Saurabh Kumaar Pandey vs State Of U.P. And 3 Ors
2018 Latest Caselaw 302 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

									A.F.R.
 
Court No. - 1
 
Case :- CRIMINAL MISC. WRIT PETITION No. - 2703 of 2018
 
Petitioner :- Saurabh Kumaar Pandey
 
Respondent :- State Of U.P. And 3 Ors
 
Counsel for Petitioner :- Indra Kumar Chaturvedi,Sushil Shukla
 
Counsel for Respondent :- G.A.,A.S.G.I.,B.K.Singh Raghuvanshi
 

 
Hon'ble Ramesh Sinha,J.

Hon'ble Dinesh Kumar Singh-I,J.

1. Heard Sri Indra Kumar Chaturvedi, learned counsel for the petitioner, Sri B.K. Singh Raghuvanshi, learned counsel for the respondent Nos. 2,3 and 4 and perused the impugned F.I.R. as well as material brought on record.

2. This Writ Petition has been filed seeking direction in the nature of mandamus commanding the respondent no.4, Senior Intelligence Officer, at the office of Additional Director General at Director General of Goods and Service Tax Intelligence (D.G.G.I.), Meerut Zone Unit not to arrest the petitioner on his appearance before him in connection with the investigation/enquiry of the Case File no. 01 of 2018 registered against the Company M/s Proplarity Infratech Private Limited over alleged evasion of Service Tax in violation of the provisions of Section 89 (1) (ii) of the Finance Act, 1994 read with Section 174 of the Central Goods & Services Act, 2017, being continued by him until conclusion of enquiry/investigation culminating into filing, if any, of regular criminal complaint before the competent criminal court.

3. The contention of the petitioner is that he is an Ex-Director of M/s Proplarity Infratech Private Limited, a Company incorporated under the provision of Companies Act, 1956 having its registered office in G.B. Nagar which deals in real estate. The said Company was established by the petitioner and two others i.e. Satyendra Singh Tomar, Pawan Kumar Jasuja in the year 2015. A personal dispute erupted between the petitioner and the other directors as a result of which, the petitioner was made to resign from one of Companies i.e. M/s Proplarity Infratech Private Limited and, thereafter, on 12.12.2016, he resigned from the Directorship also which was duly reported to the Registrar of the Company in accordance with law.

4. The other two partners i.e. Satyendra Singh Tomar and Pawan Kumar Jasuja had divested the petitioner from being signing authority in the bank account of the said Company with effect from 27.5.2015 which was duly communicated by them through their letter issued to the banker of the said Company, therefore, since the petitioner had nothing to do with the business carried out by the said Company from which, he had to finally resign on 12.12.2016, the business of the said Company continued to be done by Satyendra Singh Tomar and Pawan Kumar Jasuja. On 25.10.2017, the petitioner and Satyendra Singh Tomar entered into a "Deed of Settlement" in order to settle the business dispute which was executed in presence of their well-wishers according to which it was decided that the petitioner will control and handle the businesses of five Companies scheduled thereto whereas Satyendra Singh Tomar will control and handle the businesses of three Companies scheduled thereto, which included M/s Proplarity Infratech Private Limited. It was also agreed between them that they would continue to be responsible for all the liabilities of the respective Companies controlled by them including the statutory liabilities and customers advances etc. It subsequently transpired that the service tax allegedly due upon the said Company i.e. M/s Proplarity Infratech Private Limited remained unpaid as a result of which an enquiry/investigation was launched by the respondent no.4 and his officers against the said Company and its Directors for evasion of service tax which is an offence punishable under Section 89(1)(ii) of the Finance Act, 1994 with imprisonment for a term which may extend to seven years. The said penal Section had been made cognizable with effect from 14.5.2016 by way of amendment carried out under Finance Amendment Act, 2016. Under Section 90 and 91 of the Said Act (Finance Act), the procedure and power of arrest is also laid down on the default of payment of service tax.

