2020 (10) TMI 570 - HC - GST

Denial of Anticipatory Bail to One Applicant, Granted to Another with Conditions

The court denied anticipatory bail to applicant no.1 due to the necessity of custody to prevent tampering with evidence and ensure a thorough ... Grant of Pre-arrest Bail - non-bailable offence in terms of Section 132(1)(b) and (c) read with Section 132(5) of the Central Goods and Services Tax Act, 2017 - main allegation of the respondents is that, applicants are guilty of circular trading by claiming Input Tax Credit on the materials never purchased and passing on such Input Tax Credit to companies to whom they never sold any goods - HELD THAT:- It is to be noted that, applicants in their written submissions did not explain why applicants could not produce invoices and other documents before the respondent-Officer and further when such invoices came in their possession. Applicants ought to have been explained and furnish the explanation in view of the fact that, M/s. Jai Bajrang Traders, the sole supplier has lodged FIR against the applicants for forging the invoices - Be that as it may, when respondents were confronted with these invoices and transport receipts, learned Counsel for the respondent would submit that invoices and transport bills were submitted to the office of the respondents recently. He would submit, some of the invoices and transport bills were verified by the Officer which revealed that, many of the vehicle numbers are bogus and further also found that vehicle’s registration date is latter then the lorry receipt dates. Taking into consideration, the facts of the case, though the officers under the CGST Act, cannot seek custody of the arrested persons for completing the investigation, respondent’s contention that applicant’s detention in custody is necessary to prevent him from causing the evidence of the offence to disappear or tampering such evidence is well founded - in the larger interest of the public and the State, in serious cases like this, I am not inclined to exercise discretion under Section 439 of the Criminal Procedure Code in favour of applicant no.1. Pre-arrest bail of applicant no.1 is rejected - Pre-arrest bail of applicant no.2 is granted, subject to conditions viz. that in the event of her arrest, she shall be released on bail on furnishing bond in the sum of ₹ 50,000/- with one or more sureties in the like amount - prayer dismissed. Issues Involved:1. Legality of arrest under Section 438 of the Criminal Procedure Code.2. Allegations of availing fraudulent Input Tax Credit (ITC) under the CGST Act.3. Requirement of assessment before prosecution.4. Necessity of First Information Report (FIR) for arrest.5. Parity with other similar cases.6. Production and verification of documents supporting ITC claims.Detailed Analysis:1. Legality of Arrest under Section 438 of the Criminal Procedure Code:The applicants sought directions under Section 438 of the Criminal Procedure Code for anticipatory bail in the event of their arrest on accusations of committing non-bailable offenses under Section 132(1)(b) and (c) read with Section 132(5) of the CGST Act. The court noted that the Commissioner had 'reason to believe' the applicants' complicity in the offense, thus justifying the potential arrest under Section 69 of the CGST Act.2. Allegations of Availing Fraudulent ITC:The applicants, partners of a registered firm, were accused of availing ITC worth Rs. 63.50 crores based on invoices from a non-genuine firm, M/s. Jai Bajrang Traders, without actual receipt of goods. The investigation revealed the absence of proof of goods movement, e-way bills, or payment within 180 days, violating Section 16(2) of the CGST Act. The applicants' firm allegedly passed on the fraudulent ITC to other closely held entities, further implicating them in circular trading.3. Requirement of Assessment Before Prosecution:The applicants contended that prosecution under the CGST Act requires prior assessment or special audit to determine liability. The court rejected this argument, stating that the provisions of Chapter-XIX (offenses and penalties) and Chapter-XII (assessments) of the CGST Act are distinct and independent. The court emphasized that the prosecution provisions are not contingent upon the assessment procedures.4. Necessity of FIR for Arrest:The applicants argued that an FIR is a prerequisite for arrest. The court dismissed this contention, clarifying that under Section 69 of the CGST Act, the Commissioner can authorize an arrest based on 'reason to believe' that an offense under Section 132(1) has been committed. The court found sufficient grounds from the investigation to justify the belief in the applicants' involvement in the alleged offense.5. Parity with Other Similar Cases:The applicants sought relief based on a precedent where another individual was granted protection from arrest in a similar case. However, the court noted that the Supreme Court had directed High Courts to consider the divergent views on such matters and clarified that the precedent did not necessarily apply to the present case. Consequently, the court rejected the plea for parity.6. Production and Verification of Documents Supporting ITC Claims:The applicants claimed to possess relevant invoices and transport bills supporting their ITC claims, which they were willing to submit for verification. The court found these submissions to be an afterthought, given the applicants' previous non-cooperation with the investigation. The court highlighted discrepancies in the submitted documents, such as bogus vehicle numbers and mismatched dates, further undermining the credibility of the applicants' claims.Judgment:The court denied anticipatory bail to applicant no.1, citing the necessity of custody to prevent tampering with evidence and ensure thorough investigation. However, the court granted anticipatory bail to applicant no.2, considering her role as a dormant partner and housewife, with specific conditions to ensure her cooperation with the investigation.Order:1. Pre-arrest bail for applicant no.1 was rejected.2. Pre-arrest bail for applicant no.2 was granted with conditions, including a bond of Rs. 50,000, providing residence details, responding to summons, and not tampering with evidence.3. The interim relief for applicant no.1 was not extended.4. Observations made in the judgment were clarified to be for bail purposes only and not to influence the trial.