2020 (2) TMI 620 - HC - GST

Denial of Anticipatory Bail in Economic Fraud Case

Govind Agarwal Versus State of U.P. and Another

The court denied the anticipatory bail application due to the seriousness of economic fraud and tax evasion allegations against the applicant. It ruled ... Grant of anticipatory bail - GST evasion - FIR lodged - main point which has been emphasized by the learned counsel for the applicant is that because no proper notice has been served upon the applicant demanding outstanding amount of GST, therefore, there was no necessity of the accused being arrested - HELD THAT:- This is not a fit case in which indulgence of granting anticipatory bail should be exercised because it has come on record that the applicant's firm was found indulging in running business from bogus address and a huge transaction is shown to have been done without there is any such big transaction reflected from the account of the firm. The argument of the learned counsel for the applicant that notice is required to be issued to the accused before lodging FIR also does not sound to be a reasonable view because there are offence alleged to have been committed under sections 420, 467, 468, 471, 34 and 120B IPC also regarding which no such notice is required to be sent. It is found to be a case of economic fraud in which normal course adopted by the Courts should be not to grant stay against arrest because investigation might require custodial interrogation as well. This court is not to be guided only by the fact that apart from IPC, offence under U.P. Act is also said to have been committed which requires notice to be issued to the accused and in totality of the matter this Court finds that there is no genuine ground to grant relief of anticipatory bail to the accused-applicant in this matter. Looking to the aforesaid fact, taking into consideration the gravity of accusation, and there being possibility of his fleeing from justice, without expressing any opinion on the merits of the case, this Court does not find good ground for enlarging the applicant on anticipatory bail in this case. The anticipatory bail application is rejected. Issues Involved:1. Legality of anticipatory bail application.2. Allegations of tax evasion and fraud.3. Validity of FIR without prior notice under GST laws.4. Applicability of IPC sections in GST-related offenses.5. Judicial precedents and their relevance to the case.Issue-wise Detailed Analysis:1. Legality of anticipatory bail application:The applicant sought anticipatory bail under Section 438 Cr.P.C. during the pendency of investigation for offenses under various sections of the IPC and GST Act. The court considered the gravity of the accusations, including economic fraud and the possibility of the applicant fleeing from justice. The court concluded that anticipatory bail should not be granted, emphasizing that custodial interrogation might be necessary for the investigation.2. Allegations of tax evasion and fraud:The FIR alleged that the applicant, proprietor of Govind Enterprises, committed offenses under Sections 420, 467, 468, 471, 34, and 120B IPC and Section 122 GST. The investigation revealed that the applicant registered a business at a bogus address and engaged in significant transactions without proper documentation, suggesting tax evasion. The applicant's firm was found to be operating from a non-existent address, and the transactions did not match the financial status reflected in the firm's bank account.3. Validity of FIR without prior notice under GST laws:The applicant argued that no proper notice demanding the outstanding GST amount was served before lodging the FIR, making the FIR improper. The court referenced various judgments emphasizing that a show-cause notice is a mandatory requirement for raising a demand. However, the court found that the nature of the offenses under the IPC did not necessitate such a notice, and the FIR was valid even without prior notice under GST laws.4. Applicability of IPC sections in GST-related offenses:The court examined whether the IPC sections could be applied to GST-related offenses. The FIR detailed how the applicant's actions constituted cheating, forgery, and conspiracy, which are punishable under the IPC. The court held that the IPC sections were applicable in this case, as the fraudulent activities extended beyond mere tax evasion and involved criminal conduct.5. Judicial precedents and their relevance to the case:The applicant cited several judicial precedents, including Radheshyam Kejriwal vs. State of West Bengal, Chitira Builders P. Ltd. vs. Addl. Commr. Of C, C.E. & S.T. Coimbatore, and Metal Forgings vs. Union of India, to argue that criminal proceedings should not continue if the adjudication exonerates the accused on merits. The court acknowledged these precedents but found that they did not apply as the investigation was still ongoing, and no adjudication had exonerated the applicant. The court also referenced the Division Bench's finding that the FIR's allegations were sufficient to constitute offenses under the IPC.Conclusion:The court rejected the anticipatory bail application, emphasizing that the applicant's firm was involved in economic fraud and tax evasion. The FIR was found to be valid despite the lack of prior notice under GST laws, and the IPC sections were applicable to the case. The judicial precedents cited by the applicant were not found to be relevant at this stage of the investigation.