HON’BLE SRI JUSTICE SAMUDRALA GOVINDA RAJULU CRLP. NOs.153 OF 2006, 154 OF 2006 & 155 OF 2006 Date: 14.11.2009 CRIMINAL PETITION NO.153 OF 2006 Between: Smt Chandrakumari and 3 others …..Petitioners And: State of A.P., rep. By P.S. C.I.D, Hyderabad and another …..Respondents. CRIMINAL PETITION NO.154 OF 2006 Between: Smt M. Radha and 2 others …..Petitioners And: State of A.P., rep. By P.S. C.I.D, Hyderabad and another …..Respondents. CRIMINAL PETITION NO.155 OF 2006 Between: Smt M. Radha and 2 others …..Petitioners And: State of A.P., rep. By P.S. C.I.D, Hyderabad and another …..Respondents. HON’BLE SRI JUSTICE SAMUDRALA GOVINDA RAJULU CRLP. NOs.153 OF 2006, 154 OF 2006 & 155 OF 2006 COMMON ORDER: These petitions are filed by the accused under Section 482 of the Code of Criminal Procedure for quashing F.I.R Nos.19 of 2005, 20 of 2005 and 21 of 2005 dated 19.10.2005 of C.I.D Police Station, Hyderabad which were registered against the petitioners and others for offences punishable under Sections 409, 418, 477A and 120B of the Indian Penal Code. 2) Chandra Kumari is wife of G.C.M Banerjee. Ch. Madhavi and M. Radha are their daughters. Crime No.19 of 2005 was registered against all four of them. Crime Nos.20 of 2005 and 21 of 2005 were registered against the daughters and the father. Their names are referred in this order because they are differently arrayed in these three petitions. Out of them, G.C.M. Banarjee is not a partner or member in the respective concerns. According to the prosecution, G.C.M. Banrjee is looking after day-to-day management of the concerns on behalf of his family members. 3) Subject matter of these three crimes relates to the alleged evasion of payment of sales tax/commercial tax and the alleged maintenance of second set of accounts by manipulation of records and suppression of purchase and sales bills during the course of business, which records etc., were stated to have been un-earthed during raids conducted by Commercial Tax officials. On reports given by the 2nd respondent who is the then Deputy Commissioner of Commercial Tax No.II Division, Vijayawada, respective crimes were registered by C.I.D Police Station, Hyderabad for offences punishable under Sections 409, 418, 477/120B of the Indian Penal Code. 4) It is contended by Senior Counsel appearing for the petitioners that for the first time Commercial Tax Department (in short, the department) invoked penal provisions under the Indian Penal Code against persons who are said to have evaded payment of sales tax and who are said to have maintained second set of accounts and that there was no instance previously in which the department gave such reports to the police for investigation and that on allegations contained in the F.I.Rs, the department could have and should have filed complaints under relevant penal provisions contained in the A.P. General Sales Tax Act, 1957(in short, A.P.G.S.T Act). In my opinion, the alleged previous practice of not giving reports by the department to the police for offences punishable under the Indian Penal Code has no relevance because it is not going to estop or debar the department from invoking penal provisions in the Indian Penal Code for prosecuting such culprits. Such practice will not clothe the petitioners with any right of not being prosecuted for offences punishable under the Indian Penal Code. It has to be seen whether in the circumstances alleged by the department in the respective reports to the police, the department had made out ingredients required for the above penal provisions contained in the Indian Penal Code for which the crimes were registered against the petitioners. In case the prosecution prima facie makes out ingredients for relevant penal sections of law in the Indian Penal Code, the petitioners will not be entitled to stall investigation by seeking quashing of the F.I.Rs. 5) It is contended that the A.P.G.S.T Act is a self contained enactment and for any contravention of its provisions, that Act itself prescribed penalty. No doubt Sections 30(1)(c), 30(3)(a), (b), (c) and 30(8) of the A.P.G.S.T. Act make certain contraventions punishable thereunder. Section 31 of the A.P.G.S.T. Act states that it is Court of a Magistrate of the First Class which shall take cognizance of the offences under that Act and that certain offences under the Act shall be instituted, only with written consent of the Deputy Commissioner of Commercial Taxes having jurisdiction over the area. At the same time, there is no prohibition under the said Act for giving report to the police or for laying a complaint before the Magistrate if any person during the course of business or filing returns and during assessment commits any offence punishable under general law i.e., the Indian Penal Code. 6) The petitioners counsel while contending that the 2nd respondent cannot resort to prosecuting the petitioners for offences under the Indian Penal Code dehors offences under the A.P.G.S.T. Act, placed reliance on Al-Kabeer Exports Ltd., V. Commissioner of Commercial Taxes, A.P., Hyderabad[1] of our High Court in support of his contention. It was a case where the dealer pleaded that he was prohibited from collecting tax in respect of transactions on which exemption was sought, particularly in view of Sections 30(b) and 30(c) of the A.P.G.S.T. Act. There is no discussion muchless indication in that decision on the point whether offences under the Indian Penal Code cannot be resorted to when the field is also covered by offences under the A.P.G.S.T Act. So, the said reported decision has no bearing in these petitions. 