Case Title | Rakesh Garg VS The State of Haryana |
Court | Punjab and Haryana High Court |
Honourable Judges | Justice Manjari Nehru Kaul |
Citation | 2021 (03) GSTPanacea 166 HC Punjab and Haryana Crm-M-32331-2020 |
Judgement Date | 12-March-2021 |
The instant petition has been filed under Section 482 of the Criminal Procedure Code (Cr.P.C.) for the quashing of FIR No. 321, dated July 19, 2019. This FIR was registered under Section 132 of the Central Goods and Services Tax (CGST) Act, 2017, and Sections 420 (cheating), 467 (forgery of valuable security), 468 (forgery for the purpose of cheating), and 471 (using as genuine a forged document) of the Indian Penal Code (IPC) at Police Station Sector 50, Gurugram (Annexure P-1). The petition also seeks the quashing of any consequential proceedings arising from this FIR.
The petitioner contends that while he was the Managing Director of M/s Moksh Alloys Pvt. Ltd., Gurugram (hereinafter referred to as ‘the Company’), he resigned from this position on January 5, 2018. This resignation was duly communicated to the Ministry of Corporate Affairs on January 13, 2018. Consequently, the petitioner claims to have had no role in the company’s affairs after his resignation. To support this claim, the petitioner’s counsel presented Annexure P-2 (Colly) to the Court, which includes copies of Form No. DIR 11, DIR 12, and other relevant documents.
It was further submitted that the company was allotted GST No. 06AAHCM4191J1Z8 on November 17, 2017. This GST number is crucial to the case, as the FIR and the subsequent legal actions revolve around alleged violations of the CGST Act and other related offences committed using this GST number. The petitioner argues that since he had resigned well before the alleged offences took place, he should not be held responsible for any actions conducted by the company after his resignation.
The petition highlights that the petitioner had communicated his resignation to the appropriate authorities and had submitted all necessary forms and documents to confirm his departure from the company’s management. Therefore, the petitioner’s counsel argues that the FIR and the proceedings stemming from it are unjustified and should be quashed to prevent unnecessary harassment of the petitioner, who had no involvement in the company’s activities at the time of the alleged offences.
The core of the petitioner’s argument rests on the timing of his resignation and the subsequent registration of the FIR, emphasizing the lack of any legal or managerial connection between him and the company’s activities after his resignation was duly filed and acknowledged. The petitioner seeks relief from the legal burden of the FIR and the related proceedings based on these grounds.
The petitioner’s counsel argued that the FIR filed against the petitioner was unjust and baseless. The petitioner had resigned from the company on January 5, 2018, and the FIR was registered on October 1, 2018, well after the resignation. The counsel emphasized that the claim of the company falsely claiming Input Tax Credit (ITC) of Rs. 5,49,68,735 was incorrect. In reality, the company had declared ‘NIL’ transactions for the financial year 2017-18, as evidenced by the documents presented in Annexure P-4 (Colly).
The counsel criticized the Excise Taxation Officer, Ward No. 8, Gurugram (East) (respondent No. 2), for filing the complaint without proper verification. The officer’s actions led to the registration of the FIR without any substantial evidence or preliminary checks. Furthermore, since the petitioner was not associated with the company post-resignation, he could not be held accountable for any misdeeds the company might have committed after his departure. Even prior to his resignation, there was no evidence of any wrongful claims by the company as it had not engaged in any transactions.
The counsel also pointed out procedural lapses by respondent No. 2, noting the failure to issue a show cause notice to the company or the petitioner. Additionally, the respondent acted beyond his jurisdiction by initiating criminal proceedings without obtaining the required permission from the Commissioner of the Central Government as mandated by Section 132(6) of the Central Goods and Service Tax (CGST) Act. This action was deemed a serious oversight, suggesting a casual and overreaching approach by the respondent in filing the complaint.
In a legal dispute addressed by the court, the petitioner challenged an FIR registered against him after his resignation from a company on January 5, 2018. The petitioner argued that the allegations were false, particularly the claim that the company had fraudulently claimed an Input Tax Credit (ITC) of Rs. 5,49,68,735/-. He asserted that the company had reported ‘NIL’ transactions for the financial year 2017-18, supported by evidence in Annexure P-4 (Colly). The petitioner contended that the Excise Taxation Officer, Gurugram (East), had not conducted necessary verifications before filing the complaint leading to the FIR.
The petitioner also stated that since he had resigned before the alleged fraudulent activities occurred, he could not be held responsible for any wrongdoing by the company after his resignation. Furthermore, he argued that there was no evidence of any fraudulent claims by the company prior to his resignation. He criticized the Excise Taxation Officer for not issuing a show cause notice before filing the complaint and for acting beyond his jurisdiction by initiating criminal proceedings without the required permission from the Commissioner of the Central Government, as mandated by Section 132(6) of the Central Goods and Service Tax (CGST) Act, 2017. The petitioner supported his argument by citing the Supreme Court judgment in Union of India Vs. Ashok Kumar Sharma and others.
The State, represented by respondent No.2, countered these claims in a written statement dated February 22, 2021. The State’s counsel argued that the petitioner had overseen the company’s activities in Haryana during the relevant financial years and was responsible for registering the company in Gurugram, which was later found to be fake and non-existent. The company was allegedly involved in procuring bogus purchase invoices from other firms, specifically M/s Kamboj Brothers. The State’s counsel highlighted that the petitioner had personally applied for the company’s registration under the CGST Act and had conducted business as the Managing Director during the financial years 2017-18 and 2018-19.
