Case Law Details

Case Name : Shahzad Alam & Others Vs State Of U.P. & Others (Allahabad High Court)
Appeal Number : Criminal Misc. Writ Petition No. 3225 of 2020
Date of Judgement/Order : 24/02/2020
Related Assessment Year :
Courts : All High Courts (6004) Allahabad High Court (338)

Shahzad Alam & Others Vs State Of U.P. & Others (Allahabad High Court)

In the instant case, the allegations are in respect of getting bogus firms registered under the GST Code and of preparing bogus invoices for the purpose of evading tax. Hence Commercial Tax Officer (Special Investigation Cell) issued the first information report under Sections 420, 424, 467, 468, 120-B I.P.C. and section 122/132 of Goods and Services Tax Act.

The petition is filed here is to quashing the first information report issued under the Penal Code.

Except for offences specified in subsection (5) of section 132, sub-section (4) of section 132 of the U.P. Act renders all offences under the U.P. Act (U.P. Act should be read as U.P. Goods and Services Tax Act, 2017) non cognizable, therefore no FIR can be lodged, is not acceptable, because sub-section (4) speaks of offences under the U.P. Act and not in respect of offences under the Penal Code. It is noteworthy that section 135 of the U.P. Act makes a significant departure from general law by providing that in any prosecution for an offence under the U.P. Act, which requires a capable mental state on the part of the accused, the court shall presume the existence of such mental state. The same does not hold true for offences punishable under the Penal Code. Hence, to prove mensrea, which is one of the necessary ingredients of an offence punishable under the Penal Code, the standard of proof would have to be higher to prove commission of an offence punishable under the Penal Code than what would be required to prove an offence punishable under the U.P. Act. As such, the offences punishable under the Penal Code are qualitatively different from an offence punishable under the U.P. Act.

In view of the reasons recorded above, HC are of the considered view that the contention of the learned counsel for the petitioner that no first information report can be lodged against the petitioner under the provisions of the Code of Criminal Procedure for offences punishable under the Indian Penal Code, as proceeding could only be drawn against him under the U.P. Goods and Services Tax Act, 2017, is liable to be rejected and is, accordingly, rejected.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Heard learned counsel for the petitioners; the learned A.G.A. for the State-respondents 1, 2 and 3; and perused the record.

The instant petition seeks quashing of the first information report dated 06.02.2020 registered as Case Crime No. 0350 of 2020 at P.S. Sihani Gate, District- Ghaziabad, under Sections 420, 424, 467, 468, 120-B I.P.C. and section 122/132 of Goods and Services Tax Act (hereinafter referred to as GST Act).

