2021 (11) TMI 718 - HC - GST

Court Grants Bail in Tax Evasion Case with Allegations of Procedural Violations and Coerced Confession

The court granted bail to the applicant, who claimed innocence and false implication in a tax evasion case involving his deceased mother's business. The ... Seeking grant of Anticipatory Bail - registration certificate was not surrendered and no returns were being filed - sole proprietor of said firm expired - HELD THAT:- In the instant matter, perusal of record shows that Smt. Sushma Devi, who is mother of applicant, was sole proprietor of alleged M/s Vikas & Company and she expired on 28.04.2021. As per prosecution version, applicant-accused, being her eldest son, was looking after and co-operating of manufacturing and supplies of activities in the name of M/s Vikas & Company and as per documents, applicant and his brothers are actual beneficiaries and that tabulation conducted so far has reveled evasion of GST of ₹ 1,01,76,022/- and Central Excise duty of ₹ 31,90,909/-. It is apparent that so far evasion of GST of ₹ 1,01,76,022/- and Central Excise duty of ₹ 31,90,909/- has been revealed, however, it has been stated that investigation is still going on and that on the basis of assumption, total GST evasion is more than ₹ 5 crores. It is not disputed that an amount of ₹ 1,23,61,000/- was seized from premises of said firm, which was taken into possession by the DGGI officials. This legal proposition could also not be disputed that as per provisions of Section 132(1)(iii) of Central Goods and Services Tax Act 2017, the evasion of tax of ₹ 1,01,76,022/- is a bailable offence and that in this case, amount of ₹ 1,23,61,000/- has already been seized from the premises of applicant. Keeping in view entire facts of the matter brought on record, quantum of evasion of tax involved in the matter, period of custody of applicant and all attending facts and circumstances of the case, the Court is of the view that a case for bail is made out. The bail application is hereby allowed. Issues Involved:1. False implication and innocence of the applicant.2. Violation of procedural norms during the search and seizure.3. Legality of the applicant's arrest.4. Quantum of tax evasion and its implications.5. Bail considerations and conditions.Issue-wise Detailed Analysis:1. False Implication and Innocence of the Applicant:The applicant argued that he was falsely implicated and claimed innocence. It was contended that the applicant had no involvement in the business activities of M/s Vikas & Company, which was solely managed by his deceased mother, Smt. Sushma Devi. The applicant stated that he had poor relations with his family and resided in New Delhi with his wife, thereby distancing himself from the business operations in Kanpur.2. Violation of Procedural Norms During the Search and Seizure:The applicant's counsel argued that the officers of the Directorate General of Goods & Service Tax Intelligence (DGGSTI) violated Section 100(4) of the Code of Criminal Procedure, 1974, during the search operations conducted on 29.09.2021. It was alleged that the applicant was illegally detained and tortured to give evidence against himself. The applicant was served with a summons under Section 70 of the CGST Act to justify the actions of the authorities.3. Legality of the Applicant's Arrest:The applicant's counsel contended that the arrest was unjustified as per Sections 7 and 69 of the CGST Act, 2017. It was argued that the arrest was based solely on the applicant's confessional statement, which was coerced. Furthermore, the provisions of Section 93 of the CGST Act could only be invoked after the determination of tax, which had not occurred. The counsel cited the case of Jayachandran Alloys (P) Ltd. vs. Superintendent of GST and C.Ex., Salem to support the argument that the arrest was illegal without prior assessment or adjudication.4. Quantum of Tax Evasion and Its Implications:The prosecution alleged that M/s Vikas & Company was involved in massive suppression of production and clandestine clearance of branded chewing tobacco, leading to significant tax evasion. The tabulation revealed GST evasion of Rs. 1,01,76,022/- and Central Excise duty evasion of Rs. 31,90,909/- for four months. The applicant admitted to unaccounted sales, suggesting a total GST evasion exceeding Rs. 5 crores over 51 months. The defense argued that the evasion amount was exaggerated and that the seized amount of Rs. 1,23,61,000/- should be considered. It was also highlighted that the alleged firm had a statutory right to appeal against the adjudication order.5. Bail Considerations and Conditions:The court considered various factors for granting bail, including the nature and gravity of the accusation, the applicant's antecedents, the possibility of fleeing from justice, and the likelihood of repeating the offense. The court referenced the case of Nitin Verma vs. State of Uttar Pradesh and other authorities to emphasize that arrest should be the last option and personal liberty should be curtailed only when imperative. Given the applicant's custody since 01.10.2021, lack of criminal history, and the quantum of tax evasion being a bailable offense, the court granted bail with specific conditions to ensure cooperation with the investigation and prevent tampering with evidence.Conclusion:The court allowed the bail application, ordering the applicant's release on furnishing a personal bond and sureties. The conditions included cooperation with the investigation, surrendering the passport, not tampering with evidence, not intimidating witnesses, appearing before the trial court, and not committing similar offenses. The court emphasized that any breach of these conditions could result in the cancellation of bail.