2024 (3) TMI 1127 - HC - GST

Police custody denied for GST fraud accused as forged invoices predated his 67-day tenure as Additional Director

The State Of Andhra Pradesh Versus Prathipati Sarath

The State Of Andhra Pradesh Versus Prathipati Sarath - TMI Issues Involved:1. Legality of the Order refusing police custody under Sections 397 and 401 of Cr. P.C.2. Necessity of police custody for further investigation.3. Adequacy of the investigation conducted by DGGI, Hyderabad.4. Allegations of diversion of government funds and creation of fake invoices.5. Applicability of IPC sections and provisions under the Central Goods and Services Act, 2017.Summary:1. Legality of the Order refusing police custody under Sections 397 and 401 of Cr. P.C.:The petitioner sought to set aside the Order dated 06.03.2024, which refused police custody of A.1. The learned Magistrate rejected the petition citing that the assertions lacked adequacy to authorize police custody, as the Central GST Department had already completed the investigation. The scope of the Revision was limited to assessing the legality and propriety of this Order.2. Necessity of police custody for further investigation:The learned Special Public Prosecutor argued that the severity of the offence necessitated a more in-depth investigation. She emphasized that custodial interrogation was imperative due to the financial nature of the offence involving substantial fraud. However, the learned Magistrate noted that the alleged forged invoices were submitted when A.1 was not serving as an Additional Director, thus denying police custody.3. Adequacy of the investigation conducted by DGGI, Hyderabad:The learned Magistrate considered the DGGI's investigation, which had already recommended a penalty of Rs. 16 crores against A.1's company under the CGST Act, 2017. The DGGI had investigated the submission of counterfeit invoice bills and found no actual work transpired, suggesting that a significant portion of the investigation was already undertaken.4. Allegations of diversion of government funds and creation of fake invoices:The petitioner alleged that A.1 conspired with others to create shell companies, tampered with accounts, submitted forged documents, and diverted funds intended for developmental works. However, the committee report indicated no agreement between ADCL and M/s. Avexa Corporation Private Limited and that payments were released following due procedure, thus not substantiating the allegation of fund diversion.5. Applicability of IPC sections and provisions under the Central Goods and Services Act, 2017:The respondent's counsel contended that the parties involved were private entities with no contractual relationship with the Government, hence IPC sections could not be attracted. He also cited sections 132, 134, and 137 of the CGST Act, arguing that any offence should be dealt with under this Act, requiring the Commissioner's sanction for prosecution.Conclusion:The Court found no illegality in the Order passed by the learned Magistrate and dismissed the Criminal Revision Case. The observations made were only for adjudicating the present Revision Case and not a final expression of opinion on the merits of the case.