The impugned first information report has been lodged by Commercial Tax Officer (Special Investigation Cell), Commercial Tax, Range A, Ghaziabad alleging that on scanning of information available at GST Portal and information received from the mobile squad of Commercial Tax Department regarding the vehicles seized with goods without proper documents, exercising power under Section 67 of the GST Act, the Joint Commissioner (Investigation), Trade Tax, Range A, Ghaziabad, by order dated 06.11.2019, constituted and authorized a team of officers to carry out search and seizure operations at declared places of business. It is alleged that when the team visited the declared place, it found that it was not functioning as a registered office of any firm; no business activity could be noticed; no goods were found; and the person present there, namely, Shubham Sharma, informed that the place was not being used for any business but only for preparing documents. Shubham Sharma informed the team that he works for Dilshad Malik (petitioner no.2). The electricity connection of the premises was found in the name of Shahzad Alam (petitioner no.1). In the room, tax invoices and E-way bills of 61 firms were found. In addition thereto, rubber stamps and seals of the Proprietor/ Authorized signatory of 16 firms were found. A cheque book of Nirala Traders and Bilty Book of two transporters and original tax invoices of one Ravi Industries was found. Upon search of another room, one Abid was found, who disclosed that he works for Junaid Malik. In that premises, a bill and electricity bill was found which was in the name of Dilshad Malik. In that room, a rubber stamp/seal of the Proprietor of M/s. A.K. Metal Traders with a specified GST number was found. What was noticed was that none of the firms whose papers were found had the specified address as their place of business. Consequently, on the basis of information received, separate teams were constituted to make inspection of the firms whose documents were found there and, upon enquiry, majority of those firms were found non-existent. The place from where papers, rubber stamps and seals were recovered was discovered to be under the control of Shahzad Alam and Dilshad Malik (petitioner no.1 and petitioner no.2, respectively). On the basis of above inspection/inquiry, a prima facie conclusion was drawn that Dilshad Malik and Shahzad Alam had been indulging in preparing and utilizing bogus tax invoices for evading tax. As a result, summons were issued under Section 70 of the GST Act seeking their explanation. On the basis of the explanation submitted, further enquiry was conducted by the Inspection Team, upon which, it was found that Shahzad Alam is a resident of New Islam Nagar, Meerut and the place which was earlier inspected has been in the name of Shahzad Alam which had been let out to Azad Malik (petitioner no.3). In his explanation, Shahzad Alam stated that he carries no business from that specified place. The said explanation was not found correct because the Joint Team had found original papers of M/s. Capital Industries (GSTN number specified) whose proprietor was Shahzad Alam. It is stated in the FIR that Azad Malik was also interrogated. He stated that he had taken the place on rent from Shahzad Alam for keeping old generators and for selling spare parts. When he was enquired in respect of papers found there, he stated that he has no knowledge as to how those papers were found there. Later, however, he submitted a written submission claiming responsibility for the documents seized from the specified place and claiming that his earlier statement was made under some misconception. It is alleged that thereafter Dilshad Malik (petitioner no.2) was also summoned. In his statement made to the Team, he stated that he works on commission and that he has no firm registered in his name though he stated that the room which was searched earlier was taken by him on rent but no rent deed was prepared. However, he could not provide the details as to since when the premises was taken on rent. It is alleged in the FIR that the statement of Dilshad Malik (petitioner no.2) was contrary to the records as M/s. K.L. Enterprises was registered in his name and trade was also shown in the name
of the firm.

By narrating the facts noticed above, derived on the basis of the inspection/enquiry, conclusion was drawn that Dilshad Malik and Shahzad Alam had set up bogus firms for the purpose of evading tax and had been preparing false documents/invoices for that end and that Azad Malik had been working as their Agent.

Learned counsel for the petitioners has challenged the impugned first information report, inter-alia, on the following grounds:-

(a) that no firm/company whose rubber stamps were allegedly found at the specified place made a complaint of utilizing their seals for preparing bogus documents;

(b) that there is no specific allegation in respect of evasion of tax in any specific transaction or movement of goods;

(c) that the recovery is not supported by any public witness; and

(d) that unless and until a specific finding is returned in respect of evasion of GST, no offence can be said to be committed, as alleged in the first information report.

The learned A.G.A. has opposed the prayer for quashing the first information report by submitting that the allegations made in the impugned first information report clearly spell out creation of bogus firms and fabrication of false invoices. As to how these invoices have been utilized and to what extent tax had been evaded is a matter of investigation and since the impugned first information report discloses commission of cognizable offences, the prayer to quash the first information report cannot be accepted.

We have heard the rival submissions and have perused the record carefully.

The allegations in the impugned first information report are in respect of getting bogus firms declared/registered under the GST Act and fabricating documents/invoices with a view to evade Tax. The impugned first information report appears to have been lodged after scanning information available at the GST Portal and information received from mobile squad in respect of seizure of goods/vehicles without documents as also after gathering information from search and seizure operation and the enquiry that ensued, which led to an inference that the declared place of business was bogus. Rather, the place was being used for the purpose of preparing false documents/invoices.

As to how those invoices have been utilized or were to be utilized would be a matter of investigation. The FIR specifically alleges that information was gathered not only from search and seizure operations but also on the basis of explanation submitted by the suspects pursuant to the summons served upon them. Whether search and seizure operation memorandums, in absence of public witness, would have sufficient reliability is an issue to be examined at the stage of trial and not at this stage.