5. Further it is mentioned that the impugned summons dated 18.1.2018 was served upon the petitioner requiring him to be present before the I.O. on 22.1.2018 in his office. It was issued by filling the blanks on a prescribed format which did not show that any case of service tax evasion was launched against the said Company. Prior to the service of the said summons, the petitioner did not have any knowledge with regard to enquiry/investigation going on as he had left the Company in the year 2016 itself. He had come to know that when the Directors of the said Company i.e. Satyendra Singh Tomar and Atul Vikram Singh appeared before respondent no.4 in response to the summons issued to them in his office on 19.1.2018, both of them were arbitrarily arrested and were later on produced before the Court of Special C.J.M., Meerut who had remanded them to judicial custody accepting the remand request made by the I.O. which was completely uncalled for and malicious. In this regard, guidelines have been issued from the office of respondent no.3, Directorate General of Goods and Services Tax (D.G.G.I.), Meerut Zone vide circular dated 30.9.2016. As per provisions, after making and concluding investigation of the offence punishable under the aforesaid Act, I.O. was duty bound to file a regular criminal complaint case under chapter XV of the Cr.P.C. for which also he was required to obtain sanction from the superior authority i.e. respondent no.3 and the said offences were compoundable. In view of the above, the applicant also apprehends that if he appears voluntarily to give evidence pursuant to the summons dated 18.1.2018, he could also be arrested. He has placed reliance upon the case of Joginder Singh Vs. State of U.P., A.I.R. 1994 (SC) 1349, wherein Supreme Court has laid down that there must be some reasonable justification in the opinion of arresting officer to justify the necessity of arrest. Thereafter, in another case i.e. Arnesh Kumar Vs. State of Bihar, (2014) 8 SCC 273 it has been laid down that the power of arrest in cases involving offence punishable with imprisonment up to 7 years shall not be resorted to, unless there exist exceptional condition as given under Section 41 of Cr.P.C., therefore, in terms of aforementioned law, the interest of the petitioner needs to be protected. It is further mentioned by him that in respect of the Companies which have been under the control and management of the petitioner after "Deed of Settlement" dated 25.10.2017, all the due taxes have been paid regularly to the concerned authorities by him from time to time and there has never been any complaint. It is further argued by the learned counsel for the petitioner that an amount of Rs. one crore was deposited by the petitioner but no such averment has been found to have been made in the affidavit or in rejoinder-affidavit filed on behalf of the petitioner. However, the said contention of depositing of the said amount has been vehemently denied by learned counsel for the respondent Nos. 2,3 and 4

