered Accountants of the concerned dealers and on the VATis Receipt.
4.3. Referring to the flaws in the VATis System and the interconnection of IFMS and VATis, it is submitted that in the VATis system, even as the login does not generate any OTP nor does it send any notification and therefore, if any person logs in using credentials of an office, no notification or acknowledgment is sent to the officer who login credentials are used. It is further submitted that at the time of deposit in the trader’s account, though it may be linked with IFMS Software, access to the same is limited to the officer of Commissioner level and the applicant would have no access to such software. It is further submitted that IFMS Software and VATis are not connected while posting entries in VATis. No data from IFMS Software is shared or made available on VATIS.
4.4. It is submitted that the alleged 209 entries have been made abusing the User I.D. and Password of the applicant by his Tax Consultant and other clerical staff of the Department, of which the present applicant neither had any knowledge nor such alleged entries having the participation of the present applicant could be found. It is further submitted that the facts of the First Information Report itself suggests that the Tax Consultant Kamlesh Heruwala and others in conspiracy with the other accused have been indulging in such malpractices since long and as such, a false First Information Report has been lodged against the present applicant who was upright and honest, had an unblemished career and no complaint or memo has ever been issued to the applicant. It is submitted that the applicant on 13.11.1981 joined the Department and at the time of his retirement in July 2020 was working as a State Tax Officer at Deesa.
4.5. Learned Advocate for the applicant Mr. Barot sought to rely on the Departmental Circular of Commercial Tax, Commercial Office dated 05.09.2011 to submit that E-payment of the tax suggests that there is exemption to produce hard copies of receipts for the Financial Year 2007-2008 for the limit of Rs.10,00,000/- or more and for transactions after 01.04.2009, the E-payment option was given for the payment of tax liability upto Rs. 10,00,000/-. Traders were given a choice to make payment either as per the electronic system and in that case, the traders were directed to file receipt of the E-payment of the Challan Identification Number (CIN). It is also submitted that the Banks were uploading daily, the E-payment transaction in the IFMS. It was resolved that any another payment above Rs. 10,00,000/- or voluntary payment by E-payment system, those traders were given exemption to produce receipts and therefore, it was resolved that there should not be any insistence to produce the receipts from the traders who make E-payments. Incase any trader produces such receipts then no entry of the same should be in the VATis system. It was observed in the Circular that verification of the tax payment should be from the data uploaded by the Bank under IFMS, such reflection in the website of the Commercial Tax Department would be within a period of 2-3 days. The State Tax Officer in case of their own jurisdiction, were required to assess / verify in case of traders who have defaulted in producing the challan and it was resolved that thereafter, notices were to be issued to the defaulter.
4.6. It is submitted that four different I.P. addresses were misused for lodging entries in VATis system. He submitted that in absence of the present applicant and without his knowledge, those I.P. addresses were misused. It was, therefore, prayed that the present application may be allowed and the applicant herein may be released on regular bail.
5. Learned Additional Public Prosecutor Mr. Pranav Trivedi submitted that the present applicant had a responsibility to periodically assess the tax recoverable on the sales of goods and it is further submitted that under the Gujarat Value Added Tax Act, 2003 read with Rules, 2006, the law prescribes the manner in which the registered dealers are required to furnish their returns. Sub-section (1) of Section 29 mandates to every registered dealer to furnish correct and complete returns of the goods in respect of the business transactions in the prescribed form. The tax money shall be payable into the Government treasury in the manner prescribed, the whole amount due from traders according to such return shall be furnished alongwith a receipt showing full payment of such amount. It is submitted that Rule 26 of the Gujarat Value Added Tax Rules, 2006 provides the way in which the registered dealers have to submit Form No.207 and here in this case, it is submitted that no money has been deposited in the Government treasury. Rule 26 permits the dealer to submit to the Commercial Tax Officer one copy of the Challan receipt in Form No.207 on or before the date prescribed for submission of return. Section 34 of the Act, 2003 lays down the manner in which the yearly audit assessment has to be conducted.
5.1. It is submitted that the applicant being a Sales Tax Officer was required to have a detailed scrutiny and in the present case, it was found that acknowledgment receipt issued did not tally with IFMS treasury data. It is submitted that the present applicant facilitated the dealing with the Sales Tax Consultant and the other staff of the Department to manipulate the challans while no such payment as shown in the Challan was made in the Government Treasury for its reflection in the IFMS System (Treasury Data). The Assistant State Tax Commissioner in the Office of the Commissioner of State Tax, Unit No.35 at Deesa at Godhra called for all dues of 2016-2017 and 2017-2018 in respect of certain petroleum pumps, challans as well as proof of payment of tax details was sought from the tax Consultant. Neither the businessmen nor the Consultant provided the details and on perusing all the Challans Manual, entry in VATis with IFMS (Treasury Data), no such challans were found.