The petitioner resigned from the Company on January 5, 2018, and it was claimed that this resignation meant he could not be held accountable for any alleged misconduct by the Company after that date. The FIR against the Company stated it fraudulently claimed Input Tax Credit (ITC) of Rs. 5,49,68,735/-, which was contradicted by records showing ‘NIL’ transactions for 2017-18. The petitioner argued that the complaint by the Excise Taxation Officer was made without proper verification and without a show cause notice, and that the officer exceeded his jurisdiction by not obtaining prior permission from the Commissioner as required by Section 132(6) of the CGST Act.
The State’s written statement, however, claimed that the Company, registered by the petitioner, was a fake entity and engaged in bogus transactions. The petitioner, as the Managing Director, oversaw its operations and signed the application for its registration. Despite the petitioner’s claim of resignation, his name remained on the GST portal, indicating ongoing association with the Company. The State argued that no application for amendment of the registration certificate had been made, suggesting the resignation claim was an attempt to evade responsibility.
The State also contended that the officers were authorized to initiate enforcement actions based on intelligence across the taxpayer base, disputing the petitioner’s claim that the Excise Taxation Officer acted beyond his jurisdiction.
to be associated with the GST portal even after the claimed resignation. The case revolves around allegations of fraudulent activities related to the Goods and Services Tax (GST) claiming Input Tax Credit (ITC) amounting to Rs. 5,49,68,735/- by a company associated with the petitioner.
The petitioner, formerly associated with the company until his resignation on 05.01.2018, contends that he cannot be held responsible for any wrongdoing by the company after his departure. His counsel argues that the company had claimed ‘NIL’ transactions for the financial year 2017-18, contrary to the allegations in the FIR, and that the actions of respondent No.2, the Excise Taxation Officer, were improper and beyond jurisdiction.
However, the state counsel presents a different perspective. She asserts that the petitioner had significant involvement in the company’s operations during 2017-18 and 2018-19, despite his resignation. The state contends that the company, purportedly registered by the petitioner, was found to be non-existent and involved in fraudulent practices such as procuring bogus invoices to claim ITC. Evidence including online returns and physical inspections allegedly confirm these activities, highlighting discrepancies between claims made and actual business transactions.
Moreover, the state argues that the petitioner’s continued presence on the GST portal and the absence of formal resignation proceedings under Section 28 of the CGST Act suggest the resignation claim was merely a facade to evade responsibility. They cite a government clarification allowing tax authorities to initiate actions based on intelligence, irrespective of administrative assignments.
The state further emphasizes that due to the non-existence of the company, formal procedures like issuing a show cause notice were impractical, necessitating the FIR registration to investigate alleged fraudulent activities. They argue that the petitioner’s involvement in obtaining false ITC through fake firms and invoices, despite no actual business transactions, caused substantial losses to the state exchequer.
In conclusion, while the petitioner asserts innocence due to resignation and lack of involvement in alleged fraudulent activities post-resignation, the state counters with evidence suggesting ongoing association with the company and significant financial discrepancies. The case underscores complex legal and procedural challenges in investigating and prosecuting GST-related fraud, with both sides vehemently defending their respective positions before the court.
The case revolves around allegations concerning the petitioner, who resigned from a company (referred to as “the Company”) on January 5, 2018. Subsequently, an FIR was registered against him on July 19, 2019, based on claims that the Company had fraudulently claimed Input Tax Credit (ITC) of Rs. 5,49,68,735/- under the Central Goods and Service Tax (CGST) Act, 2017. The petitioner denies involvement, asserting he had ceased association with the Company before the alleged wrongdoing occurred.
The petitioner’s counsel argues that the allegations in the FIR are false and unsubstantiated, emphasizing that the Company reported ‘NIL’ transactions for the fiscal year 2017-18, contrary to claims made in the FIR. They criticize the Excise Taxation Officer for filing the FIR without proper verification or issuing a show cause notice, and contend that the officer exceeded jurisdiction by initiating criminal proceedings without requisite permission.
In contrast, the State counsel asserts that the petitioner continued to oversee the Company’s operations during the relevant period and facilitated its registration, albeit allegedly under false pretenses. They argue that despite claims of resignation, the petitioner’s name remained associated with the Company on official records, including the GST portal, suggesting ongoing involvement.
The State presents documentary evidence, including online returns and electronic credit ledger entries, purportedly showing fraudulent activities such as procuring bogus invoices to claim illicit ITC. They argue that despite the petitioner’s resignation, his actions had ongoing repercussions and necessitated legal action to safeguard revenue.
The court acknowledges ongoing investigations and refrains from prejudging the allegations in the FIR. It asserts that the truth or falsity of these claims should be determined during trial based on evidence presented by both parties. Additionally, it addresses procedural arguments regarding the jurisdiction of the Excise Taxation Officer to initiate criminal proceedings without prior permission under relevant statutes.
Ultimately, the court declines to intervene at this stage and allows the investigation to proceed, emphasizing that the merits of the case will be adjudicated upon presentation of a final report under Section 173 of the Criminal Procedure Code (Cr.P.C.). The decision underscores the need for caution in exercising judicial discretion under Section 482 Cr.P.C., given the wide-ranging powers vested therein.
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