prosecution & arrest under tax & corporate lawsimp. aspects related to bail 1. no bar in...

Chir Amrit Corporate

School

PROSECUTION & ARREST

UNDER TAX & CORPORATE LAWS

SANJAY JHANWARAdvocate

Data on Prosecution• The government has detected Goods and Services Tax (GST) evasion of

over Rs 45,000 crore during the financial year 2018-19. Of this,

tax sleuths have recovered an amount of Rs 25,000 crore during thisperiod, as per the data available with the finance ministry. The casesregistered by the tax authorities range from misuse of Input Tax Credit(ITC), misdeclaration to non-filing of GST returns. The most commonmodus operandi of evasion is the use of fake invoices. Close to 2,000cases of fake invoices involving Rs 8,000 crore were registered during2018-19. Tax sleuths recovered Rs 736 crore of the total tax evaded onaccount of fake invoices.

• Source: DNA India

© Chir Amrit Corporate School

MAJOR LAWS COVERING ECONOMIC OFFENCES

Income Tax Act, 1961

Companies Act, 2013

Goods and Service Tax Act, 2017

Prevention of Money Laundering Act, 2002

Foreign Exchange Management Act, 1999

Black Money (Undisclosed Foreign Income & Assets) & Imposition of Tax Act, 2015


Examples

• S. 74: Repayment of Deposit

• S. 26: Mis-statement in prospectus

• S. 134 Mis-statement in finanical stmt., board report

Companies Act, 2013

• S. 276C: Willful attempt to evade tax, penalty or interest

• S. 276CC: Failure to furnish return of Income

• S. 277A: Falsification of books of accounts or documents

• S. 278: Abetment of false return etc.

Income Tax Act, 1961

• Supply of goods or services without invoice with intention to evade tax;

• Issue of invoice or bill without supply of goods or services leading to wrongful availmentor utilization of input tax credit or refund of tax;

• collects any amount as tax but fails to pay the same to the Govt. beyond a period of 3 months.

• Fraudulently avails input tax credit or obtains refund

Goods & Service Tax, 2017 (S. 132)

• S.3: Money Laundering

Prevention of Money Laundering Act, 2002

S.69 GST ACT

Where the Commissioner has reasons to believe that a person has committed any

offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) ofsection 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) ofthe said section, he may, by order, authorise any officer of central tax to arrest such person:

POWER TO ARREST


Section 132: Whoever commits any of the following offences, namely:

(a) supplies any goods or services or both without issue of any invoice,

in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of

the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax;

(c) avails input tax credit using such invoice or bill referred to in clause (b);

(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due

S.132: Whoever commits any of the following offences, namely:


(e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund andwhere such offence is not covered under clauses (a) to (d);

(f) falsifies or substitutes financial records or produces fake accounts or documents orfurnishes any false information with an intention to evade payment of tax due under thisAct;

(g) obstructs or prevents any officer in the discharge of his duties under this Act;

(h) acquires possession of, or in any way concerns himself in transporting, removing,depositing, keeping, concealing, supplying, or purchasing or in any other manner dealswith, any goods which he knows or has reasons to believe are liable to confiscation underthis Act or the rules made thereunder;

(i) receives or is in any way concerned with the supply of, or in any other manner dealswith any supply of services which he knows or has reasons to believe are in contraventionof any provisions of this Act or the rules made thereunder;

(j) tampers with or destroys any material evidence or documents;

(k) fails to supply any information which he is required to supply under this Act or the rulesmade thereunder or (unless with a reasonable belief, the burden of proving which shall beupon him, that the information supplied by him is true) supplies false information; or

(l) attempts to commit, or abets the commission of any of the offences mentioned inclauses (a) to (k) of this section,

SECTION 132 (2)

Where any person convicted of an offence under thissection is again convicted of an offence under this section,then, he shall be punishable for the second and forevery subsequent offence with imprisonment for a termwhich may extend to five years and with fine.

REPEAT OFFENCES


Clause Amount of evasion

Cases Term of Imprisonmen

t

(i) > 5 Cr. Tax evasion/ Wrong availment/ utilization of Input tax credit/ Wrong Refund132 (a) (b) (c) and (d)

Upto5 Years with fine

(ii) Dutyevasion > 2Cr< 5 C

Tax evasion/ Wrong availment/ utilization of Input tax credit/ Refund

Upto

3 Years with

fine

(iii) Dutyevasion> 1 Cr< 2 Cr

Tax evasion/ Wrong availment/ utilization of Input tax credit/ Refund

Upto1 Year with fine

(iv) ------ Where one commits or abets the commission of offence specified in clause (f) or (g) or (j) (Falsifies/Obstructs/Tampers)

Upto 6 monthsor with fine


Cognizable & Non-Bailable

Non-Cognizable & Bailable


Classification of offences

OFFENCES

Bailable

Non-Bailable

2(a) BAILABLE OFFENCE - an offence which is shown as bailable in 1st Schedule, or which is made bailable by any other law for the time being

in force; and NON-BAILABLE OFFENCE means any other offence;

A bailable offence is one, in which, bail is a matter of right, and non bailableoffence is one, in which granting of bail is discretion of court. Eg. Defamation(bailable + Non-Cognizable); Misleading statement in Prospectus u/s. 34, CA,2013


Classification of offences

OFFENCES

Cognizable

Non-Cognizable

2(c) "COGNIZABLE OFFENCE" means an offence for which, and "cognizable case" means a case in which, a police officer may, in accordance with the 1st Schedule or under any other

law for the time being in force, arrest without warrant;

Cognizable offences are offences which are serious in

nature & police may investigate & arrest without order of

magistrate.