7) It is contended for the petitioner that the Indian Penal Code is general enactment, whereas the A.P.G.S.T Act is a special enactment and that therefore, provisions of special enactment prevail over the general enactment. Reliance is placed on Suresh Nanda V. Central Bureau of Investigation[2] in this regard. It was a decision of the Supreme Court wherein the Supreme Court clarified distinction between ‘seizure’ and ‘impounding’ of passport by a police officer during the course of investigation under provisions of Cr.P.C. and the Passport Act respectively. It was a case relating to procedure to be adopted by a police officer during investigation. There is no indication in that decision on the point whether a special law prevails over general law for invoking substantive penal provisions. On the other hand, it is contended for the 2nd respondent that there is no prohibition in law for prosecuting an accused person both under special penal law as well as general penal law in case ingredients of both the offences are made out. I n State of Madhya Pradesh V. Veereshwar Rao Agnihotri[3] it was held by the Supreme Court that offence of criminal mis-conduct punishable under the (old) Prevention of Corruption Act is not identical in a sence import and content with offence under Section 409 I.P.C and that offence of criminal mis- conduct which is a new offence created under a new enactment did not repeal by implication or abrogate Section 409 of the Indian Penal Code and that there can be no objection for trail and conviction under Section 409 I.P.C. if the accused has been acquitted of the offence under Section 5(2) of the (old) Prevention of Corruption Act. In State of Bombay V. S.L Apte[4] it was held by the Supreme Court that offence punishable under Section 409 I.P.C and that punishable under Section 105 of the Insurance Act are not one and the same and therefore two trials are not barred under Article 20(3) of the Constitution of India or by Section 26 of the General Clauses Act. The Supreme Court observed therein: “Though S.26 in its opening words refers to “the act or omission constuting an offence under two or more enactments’, the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged. This is made clear by the concluding portion of the section which refers to “shall not be liable to be punished twice for the same offence”. If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked. It therefore follows that in the present case as the respondents are not being sought to be punished for “the same offence” twice but for two distinct offences constituted or made up of different ingredients the bar of the provision is inapplicable”. 8) In A.A. Mulla V. State of Maharashtra[5] where the accused were tried for offence punishable under Section 409 I.P.C and acquitted and subsequent prosecution of the same accused was initiated for offences punishable under the Customs Act and Gold Control Act. It was held by the Supreme Court that the second prosecution is not barred, by observing as follows: “It appears to us that the ingredients of the offences for which appellants were charged in the first trial are entirely different. The second trial with which we are concerned in this appeal, envisages a different fact situation and the enquiry for finding out facts constituting offences under the Customs Act and the Gold Control Act in the second trial is of a different nature” “Not only the ingredients of offences in the previous and second trial are different, the factual foundation of first trial and such foundation for the second trial is also not indented. Accordingly, the second trial was not barred under Section 403 Cr.P.C of 1898 as alleged by the appellant”. 9) In the light of above case law, if penal provisions under Section 30 of the A.P.G.S.T Act are analysed along with Sections 409, 418, 477 read with Section 120-B I.P.C with which the petitioners are charged, it is evident that both sets of offences are distinct and different and do not overlap each other. In this case, the 2nd respondent did not invoke Section 30 of the A.P.G.S.T Act at all against the petitioners. The 2nd respondent had directly invoked the above provisions of I.P.C against the petitioners in the respective reports given to C.I.D police. Therefore, ultimately it has to be seen whether the respondents prima facie made out ingredients for offences punishable under Section 409, 418, 477-A read with 120(b) I.P.C in this case in the respective reports against the petitioners or any of them. 10) Subject matter of Crime No.19 of 2005 is alleged evasion of sales tax to the tune of Rs.13,11,27,880/- by M/s.Associated Auto Service during the years from 1999-2000 to 2003-2004 upto July, 2004. Originally M/s.Associated Auto Service was being run by mother and two daughters in partnership. Subsequent to July, 2004 both the daughters promoted a private limited company by name M/s.Associated Auto Service Private Limited and ran the business. Subject matter of Crime No.20 of 2005 is alleged evasion of sales tax to the tune of Rs.3,33,27,718/- during the year 2004-05 by the said private limited company. Further, both daughters along with others floated another private limited company by name M/s.R.M. Motors Private Limited, and did business during the years from 2001-2002 to 2004-2005. All three concerns did business during the relevant years as dealers in Hero Honda Motor Cycles at Vijayawada. Subject matter of Crime No.21 of 2005 is alleged evasion of sales tax to the tune of Rs.6,94,71,665/- during the years from 2001-02 to 2004-05 by M/s.R.M.Motors private limited. It is alleged that on enquiries made by the Commercial Taxes Department, it was revealed that turn over of purchases and sales disclosed by the dealers in their returns and trading accounts are false and incorrect and that the dealers suppressed their turn over with intention of misappropriating taxes collected from customers which are to be paid to the Government. Basis of the complaints is the allegation that the dealers are basically trustees and custodians of taxes collected from customers and in a sense they act as agents of the Government in collecting and remitting taxes along with monthly returns. 