2021 (12) TMI 135 - HC - GST

Anticipatory Bail Granted in CGST Fraud Case: Upholding Personal Liberty & Presumption of Innocence

Tarun Jain Versus Directorate General Of GST Intelligence DGGI

The court granted anticipatory bail to the petitioner in a case involving alleged fraudulent activities under the CGST Act. The petitioner was required to ... Seeking grant of Anticipatory Bail - fraudulent availment and passing on ineligible/fake Input Tax Credit - HELD THAT:- In the case of P.V. RAMANA REDDY, G. SRINIVASA RAJU, VENKATA SATYA DHARMAVATHAR BOLLINA, BALARAMA KRISHNA MANDAVA, M/S. VS FERROUS ENTERPRISES PRIVATE LIMITED, SMT. JAGANNAGARI RAGAVI REDDY, CHALLA DURGA ADI DEVA VARA PRASAD, TELAPOLU RAM PRASAD VERSUS UNION OF INDIA, MINISTRY OF FINANCE, DEPT OF REVENUE, NEW DELHI AND OTHERS [2019 (4) TMI 1320 - TELANGANA AND ANDHRA PRADESH HIGH COURT] prearrest bail in a similar matter was refused. This was a case arising out of petition under Article 226 of the Constitution. Therein, the court rejected pre-arrest protection to the petitioner in view of the special circumstances of the case. The court there distinctly noted that in view of several decisions of the Hon’ble Supreme Court, pre-arrest protection being akin to anticipatory bail needs to be sparingly exercised under Article 226. No such constraint can be read into the present application, since the present application has been filed under Section 438 of the Code, which specifically calls for decision on anticipatory bail. The Special leave petition against this decision has been dismissed by the Hon’ble Supreme Court. In the present case, there cannot be any conflict with the fact that petitioner has been charged with economic offence. However, it is to be reiterated that the offence does not contemplate punishment for more than five years or commission of any serious offence along with the economic offence as it is usually the case in offences under other special statutes dealing with economic offences like Prevention of Money Laundering Act, 2003. Thus, as per the scheme of the CGST Act, though the offence is of economic nature yet the punishment prescribed cannot be ignored to determine the heinousness of the offence - the offences under the Act are not grave to an extent where the custody of the accused can be held to be sine qua non. Since, the genesis of the statutory right to anticipatory bail can be found under Article 21 of the Constitution, it is essential to understand the true import of rights under Article 21 of the Constitution. The Hon’ble Supreme Court has held that such right to life does not merely mean animal like existence but includes wider connotations to make the life meaningful. One such ingredient of right to livelihood has been accepted as a part of Article 21 - Since, anticipatory bail is a statutory right in consonance with the Right to life and personal liberty under Article 21, it is essential to be alive to the various facets that form a part of rights under Article 21 of the Constitution. It is in this background, that this court ventures upon to decide the present application. In the present case, the Petitioner has been accused of wrongfully utilizing the Input Tax Credit amounting to ₹ 72 Crores, an offence under Section 132(b) and (c). Since the alleged amount exceeds five hundred lakhs, the accused can be punished with a maximum of five year of imprisonment and with fine. It is equally important to highlight that the offences under the Act are bailable and non-cognizable except for the offence under Section 132(5) of the Act - The task before this Court is two-fold, first being to ensure that no unwarranted abuse of process is allowed to impinge upon life and liberty of the petitioner, and second to ensure that the investigation is not hampered, procedure of administration of justice is not adversely impacted and ultimately the guilty is prosecuted. This Court allows the instant application under section 438 of Code of Criminal Procedure. In the event of arrest, the petitioner be released on bail on his furnishing a personal bond in the sum of ₹ 5,00,000/- with two solvent sureties of like amount to the satisfaction of the Investigating Officer/Apprehending Authority with the terms and conditions imposed - application allowed. Issues Involved:1. Anticipatory Bail Application under Section 438 of the Criminal Procedure Code, 1973.2. Alleged fraudulent availing and passing on of ineligible/fake Input Tax Credit under Section 132 of the Central Goods and Services Act, 2017.3. Compliance with summons issued by the respondent.4. Nature and gravity of the alleged economic offence.5. Applicability of custodial interrogation.6. Legal precedents and judicial approach towards anticipatory bail in economic offences.Issue-wise Detailed Analysis:1. Anticipatory Bail Application under Section 438 of the Criminal Procedure Code, 1973:The petitioner sought anticipatory bail under Section 438 of the Code, fearing arrest in a case involving alleged fraudulent activities under the CGST Act. The petitioner also filed an application for ad-interim protection from coercive action during the pendency of the anticipatory bail application.2. Alleged fraudulent availing and passing on of ineligible/fake Input Tax Credit under Section 132 of the Central Goods and Services Act, 2017:The respondent alleged that the petitioner's company, along with other firms, fraudulently availed and passed on ineligible/fake Input Tax Credit amounting to Rs. 72 crores. The purchases were primarily from firms found to be non-existent at their official addresses.3. Compliance with summons issued by the respondent:The petitioner failed to comply with multiple summons issued by the respondent, citing reasons such as his and his mother's ill health and apprehension of arrest. The respondent argued that the petitioner’s non-compliance exhibited appalling conduct and set a wrong precedent.4. Nature and gravity of the alleged economic offence:The court analyzed the nature of the offence under Section 132 of the CGST Act, which includes availing input tax credit using invoices without the supply of goods or services and issuing invoices without the supply of goods or services. The maximum penalty for such offences is imprisonment for up to five years and a fine. The court noted that while economic offences are grave, they do not always necessitate denial of bail.5. Applicability of custodial interrogation:The court found that custodial interrogation was not warranted for the alleged offence. The petitioner’s cooperation with the investigation could be ensured without detaining him in judicial custody, which would adversely impact his business.6. Legal precedents and judicial approach towards anticipatory bail in economic offences:The court referred to various legal precedents, including the Supreme Court's judgments, emphasizing that bail is the rule and jail is the exception. The court also noted that anticipatory bail is a statutory right linked to the fundamental right to life and personal liberty under Article 21 of the Constitution. The court considered the petitioner’s clean antecedents, cooperation with the investigation, and the fact that the alleged offence is compoundable under the CGST Act.Conclusion:The court allowed the anticipatory bail application with stringent conditions to ensure the petitioner’s cooperation with the investigation. The petitioner was required to furnish a personal bond of Rs. 5,00,000 with two solvent sureties, surrender his passport, cooperate with the investigation, and not commit any offence during the bail period. The court emphasized the importance of upholding the principles of personal liberty and the presumption of innocence while ensuring that the investigation is not hampered.