Eg. Illegal gratification (bribe) by Public Servant

2(l) "NON-COGNIZABLE OFFENCE"means an offence for which, and "non-cognizable case" means a

case in which, a police officer has no authority to arrest without

warrant;


Types of cases

2(x)

WARRANT CASE

Means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding

2 yrs; (Eg. Murder, Rape)

2(w)

SUMMONS CASE

Means a case relating to an offence, & not being a warrant-case;

In other words, summon cases are those in which punishment will not exceed imprisonment

for 2 yrs. (Eg. Defamation)


Basic Terminology• The act of being taken into legal custody to be formally charged with a crime.

ARREST

• Prosecution is the action of charging someone with a crime and putting them on trial.

Prosecute or Prosecution

• When a judge after trial find the accused guilty of the offense he is charged with, then the accused is convicted.CONVICTION

• When a judge finds the accused not guilty after trial, the accused is acquittal i.e. he is held not guilty and set free. ACCQUITAL

• Sentence is the punishment which is accorded to an accused who has been convicted. SENTENCE


Basic Terminology

2(d) "COMPLAINT" means any allegation made orally orin writing to a Magistrate, with a view to his taking actionunder this Code, that some person, whether known orunknown, has committed an offence, but does not includea police report.

2(g) "INQUIRY" meansevery inquiry, other thana trial, conducted underthis Code by aMagistrate or Court;

2(h) "INVESTIGATION" includes all theproceedings under this Code for the collectionof evidence conducted by a police officer or byany person (other than a Magistrate) who isauthorized by a Magistrate in this behalf;

2(i) JUDICIAL PROCEEDING

includes any proceedingin the course of whichevidence is or may belegally taken on oath;


Basic Terminology

“POLICE CUSTODY” &

“JUDICIAL CUSTODY”

• PC means that police hasphysical custody of accusedwhile JC means an accused is inthe custody of the concernedMagistrate i.e. Prison.

• In PC, the accused is lodged inpolice station lockup, while in JC,he is jail. When Police takes aperson into custody, it produceshim before a Magistrate within24 hrs of arrest.

CHARGESHEET

• A charge-sheet is prepared afterFIRs, & charges accused for thecrimes specified in the FIR. Oncethe charge sheet has beensubmitted to a court of law, thecourt decides as to who amongthe accused has sufficient primafacie evidence against him to beput on trial.


PROCEDURE IN COMPLAINT CASE

Recourse

Court takes cognizance and call

the accused by:

Governed by CrPC Procedure

Summon or BailableWarrant

Appear & furnish bail

bond

Non-Bailable/ Arrest

Warrant

App. u/s. 70(2) of CrPC

Anticipatory Bail or S.482


Imp. Stages of criminal trial

Acquittal/ Conviction

Arguments

Defence Evidence

Prosecution Evidence

Discharge/ Framing of charge

Chargesheet

Arrest/Bail


PROCESS AFTER ARREST?

Taken in police custody and

kept in policestation.

Produces before the magistrate

within 24 hrs

Police may seek remand

If remand granted, then

person is further kept in

PC for investigation

If remand not granted, then

JC

Bail Application is filed only

when person is sent to JC.


BAIL - MEANING

‘Bail’ is temporary release from

imprisonment on furnishing requisite

security/surety to appear for trial.

Regular Bail

Interim Bail

Default bail

Anticipatory Bail

Transit Bail

Parole


DEFAULT BAIL

If chargesheet is not filed within stipulated time limit of60/90 days (S. 167)

If a person has undergone detention for a period of almostone half of max. period of imprisonment specified for theoffence for which he is being tried. (S. 436A)


RELEVANT FACTORS FOR GRANT OR DENIAL OF BAIL

Nature or seriousness of the offence

Prima-facie or reasonable ground to believe that the accused had committed the offence

Danger of accused absconding or fleeing if released on bail

Possibility of influencing the witnesses & tampering the evidence

Previous conduct, character, behavior, position & standing of the accused in society

Period of detention of the accused

Economic condition of the family of the accused & their dependency on the accused for survival

Health, age & sex of the accused

Possibility for repetition of crime

Time lag between the date of occurrence & conclusion of trial

Severity of the punishment in the event of conviction


Imp. aspects related to Bail

1. No bar in filing successive bail applications

2. Bail order could be conditional also

3. Bail once granted is subject to subsequent cancellation or modification

4. Anticipatory Bail u/s. 438 could be filed even if there is no FIR or if the accused is not named in the FIR.

5. If HC dismisses bail application then it is filed before Hon’ble SC by way of SLP (Special Leave Petition).


GRANT OF REGULAR AS WELL AS ANTICIPATORY BAILCOULD BE CONDITIONAL:

Surrender passport

Person on bail does not interfere with the investigations or intimidate witnesses

Co-operate in the investigation

Deposit certain amount by way of FDR


CASE LAWS

Sumit Mehta v. St. of NCT - SC held that “Any condition” while granting bail

has to be interpreted as a reasonable condition acceptable in the facts

permissible in the circumstance and effective in the pragmatic sense and

should not defeat the order of grant of bail. SC set aside the decision wherein

Bail was granted with direction to deposit Rs. 1 cr. in FDR.