11) At this stage, reference to various ingredients required for attracting respective offences can be usefully made. In S.Harmam Singh V. The State (Delhi Admn.)[6] the Supreme Court analysed Section 477-A I.P.C and culled out the following ingredients therein: (a) that at the relevant time, the accused was a clerk, officer or servant; and (b) that acting in that capacity he destroyed, altered, mutilated or falsified any book, paper, writing, valuable security or account which belonged to or is in the possession of his employer of has been received by him for and on behalf of his employer etc., (c) that he did so wilfully and, with intent to defraud. Thus, basically the accused must be a clerk or officer or servant at the relevant time of offence in order to attract offence punishable under Section 477(a) I.P.C. 12) For attracting the offence punishable under Section 409 I.P.C following ingredients have to be established: (a) There must be entrustment with property or with any dominion over the property, (b) The said entrustment or dominion was in the capacity of a public servant or during the course of business as a banker, merchant, factor, broker, attorney or agent, and (c) There must be criminal breach of trust in respect of that property. As per Indian Oil Corpn. V. NEPC India Ltd.[7], the following ingredients should be there to attract offence punishable under Section 405 I.P.C. (a) A person should have been entrusted with property, or entrusted with dominion over property; (b) That person should dishonestly misappropriate or convert to his own use that propery, or dishonestly use or dispose of that property or wilfully suffer any other person to do so; (c) That such misappropriation, conversion, use of disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust. 13) Section 418 I.P.C prescribes that there must be cheating with knowledge of causing wrongful loss to a person whose interest in the transaction to which the cheating relates the accused was bound either by law or by legal contract to protect. Section 415 I.P.C is attracted when (a) there is deceiving of any person, (b) the said deception is for fraudulently or dishonestly inducing the person so deceived to deliver any property to any person, and (c) it must cause damage or harm to that person in body, mind, reputation or property. 14) In the light of requirement of above ingredients in order to attract Sections 409, 418, 477-A I.P.C, it has to be seen whether the respondents made out offences punishable under the said sections. Prima facie in these cases even on the allegations contained in the respective first information reports. As pointed out earlier, it is alleged that the petitioners conspired together and falsified accounts of the above three business concerns and suppressed purchase and sale bills resulting in evasion of sales tax running into crores of rupees, details of which are given previously. Basically the prosecution has to allege and establish that the petitioners as registered dealers under the A.P.G.S.T Act are in the nature of trustees or agents or servants of the Government or Commercial Taxes Department in collecting and remitting sales tax into Government treasury along with their monthly returns. It is contended by senior counsel appearing for petitioners that there is no fiduciary relationship either as trustee or agent or servant for the petitioners vis-à-vis the Government or the Department. 15) Section 5(1) of the A.P.G.S.T.Act levies tax on sale or purchase of goods and imposes duty on every dealer to pay the same for each year on every rupee of his turn over of sales or purchases of goods in each year at the rates of tax and at the points of levy specified in the schedule. As per entry-1 of the first schedule, rate of sales tax on motor cycles is 12% of the value. As per Section 5(1) of the A.P.G.S.T Act, the tax is payable on turn over of sales or purchase of goods as the case may be. It is contended that no duty is cast on the dealer-qua government except payments of sales tax and that incidence of tax is on the dealer irrespective of the fact whether or not the dealer collects tax from its customer. There is no provision in the A.P.G.S.T Act casting any duty on the dealer to collect tax from its customer and to pay the same to the Government. Under Section 5(1) of the A.P.G.S.T Act, duty is cast on the dealer to pay the tax on turn over basis. Section 2(1)(s) of the A.P.G.S.T Act defines turn over as meaning total amount set out in the bill of sale excluding the amount collected towards tax or the tax due under the Act whichever is less. 16) In Central Wines V. Special Commercial Tax Officer[8] the Supreme Court laid down salient features of the A.P.G.S.T Act, out of which the following features are relevant: 1. There is no provision in the Act which imposes a legal obligation on the vendor of the goods to recover sales tax on the goods sold to the vendee. For instance the vendor is not prohibited from selling the goods without recovering the sales tax from the vendee. The seller may not charge or recover the sales tax from the buyer. He will not be violating any provision of the Act or incurring any penal consequence by doing so. In other words the collection of the sales tax from the buyer is a matter of his choice. He may or may not do so. If he does not do so he does not expose himself to any penal consequence or legal liability. 