6. From the side of the respondent Nos. 2, 3 and 4 opposing the contention of the petitioner, following contentions have been made by filing counter-affidavit stating therein that the petitioner has not given any reason/documents as to why he was made to resign and divested from being signing authority in the bank account of the said Company with effect from 27.5.2015. The letter sent to the bank does not indicate the date on which the same was received by the bank and also the petitioner is silent in respect of other bank accounts of the Company. When the petitioner has nothing to do with the business carried out by the M/s Proplarity Infratech Private Limited, why he continued to remain Director of the same from 27.5.2015 to 12.12.2016 i.e. period of more than one and half years. It is further mentioned that the liability to pay service tax or for that matter any tax is a statutory liability imposed by statute under the authority of law in terms of Article 265 of the Constitution. In the present case, the liability to pay service tax arises under Section 66 (B) of the Finance Act, 1994 which states that there shall be levied a tax (herein after referred to be service tax) at the rate of 14%. On the value of all services other than those services specified in the negative list provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Further, the definition of a 'person' under Section 65 (B), clause 37 of the said Act includes a 'Company' also, hence, the said Company is person under the Finance Act, 1994 and under Section 9AA of the Central Excise Act, 1994 which is applicable to the service tax matters vide Section 83 of Finance Act, 1994, there is a vicarious responsibility cast upon the Directors to pay the service tax. The said Section 9AA of the Act makes it absolutely clear that the Directors of the Company and other persons are liable for the offence. The Section 168 of the Companies Act, 2013 stipulates that the Director who has resigned shall also be liable even after his resignation for the offences which occurred during his tenure. Thus, the penal/statutory liability which has been imposed by a statute (in this case Section 9AA of Central Excise Act, 1944 and proviso to sub-Section (2) of Section 168 of the Companies Act, 2013) cannot be over-written by contractual "Deed of Settlement". Therefore, the contention of the petitioner regarding "Deed of Settlement" does not stand scrutiney of law. The petitioner himself has accepted the fact that the service tax was due from M/s Proplarity Infratech Private Limited which remained unpaid, as a result of which, an inquiry/investigation was started by the respondent against the said Company and its Directors for evasion of service tax which is an offence punishable under Section 89(1) (ii) of the Finance Act, 1994. It is further submitted that only those documents related to the said Company may be seized which were found available in the premises of the said Company. For further investigation, the searches have also been made at the premises of other Directors and other concerned persons. Further, it is submitted that there is no requirement of any prior notice before issuing summons under Section 14 of the Said Act. In fact, the summons can be issued to any person whose attendance is considered necessary either to give evidence or to produce the document or any other thing in any inquiry which a Central Excise Officer is making for any of the purposes of the said Act. The other two Directors i.e. Satyendra Singh Tomar and Atul Vikram Singh who appeared in compliance with summons dated 19.1.2018 gave clinching evidence including one hand-written diary mentioning cash receipts of Rs. 45,10,46,081/- (Rs. 45.10 Crore) on which no service tax had been paid. Their arrest was made following due process of law and as per guidelines laid down by C.B.E.C. (Central Board of Excise and Customs) vide its circular dated 30.9.2016. Further it is mentioned that the apprehension of the petitioner for being arrested is unfounded as he could show his honest intention by appearing in response to the summons issued to him and could have cooperated in the investigation. He had got complete 17 days time since service of summons upon him but during this entire period, he concealed himself and did not deposit any amount of service tax. The attention of the Court has also been invited to the fact that till date no commercial space/unit has been constructed in the project BizLife Complex at Sector-62 , Noida which clearly shows that the intention of the fraud not only with the Government but also with customers, was there from whom the advances along with service tax had been collected by the Company. Further it is submitted that due to personal dispute with Co-Directors, the petitioner was removed and divested of the right of being signing authority in the bank account of the said Company with effect from 27.5.2015 and, thereafter, he resigned with effect from 12.12.2016 but as per record, petitioner remained Director in the said Company from 29.8.2013 to 12.12.2016 and during his Directorship, more than two crores of service tax was received by him from the customers but the same was not deposited into Government account. It is further submitted that there are six essential ingredients laid down by C.B.E.C. vide circular dated 30.9.2016 relating to arrest which have been mentioned in the written submissions of the counter-affidavit in para 18 which are required to be established to the satisfaction of the competent authority before ordering arrest. However, if the alleged offender is assisting in the investigation and has deposited at least half of the evaded tax, then the need to arrest may not arise. In the case at hand, all the ingredients were established to the satisfaction of the competent authority. The service tax collected but not deposited for the period of 2014-2015, 2015-2016 and 2016-2017 goes beyond Rs. 4.80 crores and the alleged offender has neither shown any intention of assisting in the investigation nor he deposited at least half of the evaded tax and there was great probability of destruction of evidence, therefore, the arrest became inevitable. Further, it is mentioned that simply because the offence is compoundable, does not place any embargo on the power of arrest vested in Section 91 of the Finance Act. All the Directors are passing their responsibility on one another and none of them has paid full dues towards the service tax along with interest and penalty nor have they provided requisite details to the department. Also the cash transactions figures of around 45 crore remain unexplained by the three accused Directors, thus, they have committed a crime against the country by collecting taxes from the customers and not depositing the same to the Government rather misappropriated the said money. This is an offence of grave and serious nature, hence, no indulgence should be granted to the petitioner.

