2021 (2) TMI 1048 - HC - GST

Court modifies bail condition to allow security instead of cash, emphasizing reasonableness and applicant's compliance.

The court found Condition No. 4 of the bail order unsustainable and modified it, allowing the applicant to submit security equivalent to the remaining ... Reasonable bail conditions and limits on onerous conditions - power to impose conditions under Section 438(2) and Section 437(3) of Cr.P.C. - protection of revenue balanced against individual liberty - security in lieu of cash deposit as alternative to satisfy revenue interestReasonable bail conditions and limits on onerous conditions - security in lieu of cash deposit as alternative to satisfy revenue interest - protection of revenue balanced against individual liberty - Modification of condition No.4 of the bail order dated 24.11.2020 to permit submission of security other than cash or bank guarantee in place of deposit of the remaining disputed ITC amount. - HELD THAT: - The Court found that the condition directing the applicant to deposit the remaining disputed ITC amount before the Department was harsh and unreasonable in the facts of the case. It noted that the applicant had already deposited a substantial part of the disputed amount and that investigation/enquiry was still pending; no criminal complaint had been filed, no proceedings under the demand and recovery provisions had been initiated, and no provisional attachment order under the Act had been made. Applying the established principle that conditions imposed under the bail provisions must be necessary, just and efficacious and must not be so onerous as to render bail illusory, the Court balanced the interest of revenue with the individual's right to personal liberty. Having regard to the applicant's undertaking and the need to safeguard government revenue, the Court held that directing submission of security equivalent to the remaining disputed amount, other than cash or bank guarantee, would adequately protect revenue while avoiding an unreasonable precondition to bail. The Court therefore modified the bail condition to permit submission of such security (in accordance with the undertaking filed) within a specified timeframe and recorded that failure to furnish the security would permit the Department to move for cancellation of bail. [Paras 22, 23, 24]Condition No.4 of the bail order dated 24.11.2020 is modified to require the applicant to submit security other than cash or bank guarantee, equivalent to the remaining disputed ITC amount, in accordance with his undertaking, within the prescribed period; failure to furnish security will permit opposite party No.2 to seek bail cancellation.Final Conclusion: The petition under Section 439(1)(b) is disposed of by modifying the impugned bail condition: instead of depositing the remaining disputed ITC amount in cash the applicant is directed to furnish security (other than cash or bank guarantee) equivalent to that amount as per his undertaking within the time fixed; non-compliance will entitle the Department to move for cancellation of bail. Issues Involved:1. Validity of condition No. 4 of the bail order dated 24.11.2020.2. Alleged fraudulent availing of input tax credit (ITC).3. Applicant's compliance with bail conditions and undertakings.4. Legal precedents regarding onerous bail conditions.Detailed Analysis:1. Validity of Condition No. 4 of the Bail Order:The applicant sought to set aside condition No. 4 of the bail order dated 24.11.2020, which required him to deposit the remaining disputed ITC amount of Rs. 4,51,00,000/- within three months. The applicant argued that this condition was onerous and unreasonable, particularly since the investigation was still ongoing, and he had already deposited Rs. 5,00,00,000/- under duress. The court agreed, stating that bail conditions should not be so strict as to make compliance impossible, thereby rendering the grant of bail illusory. The court modified the condition, allowing the applicant to submit security equivalent to the remaining disputed amount instead of cash or bank guarantee.2. Alleged Fraudulent Availing of ITC:The applicant was accused of fraudulently availing ITC amounting to Rs. 9,51,00,000/- through firms that were not found in existence. The applicant had already deposited Rs. 5,00,00,000/- and argued that no criminal complaint or proceedings under sections 73 or 74 of the CGST Act had been initiated against him. The court noted that the investigation was still pending, and no provisional attachment of property had been made under section 83 of the CGST Act.3. Applicant's Compliance with Bail Conditions and Undertakings:The applicant had given undertakings to deposit the disputed ITC amount and had complied by depositing Rs. 5,00,00,000/-. He proposed to submit property papers worth approximately Rs. 5,60,20,000/- as security for the remaining amount. The court found this proposal reasonable and modified the bail condition accordingly. The court emphasized that the applicant had already adhered to significant portions of the bail conditions and had shown willingness to comply further.4. Legal Precedents Regarding Onerous Bail Conditions:The applicant cited several Supreme Court judgments to argue that bail conditions should not be excessively harsh or onerous. The court referred to these judgments, including Sandeep Jain v. National Capital Territory of Delhi, Amarjit Singh v. State of NCT of Delhi, and Sumit Mehta v. State (N.C.T. of Delhi), which held that bail conditions should be reasonable and not frustrate the very object of granting bail. The court found that the condition imposed in the present case was too harsh and modified it to ensure a balance between the interests of the accused and the prosecution.Conclusion:The court concluded that condition No. 4 of the bail order was unsustainable as it was too harsh and unreasonable. The court modified the condition, allowing the applicant to submit security equivalent to the remaining disputed amount of Rs. 4,51,00,000/- instead of cash or bank guarantee. The bail application was disposed of in these terms, with the provision that the opposite party could move for bail cancellation if the applicant failed to furnish the security as per his undertaking.