2. There is no legal obligation imposed by the Act on the buyer of the goods to pay sales tax at the time of the purchase of the goods. If the vendor does not insist on such payment and if the buyer does not pay the tax he does not violate any provision of the law or incur any legal liability. 3. There is no provision in the Act which casts any legal duty on the vendor to mention in the bill or the voucher issued to the buyer that sales tax has been recovered from the buyer. Nor is there any obligation on him to show that sales tax is included in the price charged or to specify the amount of sales tax separately in the bill or voucher. 4. Nothing in the Act requires the dealer to set apart the amount recovered from the vendee by way of sales tax. He is neither bound to keep a separate account of the amount so recovered nor to keep it in a separate cash box. He can treat it as his own money, keep it in his own cash box, and use it as if it were his own property. If the amount is stolen or is misappropriated by his employee it is he who loses his own money and it is not the Revenue which has to bear the loss. 5. His liability to pay sales tax is analogous to his liability to pay the municipal taxes or the income-tax, etc. The liability is to pay from his own property and not from any property earmarked for that purpose from out of the collection of tax made from the buyers. 6. The dealer is no doubt required to deposit along with sales tax return periodically the amount of tax due on the sales effected by him. But that is merely a convenient mode of discharging his liability at the intervals as enjoined by the Act. It is neither linked nor dependent on recovery if any made by him from the buyer (which he may or may not make). 7. The dealer is not paid any remuneration or reward for collecting the sales tax. If he was acting as an agent, the State would be obliged to pay him some remuneration or reward for the State cannot oblige him to work as its agent gratis. It would amount to forced labour if it were otherwise. The Supreme Court further observed: “A dealer who sells the goods does not act as an agent for the State in collecting the sales tax from the persons to whom he sells the goods. If he was acting as an agent he would be required to take reasonable care of the sale proceeds as a bailee. He would also be required to set apart the same without intermingling with his own money, for, he cannot use the monies belonging to the State for his own private purposes. If the intention of the legislature was to make him an agent, the legislature would have imposed penal liability on the vendor if he were not to collect the taxes. He would be obliged to maintain separate accounts of the collection made by him as also to treat the collections as the collections made by the agent on behalf of the principal. It is, therefore, futile to contend that the sales component of the sale price charged by the vendor to the vendee is collected by him as an agent of the State Government. Even if therefore the bill or the voucher issued to the purchaser indicates the amount of sales tax separately what is collected by the vendor from the vendee is not tax but is merely a part of the sale price charged by the vendor to the vendee. So far as the statute is concerned it does not cast any obligation on the purchaser of the goods to pay any tax and therefore what is collected by the vendor from the vendee by way of consideration for passing the property in the goods to the vendee is the price charged by him and not tax collected by him from the purchaser. The amount of money which goes from the pocket of the vendee to the pocket of the vendor as a condition or consideration for passing of the property in the goods is thus the sale price and not the tax”. 17) Further, in Mafatlal Industries Ltd V. Union of India[9] the Supreme Court held: “It is clear that when the seller passes on his tax liability to the buyer, the amount recovered by the dealer is really part of the entire consideration paid by the buyer and distinction between the two amounts-tax and price-loses all significance”. 18) In Kamala Ginning & Oil Mill V. State of Andhra Pradesh[10] this Court observed: “Mere fact that the petitioners have not collected the tax from the customers does not make the tax confiscatory as it is not an essential characteristic of the sales tax that the petitioners must have the right to pass it on to the customer”. 19) Thus, from the scheme of the A.P.G.S.T Act and case law on the subject, it is evident that there is no obligation for the dealer to “collect and remit” sales tax. It is open for the dealer either to collect or not collect sales tax from the customer. Irrespective of its collection or no collection, there is duty cast on the dealer to pay sales tax to the government on the basis of his turn over. Reckoning a dealer as trustee or agent or servant qua Government is not warranted. In the absence of any of such capacities for the dealer, it cannot be said that the dealer committed offences punishable under Sections 409 and 477-A I.P.C. There is no entrustment of any property or dominion over any property either by the customer or by the Government to the dealer. In case the dealer failed to pay the tax and evaded payment of tax, then remedy of the department is to proceed under provisions of the A.P.G.S.T Act either for collection of taxes on re- assessment or for prosecuting the dealer for the offences provided therein within the period of limitation or imposing penalties within frame work of the said Act, which is