Sheikh Ayub vs. St. of M.P - SC held that the direction to deposit Rs. 2.5

lacs which is alleged to be the amount mis-appropriated by the Accused was

not warranted, as part of the conditions for granting bail.


S.482: Inherent Powers of HC

S. 482: Nothing in this Code shall be deemed to limit or affect the inherentpowers of the High Court to make such orders as may be necessary to giveeffect to any order under this Code, or to prevent abuse of the process of anyCourt or otherwise to secure the ends of justice.

Imp. Points:1. Only with High Court (not with lower courts)2. Quashing of FIR can be done.3. Direction of no coercive action or stay on arrest (akin to anticipatory bail)4. Investigation or trial could be stayed.5. Prior notice be given to the accused before arrest.


HABEUS CORPUS

Art. 226 of Constitution: Writ of Habeas Corpus Challenges the legality of detention Order. It is a means to secure the liberty ofthe person illegally detained.

Court is concerned with the jurisdiction of detention order & not with thequestion whether it is correct on its merits. Writ of Habeas Corpus cannot beused as a means of appeal but only as a means of review.

Instances:a. Order of detention made by subordinate body is ultra vires.b. Detention made is unconstitutional (eg. contravenes Art. 14.)c. Authority who gives detention order is not properly constituted or is

otherwise without jurisdiction.d. Detention Order is ultra vires the statute.e. Order made by authority is ex facie outside the authority delegated to him.f. Ground upon which detention order is made is invalid or irrelevant.


Prison & Prisoners

“PRISON” means any jail or place used permanently or temporarily under thegeneral or special orders of a St. Govt. for the detention of prisoners, andincludes all lands and buildings appurtenant thereto, but does not includeany place for the confinement of prisoners who are exclusively in the custodyof the police. [S.3(1)- The Prisons Act, 1894 & S. 266(b) of CrPC]

CATEGORY OF PRISONERSa. Criminal Prisoners [S.3(2)]b. Convicted Criminal Prisoners [S.3(3)]c. Civil Prisoner [S.3(4)]

UNDERTRIAL: A person who has been committed to prison custody withpending investigation or trial by a competent authority (and not beingconvicted till date).


OPEN PRISON

Open jails are minimum security prisons in which prisoners areallowed to work with the society and left free with less controland less scrutiny.

14 states have functioning Open Jails in their jurisdiction.Rajasthan reported the highest number of 23 open jails. Thereare no Open Jails in any of the UTs.


Rights of prisoners

Prisoner’s Rights under the Prisons Act, 18941. Examination of prisoners by qualified Medical Officer [S. 24(2)]2. Unconvicted Prisoner shall be permitted to purchase food, clothing, bedding orother necessary items subject to such examination & rules as approved by the IG[S.31].

Prisoner’s Rights under the Article 21, Constitution of India3. Right to free legal aid [M.H. Hoskot v. St. of Maha., [(1978) 3 SCC 544]

4. Right to meet friends & consult lawyer [Sunil Batra v. Delhi Admn, AIR 1980 SC 1579]

5. Rights against solitary confinement, handcuffing & protection from torture [PremShankar Shukla v. Delhi Administration, AIR 1980 SC 1535]

6. Right to reasonable wages in prison [People’s Union for Democratic Rights v. UOI, AIR 1982

SC 1473]

7. If one wants home cooked food, then he has to seek permission from JailSuperintendent or court


Plea Bargaining

An accused can plead guilty & in result can bargain for lesser sentence. It is a pre trialnegotiation b/w prosecution & accused (S. 265 A to 265 L of CrPC).

Not applicable in case if:a. Offence in which sentence is more than 7 yearsb. Offence committed against a woman or a child below 14 yrsc. Accused not previously convicted for the SAME offenced. Offence does not affect socio-economic condition of the country

BENEFITSa) Court can release the accused on probation u/s 360 of CrPC or under Probation

of Offenders Act, 1958 or under any other law in force if such provisions areattracted.

b) If min. punishment is provided, then court may sentence the accused to half ofthe such min. punishment

c) If no minimum punishment is provided, then court many sentence the accusedto one fourth of the punishment provided.

d) The period already undergone in custody shall be set off u/s 428 of Cr.P.C


Defence strategy

Limitation (S. 468)

Procedural lapses like sanction not given by proper authority

Compounding

THANK YOU

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