2025 (12) TMI 1296 - DSC - GST

Accountant's role in alleged GST evasion tied to client firms' s.70 summons; anticipatory bail granted u/s438 CrPC

The dominant issue was whether anticipatory bail under s. 438 CrPC should be granted in connection with proposed prosecution under s. 132 CGST/GGST Act ... Grant of anticipatory bail - evasion of tax - issuance of summons issued u/s 70 of Central / Gujarat Goods and Service Tax Act, 2017 - HELD THAT:- The age of Accused seems to be just of 38 Years. He is resident of this State as stated by the Ld. Advocate for the Applicant and if bail is not granted, it seems that he may have to see the days of hardship. The Applicant is a chartered account of several firms, which are alleged to have involved in manufacturing / business / trading of goods or services and those firms are alleged to have evaded G.S.T. The Applicant is a chartered account and not involved in any manufacturing / business / trading of goods or services and therefore he shall not be liable to pay any G.S.T. and therefore the question will not arise for him to evade Goods & Service Tax. It could be at the most, those firms who might have evaded any Goods & Service Tax, if any and concerned person of those firms could be liable for paying such Goods & Service Tax and penal liability, if any, but their chartered account can’t be made liable to pay any Goods & Service Tax, for any evasion of Goods & Service Tax by firms, if any, of whose account the Applicant used to maintain or to audit. Where any amount payable by a person (here-in the concerned person of the firms, who are clients of the Applicant) to Government under any of the provisions of this Act or the rules made thereunder, is not paid, the proper officer shall proceed to recover the amount by one or more of the modes, described in Section 78 & 79 of Central Goods and Services Tax Act, 2017 and / or Gujarat Goods and Services Tax Act, 2017. All the allegation of evasion of Tax is qua firms, who are client of Applicant and evasion of tax is not by Applicant and the concerned person of those firms could be liable, if any. The Supreme Court held in SHRI GURBAKSH SINGH SIBBIA Vs. STATE OF PUNJAB [1980 (4) TMI 295 - SUPREME COURT] that the Punjab and Haryana High Court erred in putting strict limitations and conditions on granting anticipatory bail under Section 438 of Cr.P.C. that are not present in the statutory language itself. The Section 438 of Cr.P.C. uses wide language and confers a wide discretion on High Courts and Courts of Session to grant anticipatory bail. This discretion should not be curtailed by reading stringent conditions into the provision. It held that no inflexible rules can be laid down to limit judicial discretion under Section 438 of Cr.P.C. The Courts must exercise this discretion judiciously based on facts and circumstances of each case. Anticipatory bail is a vital instrument to secure personal freedom and the statutory provision conferring this must receive liberal interpretation in favor of personal freedom. The Anticipatory Bail Application under Section 438 of Cr.P.C. of Applicant – Mr. Alkesh Harilal Pedhadiya, is allowed and he shall be released immediately on bail, in case of his arrest, on furnishing surety of Rs.50,000/- (Rupees Fifty Thousands only) and on executing personal bond of like amount by Accused, in connection with offence anticipated to be registered under Section 132 of Central Goods and Services Tax Act, 2017 and / or Section 132 of Gujarat Goods and Services Tax Act, 2017, based on and in pursuance to undated Summons at Mark-3/7 issued under Section 70 of the Central / Gujarat Goods and Service Tax Act, 2017, by the Assistant Commissioner of State Tax, Enforcement, Division- 10, Rajkot and Summons dated 03/10/2025 at Mark-3/8 issued under Section 70 of the Central / Gujarat Goods and Service Tax Act, 2017, by the Assistant Commissioner of State Tax (1), Enforcement, Division-9, Bhavnagar and Summons dated 04/10/2025, 05/10/2025, 06/10/2025, 07/10/2025 etc. issued under Section 70 of the Central / Gujarat Goods and Service Tax Act, 2017, subject to the conditions imposed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether anticipatory bail should be granted where arrest is apprehended in relation to investigation under the GST law initiated through summons, the alleged offence being punishable up to five years and triable by a Magistrate. (ii) Whether, on the facts shown, denial of anticipatory bail was justified on the prosecution's assertions of non-cooperation, likelihood of tampering with evidence, or influencing witnesses. (iii) Whether the applicant's position as a chartered accountant of firms alleged to have evaded GST, and the documentary/electronic nature of the material, weighed in favour of pre-arrest protection with conditions. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Grant of anticipatory bail in apprehended arrest arising from GST summons and anticipated offence Legal framework: The Court applied the provision governing anticipatory bail (referred to as Section 482 of the BNSS, treated as the provision corresponding to anticipatory bail jurisdiction). The Court also considered that the investigation arose from summons issued under the GST law for production of records and recording of statement, and that the anticipated offence under the GST law carried a maximum sentence of five years, being triable by a Magistrate. Interpretation and reasoning: The Court accepted that the applicant had reason to apprehend arrest while appearing pursuant to summons and that anticipatory bail can be granted at such stage. The Court treated the five-year maximum punishment as a significant factor, stating that in such cases the authorities are required to strictly follow the directions laid down by the Supreme Court in relation to arrests in offences punishable up to seven years. The Court also noted that, at the time of decision, there was no formal accusation in the form of an FIR or complaint by the department, while the investigation was stated to be ongoing. Conclusion: Anticipatory bail was held appropriate to protect personal liberty and to strike a balance between investigation needs and the necessity of arrest, subject to stringent conditions ensuring availability and cooperation. Issue (ii): Whether anticipatory bail should be refused due to alleged non-cooperation, risk of evidence tampering, or witness influence Legal framework: The Court proceeded on the principle that bail should not be denied on speculative apprehensions and that the necessity of arrest must be justified with concrete material, particularly where punishment is not severe and the case is largely documentary. Interpretation and reasoning: The prosecution opposed bail alleging strong material, possible tampering, and influence on witnesses, and asserted non-cooperation, including issuance of a lookout notice. The Court held that merely filing an anticipatory bail application upon receiving summons cannot, by itself, be treated as absconding. The Court further reasoned that general assertions that the applicant 'may' tamper with evidence or induce witnesses, without specific justification, do not warrant detention. It emphasized that the material was primarily documentary/electronic, reducing the likelihood of manipulation through custody, and recorded the applicant's assurance to cooperate and produce documents. The Court found that nothing concrete was shown which justified custodial detention at that stage. Conclusion: Refusal of anticipatory bail was not justified on the prosecution's generalized apprehensions; the Court instead addressed investigative concerns through conditions ensuring presence, cooperation, and non-tampering. Issue (iii): Effect of the applicant's role as chartered accountant and the nature of allegations on entitlement to anticipatory bail Legal framework: The Court evaluated the allegations as framed-evasion of GST attributed to client firms-and considered the statutory scheme noted in the judgment regarding assessment, recovery, and the availability of compounding under the GST law for the alleged offence. Interpretation and reasoning: The Court reasoned that the allegations of tax evasion were 'qua' the firms who were clients, and that the applicant, being a chartered accountant and not engaged in the underlying manufacturing/business/trading of goods or services, was not shown to be the person liable to pay GST. The Court observed that liability for GST and penal consequences, if any, would primarily attach to the concerned persons of the firms alleged to have evaded tax, and that the applicant could at most be required to assist by producing records. The Court also considered that there was no past criminal history stated against the applicant and that anticipatory bail would not amount to discharge but only liberty during investigation and any ensuing trial. Conclusion: The applicant's professional role, the attribution of alleged evasion to client firms, absence of shown prior criminal antecedents, and the documentary nature of the investigation supported granting anticipatory bail with strict directions for document production and attendance. FINAL DETERMINATION (as reflected in operative decision): Anticipatory bail was granted in connection with the anticipated GST offence based on summons, with conditions requiring attendance at the designated GST office on specified dates and hours, production of relevant documents and electronic records, continued cooperation upon written call, disclosure of contact details, surrender of passport (or affidavit of non-possession), restriction on leaving the country, non-inducement/threat to witnesses, non-tampering with evidence, and permitting the investigating agency to seek remand subject to judicial decision.