In Vinod Raghuvanshi Vs. Ajay Arora and Ors.: (2013) 10 SCC 581 (para 30), the Apex Court had taken the view that an investigation should not be shut out at the threshold if the allegations have some substance.

In the instant case, we find that the allegations are in respect of getting bogus firms registered under the GST Code and of preparing bogus invoices for the purpose of evading tax. The above allegations have been made on the basis of search and seizure operations and the enquiry that followed. As to how the bogus tax invoices were used or were to be used would be determined on the basis of material collected during the course of investigation.

The submission of the learned counsel for the petitioners that there could be no registration of first information report without a specific order under the GST Code in respect of evasion of tax is not acceptable for the simple reason that the GST Code does not impliedly or explicitly repeals the provisions of Indian Penal Code or the Code of Criminal Procedure and therefore an offence punishable under the Indian Penal Code can very well be reported and investigated as per law. A Division Bench of this Court of which one of us (Manoj Misra, J.) was a member in Criminal Misc. Writ Petition No. 7303 of 2019 : Govind Enterprises vs. State of U.P. and others, decided on 30.05.2019, after scanning through number of decisions of the Apex Court as well as High Court including statutory provisions, held as follows:-

“Upon careful consideration of the rival submissions, the decisions noticed above, the relevant provisions of the U.P. Act as also the Penal Code and the Code, we find that Sections 69, 134, and 135 of the U.P. Act are applicable in respect of offences punishable under the U.P. Act. They have no application on offences punishable under the Penal Code. Further, there is no provision in the U.P. Act, at least shown to us, which may suggest that the provisions of the U.P. Act overrides or expressly or impliedly repeals the provisions of the Penal Code. There is also no bar in the U.P. Act on lodging an FIR under the Code for offences punishable under the Penal Code even though, for the same act/ conduct, prosecution can be launched under the U.P. Act. Rather, section 131 of the U.P. Act impliedly saves the provisions of the Penal Code by providing that no confiscation made or penalty imposed under the provisions of the Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of the U.P. Act or under any other law for the time being in force.

The argument of the learned counsel for the petitioner that except for offences specified in subsection (5) of section 132, sub-section (4) of section 132 of the U.P. Act renders all offences under the U.P. Act non cognizable, therefore no FIR can be lodged, is not acceptable, because sub-section (4) speaks of offences under the U.P. Act and not in respect of offences under the Penal Code. It is noteworthy that section 135 of the U.P. Act makes a significant departure from general law by providing that in any prosecution for an offence under the U.P. Act, which requires a capable mental state on the part of the accused, the court shall presume the existence of such mental state. The same does not hold true for offences punishable under the Penal Code. Hence, to prove mensrea, which is one of the necessary ingredients of an offence punishable under the Penal Code, the standard of proof would have to be higher to prove commission of an offence punishable under the Penal Code than what would be required to prove an offence punishable under the U.P. Act. As such, the offences punishable under the Penal Code are qualitatively different from an offence punishable under the U.P. Act.

In view of the reasons recorded above, and by keeping in mind the provisions of Section 26 of the General Clauses Act, 1897 as also the law laid down by the apex court in that regard, which we have noticed above, we are of the considered view that the contention of the learned counsel for the petitioner that no first information report can be lodged against the petitioner under the provisions of the Code of Criminal Procedure for offences punishable under the Indian Penal Code, as proceeding could only be drawn against him under the U.P. Goods and Services Tax Act, 2017, is liable to be rejected and is, accordingly, rejected. ”

[Note : U.P. Act should be read as U.P. Goods and Services Tax Act, 2017).

Another submission made by the petitioners’ counsel, that in absence of complaint from those firms whose papers were found no FIR ought to be registered, is unworthy of acceptance, particularly when those firms were found non-existent.

For the reasons aforesaid, as the impugned first information report discloses commission of cognizable offence, the prayer to quash the first information report cannot be accepted.

The petition is dismissed without prejudice to the right of the petitioners to apply for bail.

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