Facts of the Case

The petitioners — directors/individuals connected with M/s Shri Ram Alloys and Ingot Pvt. Ltd., Bokaro — sought quashing of criminal proceedings in Bokaro Steel City P.S. Case No. 121 of 2018 (G.R. No. 663 of 2018), registered under Sections 409, 420 and 120-B IPC read with Sections 73, 74, 132(1)(e), (f), (i) and (iv) of the Goods and Services Tax Act, 2017. The FIR alleged that for the period 01.07.2017 to 31.03.2018, the petitioners, as directors, abetted the mis-utilisation of Input Tax Credit through wrong figures by two dealers, M/s Sidhi Vinayak Metal and Salt Company Pvt. Ltd. and M/s Renu Raj Enterprises. Significantly, the underlying demand and assessment against the petitioners had itself been challenged in a batch of writ petitions (including W.P.(T) Nos. 91, 94 and 163 of 2021), which a Division Bench of the same High Court had already decided by judgment dated 14.09.2022, quashing the demand and assessment and remitting the matter for fresh consideration.

Issues Involved

  1. Whether only the Commissioner of State Taxes (not the Additional Commissioner) was competent to sanction prosecution under Section 134 of the Jharkhand GST Act.
  2. Whether continuation of criminal proceedings was an abuse of process once the very demand and assessment forming the basis of the FIR had been quashed by the Division Bench.

Petitioner's Arguments

  • Under Section 134 of the Jharkhand GST Act, only the Commissioner of State Taxes was competent to sanction prosecution, whereas the sanction in this case had been granted by the Additional Commissioner; further, individuals had not been made accused, only the company, contrary to Section 137 of the Act.
  • GST offences are compoundable under Section 138, and prosecution under the GST Act ought to proceed only by way of complaint, not FIR; relying on Jeevan Kumar Raut v. CBI, it was argued the IPC sections were not independently attracted where a special law occupied the field.
  • Crucially, the demand and assessment underlying the allegation of wrongly availed ITC had already been quashed by a Division Bench judgment dated 14.09.2022 in a batch of writ petitions naming the petitioners, with the matter remitted for fresh consideration.

Respondent's Arguments

  • The FIR had been validly registered based on the investigation's findings regarding mis-utilisation of Input Tax Credit for the specified period by the named dealers, with the petitioners implicated as abettors in their capacity as Directors.

Court Order / Findings

  • The Court took on record the Division Bench's judgment dated 14.09.2022, which named the petitioners at paragraphs 12(ix), (x) and (xii), and by which the demand and assessment order against them had been quashed and remitted for fresh consideration after fulfilling certain modalities.
  • The Court held that the basis of the FIR — the demand and assessment alleging wrongful ITC availment — had itself already been quashed by the Division Bench, and to allow the criminal proceedings to continue in these circumstances would amount to an abuse of the process of law.
  • Accordingly, the entire criminal proceedings in connection with Bokaro Steel City P.S. Case No. 121 of 2018 were quashed, with liberty reserved to the State to proceed afresh if, after the fresh assessment consequent on the Division Bench's remand, a fresh cause of action were found to exist.

Important Clarification

Where a criminal prosecution under Section 132 of the GST Act rests entirely on a tax demand and assessment order that has itself been set aside and remitted by a competent court, continuation of the criminal proceedings pending the fresh assessment amounts to an abuse of process, and the proceedings are liable to be quashed under Section 482 Cr.P.C., without prejudice to fresh action if warranted after the remitted assessment is completed.

Sections Involved

  • Section 132, Jharkhand GST Act, 2017 — penalises specified offences including fraudulent availment of ITC without invoice.
  • Section 134, Jharkhand GST Act, 2017 — requires previous sanction of the Commissioner for prosecution under the Act.
  • Section 137, Jharkhand GST Act, 2017 — deals with offences by companies and liability of persons in charge.
  • Section 482, Cr.P.C., 1973 — the High Court's inherent power to quash proceedings to prevent abuse of process.

Decision – In Favour of

In favour of the Assessee — the FIR and all connected criminal proceedings were quashed, with liberty reserved to the State to proceed afresh if warranted after the remitted GST assessment is completed.

Case Details

  • Court: High Court of Jharkhand at Ranchi
  • Case Number: Cr.M.P. No. 3155 of 2019
  • CNR / Citation: Cr.M.P. No. 3155 of 2019
  • Coram: Hon'ble Mr. Justice Sanjay Kumar Dwivedi
  • Date of Order: 31 August 2023

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