7. The rejoinder affidavit has been filed from the side of the petitioner wherein the contention which were made in the affidavits in support of the petition have been reiterated and the contention made by the learned counsel for the respondent no.2 have been refuted. Mainly, it has been stated in rejoinder-affidavit that for making out a case against the petitioner accused, no definite liability in terms of money has been fixed, hence the protection should be granted to the petitioner against any kind of arrest which is likely to be made in case, the stay is vacated.

8. Perused the entire record and heard both the counsel.

9. It is apparent from the above details that the petitioner has been provided summons under Section 14 of the Central Excise Act, 1944 which is applicable in the present case.

10. From the rival contentions it is apparent that the petitioner is alleged to have resigned from the directorship of the Company in question i.e. M/s. Proplarity Infratech Private Limited in the year 2016 and therefore he is denying to have any liability towards payment of any dues concerning service tax and is taking the plea that the liability for the same is upon the other two Co-Directors who are still running the business of the said Company and it is also stated by him that both the other Co-Directors had already been arrested by the respondent no. 4, the investigating officer when they appeared in his office in response to summons issued to them because they could not make the payment of outstanding amount of service tax which constituted an offence under Sections 89 (1) (ii) of the Finance Act, 1994. Therefore the petitioner is apprehending his arrest also in case he appears before respondent no. 4 who had issued notice to the petitioner also in the same matter. According to the petitioner the arrest of the Co-Directors was arbitrary and illegal because in a case punishable with imprisonment of up to 7 years as laid down in Arnesh Kumar vs State of Bihar (supra) the arrest of an accused should be made only in exceptional conditions given in Section 41 Cr. P.C. and hence his likely arrest in case of vacating the stay would also be illegal. On the other hand the respondents have clearly stated that according to the documentary evidence the said Company is shown to have collected service tax for the period 2014 - 15, 2015 - 16 and 2016 - 17 to the tune of Rs. 4.80 crore and the investigation reveals that no deposit of the said amount has been made with the respondents, therefore against the Directors of the said Company an offence punishable under Sections 89 (1) (ii) of the Finance Act is made out. It is further apparent that the petitioner has also been issued a notice under Section 14 of the Central Excise Act, 1944 as made applicable to service tax matters vide Section 83 of the Finance Act, to interrogate the petitioner, to which the petitioner avoided from appearing before the investigating officer and has taken shelter of court by filing the present writ petition. It is also apparent that as per the scheme of the Finance Act an offence under Section 89 of Act is a cognizable offence by virtue of Section 90 and in Section 91 power of arrest is conferred upon an officer of the Central Excise Department not below the rank of Superintendent of Central Excise nominated by the Principal Commissioner of Central Excise or Commissioner of Central Excise who would adopt the same procedure as provided under Cr.P.C. for arrest. It is also made clear that it being an economic offence separate guidelines have been issued by the Department of the respondents which need to be followed while making arrest and the most important among them being that in case the accused is ready to deposit at least half of the service tax due, the need to arrest may not arise. It is argued from the side of the respondents that the petitioner neither made himself available for being interrogated nor was ready to deposit half the amount of service tax due to be realised, hence no protection may be given to the petitioner. It is also made clear by the respondents that even if any Director resigns, he cannot seek exoneration from liability of making payment of service tax, simply because he resigned from the post of Director, if the service tax due is for the period when the accused was a Director. In the case at hand it is clarified by the respondents that there is a huge amount of service tax outstanding belonging to the period when the petitioner was one of the Directors of the said Company, therefore he cannot take the plea of not being liable to pay in terms of the "Deed of Settlement" which is alleged to have been executed between other two Co-Directors and him, the dues being statutory duty to be cleared.

11. In the above conspectus we find that no case is made out in favour of the petitioner to pass any order prohibiting his arrest, if the same has to be carried out in accordance with the provisions as provided under the Finance Act. The prayer deserves to be dismissed and is accordingly dismissed. The interim order, if any shall stand vacated.

12. This Writ Petition is, accordingly, dismissed.

(Dinesh Kumar Singh-I.,J.)      (Ramesh Sinha,J.)
 
Order Date :- 2.5.2018/A. Mandhani