5.2. It is submitted by learned Additional Public Prosecutor that by getting wrong entries made in VATis system and generating acknowledgement receipt for the period from 2013 to 2020, prima-facie illegalities were found in case of 29 traders.
5.3. It is submitted that the present applicant undertook audit assessment for the period 2015 – 2016 of the four dealers, no manual challans were found and after due verification and as per the statement of the co-accused Senior Clerk Nareshbhai Savabhai Chowdhury, the present applicant was aware of the entries of filing the challan. Therefore, it is stated that the State Exchequer suffered a loss to the tune of Rs.5,98,29,881/-.
5.4. It is submitted that as per sub-section (8) of Section 34, the present applicant was required to make tax demand and was required to assess the details of registered traders and after making assessment, the applicant was required to give the dealer an opportunity of being heard and it was for him to get satisfied whether for the default it was required for the dealer to pay the duty by way of penalty in addition to the amount of the tax shown. During the course of proceedings, if he was satisfied that tax has been evaded or sought to be evaded or any tax liability has not been disclosed, for any transaction of sale or purchase or for any transaction false claim has been made or a claim has been incorrectly made, then inspite of any notice for assessment being issued, he ought to have initiated proceedings against the defaulter.
5.5. It is submitted that the present applicant was having a Login I.D. and password and it was the responsibility to verify the due payment as shown in the challan or should have himself verified from the IFMS (Treasury Data) and also should have seen whether such amount as shown in the Manual Challan was actually paid. It is submitted that it is a systematic conspiracy by all and considering the offence of such a magnitude, it was urged to reject the application for grant of bail.
6. Heard learned Advocates on both the sides and perused the material on record. With regard to the allegations of the applicant’s connivance with the co-accused, incase of manual challans of four dealers in respect of 2015-2016, is stated to have been produced but the allegations against the present applicant is that those were approved without due verification. The Departmental Circular dated 05.09.2011 referred to, gives direction to the Dealers to adopt the E-payment mode for the tax payment above Rs. 10,00,000/- while option has been given to the tax payment below the level of Rs. 10,00,000/-. Here in the case of assessment of four dealers, the tax so assessed is below Rs.10,00,000/-. This requires the production of Form No.207 which shows that the duplicate of the Challan is required to sent to the CTU. The triplicate copy is for the treasury and the duplicate is to be sent to the CTU. The information with regard to the payment of the challan would be in the VATis system.
6.1. Reliance has been placed on the provision of law under Section 34 of the Gujarat Value Added Tax Act, 2006 for the amount of tax due on the registered Dealer which is required to be assessed separately every year and it was urged that the applicant as a State Tax Officer was required to tally the information regarding the challan payment of the VAT is system to the data reflected in IFMS which in turn is entered in the website of the Tax Department. Whether there has been a criminal conspiracy or any negligence of the applicant would be course of trial by adducing evidence. How the challans were manipulated and false postings were made in the VAT is system with an intention to defraud by causing losses to the Government exchequer would be a question of fact.
6.2. However, for amount to the extent of Rs.5,98,29,882/- which is noted to be in relation to the 29 defaulters, the data could not tally with the VAT is system from the year 2013. Recovery to the extent of Rs. 1,98,75,998/- has been made and the Department would be in the process of recovering the rest of the money from the registered traders. Whether any illegal gratification has been received by the present applicant for any manipulated, fraudulent entries with an intention to cause loss to the Government treasury would be a question of evidence which would be required to be examined during the course of trial. Further, since the charge-sheet is filed and considering the facts and circumstances of the case, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant.
7. Hence, the present application is allowed. The applicant is ordered to be released on regular bail in connection with the First Information Report being C.R. No.11195016210589 of 2021 registered with Deesa North Police Station, Banaskantha on executing a personal bond of Rs. 15,000/- (Rupees Fifteen Thousand only) with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions that he shall;
[a] not take undue advantage of liberty or misuse liberty;
[b] not act in a manner injurious to the interest of the prosecution;
[c] surrender passport, if any, to the lower court within a week;
[d] not leave India without prior permission of the concerned trial court;
[e] furnish the present address of residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of the concerned trial court;
8. The authorities shall adhere to its own Circular relating to COVID- 19 and, thereafter, will release the applicant only if he is not required in connection with any other offence for the time being. If breach of any of the above conditions is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter. Bail bond to be executed before the lower Court having jurisdiction to try the case.
Rule is made absolute to the aforesaid extent. Direct service is permitted. Registry to communicate this order to the concerned Court/authority by Fax or Email forthwith.
