2022 (7) TMI 803 - DSC - GST

Manufacturing unit in-charge denied bail for GST evasion of Rs 22 crores using agriculture grade urea

Shamim Akhtar Versus Director General of GST Intelligence Gurugram

Shamim Akhtar Versus Director General of GST Intelligence Gurugram - TMI Issues Involved:1. False Implication and Premature Arrest2. Alleged Tax Evasion and Search and Seizure Proceedings3. Compoundable Offences and Calculation of Tax Liability4. Parity in Bail and Previous Bail OrdersIssue-Wise Detailed Analysis:False Implication and Premature ArrestThe applicant-accused claimed false implication in the GST evasion case, asserting that the allegations were baseless. The applicant was arrested by the Intelligence Officer of the Principal Commissioner, DGGI, Gurugram Zonal Unit on 26.4.2022 and has been in custody since 27.4.2022 for alleged offences under clauses (a) and (i) of sub-section (1) of Section 132 of the CGST Act. The applicant argued that the arrest was premature as the assessment proceedings were not completed, making it impossible for the GST department to fix liability on the company.Alleged Tax Evasion and Search and Seizure ProceedingsThe respondent department gathered information that M/s. Saba Chemicals Wood Products, managed by the applicant, was a major recipient of agricultural urea from Shri Manoj Kumar, used to manufacture and clear resin without paying GST. The search and seizure proceedings conducted on 25.04.2022 were alleged to be in complete derogation of the law. The applicant claimed that search warrants were not shown, and officers coerced him to sign pre-printed documents under threat. The applicant and employees were interrogated rigorously, and documents were seized without proper inventory or providing copies. Despite cooperation, the applicant was formally arrested on 26.04.2022 for alleged tax evasion.Compoundable Offences and Calculation of Tax LiabilityThe offences under Section 132 of the GST Act are compoundable under Section 138. The applicant was never charged with any GST Act offence before this allegation. The CGST authorities failed to provide calculations or ascertainment of the alleged GST evasion and did not provide 'reasons to believe' or 'grounds of arrest' as per Section 69 of the GST Act. The respondent department allegedly miscalculated the tax liability of M/s Saba Chemicals Wood Products, inflating it to bring the alleged acts under Section 132 (5) of the Act. The calculation was based on forced statements and false records from Shri Manoj Kumar, without any incriminating evidence from the applicant's premises. The applicant argued that the composition of urea for manufacturing resin as alleged was technically impossible.Parity in Bail and Previous Bail OrdersThe applicant's counsel argued that no show-cause notice for tax liability determination was issued even after two months of arrest. The main accused, Mr. Manoj Kumar, was granted bail by the Sessions Court Yamuna Nagar on 22.6.2022, and the applicant sought similar treatment on parity. Multiple legal precedents were cited to support the bail application. However, the respondent contested the bail, emphasizing the gravity of the allegations and the significant loss to the State Exchequer, amounting to Rs. 22,30,51,232/-. The court noted that the bail granted to Manoj Kumar was for a loss less than Rs. 5 crores, a bailable offence, making the applicant's case different.Judgment:The court, after hearing both parties, concluded that the allegations against the applicant were grave, involving a significant loss to the State Exchequer. The court emphasized that it could not engage in a mini-trial at this stage and noted the seriousness of the economic offence. The court found no ground for parity with the bail granted to Manoj Kumar due to the different circumstances. Consequently, the court dismissed the bail application, emphasizing the seriousness of the allegations and the economic impact involved. The file was consigned to the record room after due compliance.Announced in open Court.