Kar Vivad Samadhan Scheme Grants Immunity From Prosecution In Only Tax Matters; Gujarat HC Affirms Sec 464 IPC Charges Against Director

Gopal Glass Works vs Union of India [Decided on November 17, 2025]

November 19, 2025

Finding that the manufacturer (petitioner) had made a declaration before the tax authority under the Kar Vivad Samadhan Scheme, 1998, and claimed the thickness of the glass to claim a particular tax regime and evaded the tax duty, the Gujarat High Court (Ahmedabad Bench) ruled that prima facie making of a false declaration before the Government authority to claim the tax benefit attracts the definition of ‘forged documents’, as defined under Section 464 of the IPC. Accordingly, the Court dismissed the petition against the petitioner as well as the managing director.

The Court noted that the prosecution against the petitioner and its managing director was launched in the year 1994, and the criminal case was filed on April 07, 1994, which was much prior to the launching of the Kar Vivad Samadhan Scheme. Therefore, merely because the petitioner has accepted the Scheme and paid the tax thereon, for which the prosecution has been launched against him in priori, it cannot be said that the petitioners were given immunity from the prosecution, which was initiated much before the launching of the scheme.

As far as the submission regarding the acceptance of the Kar Vivad Samadhan Scheme, 1998 and the payment of the arrears of tax by the petitioners are concerned, the Court clarified that the Kar Vivad Samadhan Scheme, which operates prospectively and not retrospectively, provides immunity to initiate prosecution only under direct tax or indirect tax; and no immunity is provided for any other offences. Apt to note that immunity is provided from the institution of a fresh Criminal Case.

A Single Judge Bench of Justice D.C. Doshi observed that the prosecution of the Directors of the Company requires proving their active personal involvement or knowledge in the offence or a statutory provision that imposes liability upon them. Essentially, the criminal liability cannot be based on designation alone, but has to be on the role they played in the company’s affairs.

The Bench explained that since the companies are distinct legal entities separate from their Directors and shareholders, the Doctrine of Separate Legal Personality will prevail, except if a specific statutory provision or circumstances warrant lifting the corporate veil. Such averments in the complaint are missing, which may prima facie establish the personal involvement of the petitioners in any specific statutory provision.

Briefly, a search was conducted by the officers of the Central Excise Department on the factory premises of the petitioner, engaged in the manufacturing of figured and rolled glass, to unearth that the petitioners were writing different thicknesses in their packaging slips than the thickness mentioned in the production record, without any measuring apparatus. Accordingly, the Collector of Central Excise & Customs held that the petitioners have evaded duty of Rs. 25.79 lacs, being the duty on the amount realised by the way of contingency bills aggregating to Rs. 3.31 lacs, and therefore, ordered recovery of the said duty under the proviso to Section 11A(1) of the Central Excise Act, 1944. The goods were confiscated and a penalty of Rs. 5 lacs was imposed under Rule 173Q of the erstwhile Central Excise Rules, 1944.

On appeal, the CESTAT ordered the petitioner to deposit Rs. 10 lacs under Section 35F of the 1944 Act, which was duly complied with in two instalments. In the meantime, and during the pendency of the appeal, a ‘Kar Vivad Samadhan Scheme, 1998’, was introduced by the government, which permitted the settlement of “tax arrears”. Thus, to settle the dispute, the petitioner filed a declaration in Form 18, which was accepted, and the Commissioner of Central Excise issued a certificate in Form 2B to the petitioners, directing them to pay Rs. 9.55 lacs within 30 days, which was duly complied with, and resultantly, the petitioners were certified about the full and final settlement of their tax arrears.

However, after more than a decade, the petitioners were shocked to receive the summons from the Court of Chief Judicial Magistrate, for offences under Sections 468 and 120B of the IPC read with Section 9 of the Central Excises and Salt Act, 1944. Hence, the petitioners had approached the High Court seeking the quashing of that summons.