TaxTMI 
TaxTMI 
2021 (2) TMI 762
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....er for alleged violation of the provisions of the CGST Act which are compoundable offences. Additionally, petitioner seeks a direction to respondent Nos.2 and 3 to take a decision by passing a speaking order on the compounding applications dated 28.01.2021 filed by the petitioner and the two companies of which he is a director. An interim prayer has been made for enlarging the petitioner on bail since he is under judicial custody with effect from 21.01.2021. 3. Though facts lie within a very narrow compass, to have a proper perspective it would be apposite to briefly advert to the relevant facts as averred in the writ petition. 4. It is stated that petitioner is a senior citizen aged about 65 years. He is the Director of two companies by the name of Twinstar Industries Limited and Originet Technologies Limited. 5. In the year 2018, respondent No.4 initiated an investigation on the basis of intelligence inputs regarding alleged fraudulent availment and utilization of input tax credit (ITC) by one M/s. Al Fara's Infraprojects Private Limited on the basis of bogus invoices without actual receipt of goods or services. During the course of the investigation, statements of various per....
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....urther prejudice to his personal liberty. 10. With the above grievance, the present writ petition has been filed seeking the reliefs as indicated above. 11. On 02.02.2021, when the writ petition was placed before the Court, the same was adjourned to 05.02.2021 on request of Mr. Jetly, learned senior counsel for the respondents. On 05.02.2021, notice was issued. While issuing notice, this Court noted that petitioner is in custody since 21.01.2021; therefore, the matter was directed to be listed on 10.02.2021 for consideration of the bail prayer of the petitioner. Accordingly, the matter was listed and heard on 10.02.2021 on the prayer for bail. 12. Respondent No.4 has filed a detailed affidavit in reply. Stand taken in the reply affidavit is that the petitioner has the remedy of applying for bail under section 437 of the Code of Criminal Procedure, 1973 (briefly 'the Cr.P.C.' hereinafter). In such circumstances, filing of writ petition under Article 226 of the Constitution of India for bail would not be a proper remedy. After referring to the allegations against the petitioner in detail, it is stated that in the course of investigation, statements of the petitioners were recorded....
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....r. Batra, learned counsel for the petitioner submits that though the petitioner denies all the allegations made against him by the respondents, he has nonetheless co-operated with the investigation carried out by respondent No.4. Whenever summons were issued to him under section 70 of the CGST Act, petitioner had responded to the same and had appeared before the respondents not once but on five occasions. In such circumstances, there can be no justification or reasons to believe for arresting the petitioner. The arrest carried out is arbitrary, unreasonable and punitive thus illegal. Mr. Batra has referred to a decision of the Delhi High Court in Makemytrip (India) Private Limited Vs. Union of India, 2016 (44) STR 481 in support of his contention that arrest in such a situation cannot be justified and, therefore, petitioner should be enlarged on bail forthwith. 14. Mr. Jetly, learned senior counsel for respondent No.4 at the outset has referred to the prayer portion in the writ petition. After reading out the prayer portion, he submits that there is no substantive prayer for bail, only an ad-interim prayer for bail has been made. In the absence of any substantive prayer, no interi....
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....ess and prosecution in the case of alleged tax evasion can go on simultaneously. It is not necessary that the demand has to be first quantified after an adjudicatory process and thereafter resort can be taken to for arresting the person concerned or those involved in evasion of tax. Economic offences are a class apart. Therefore, such offences must be viewed seriously and a different yardstick has to be followed while considering the prayer for bail of a person accused of committing economic offence. In support of his submissions, Mir. Mishra has placed reliance on a number of decisions apart from reiterating the decision of the Telangana High Court in P. V. Ramana Reddy (supra). He, therefore, submits that the prayer for bail of the petitioner may be rejected. 16. Mr. Batra, learned counsel for the petitioner in his reply submissions has stressed upon the fact that investigation is going on for more than two and half years. There is no record of the petitioner avoiding investigation or tampering with evidence during this period. His conduct is self-evident from the record itself. Therefore, continuing with the illegal detention of the petitioner would be wholly oppressive besides....
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....n 70 deals with power to summon persons to give evidence and produce documents. As per sub-section (1), the proper officer under the CGST Act shall have the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any enquiry in the same manner as provided in the case of a civil court under the provisions of the Civil Procedure Code, 1908. Thus what sub-section (1) of section 70 provides is the conferment of power on the proper officer to summon any person whose attendance he considers necessary to either tender evidence or to produce documents etc. in any enquiry. Exercise of such a power is akin to power exercised by a civil court under the Civil Procedure Code, 1908. Sub-section (2) clarifies that every enquiry in which summons is issued for tendering evidence or for production of documents is to be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code, 1860. 22. As noticed above, power to arrest is provided in section 69. As per sub-section (1), where the Commissioner has reasons to believe that the person has committed any offence specified in clau....
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....m which may extend to five years and with fine. 23.1. As per sub-section (5), the offences specified in clause (a) or (b) or (c) or (d) of sub-section (1) and punishable under clause (i) of that section are cognizable and non-bailable. 24. Reverting back to the facts of the present case, we find that summons were issued to the petitioner under section 70 of the CGST Act. Responding to the summons, petitioner had appeared before the investigating officer whereafter his statements were recorded on 05.12.2018, 12.12.2018, 04.01.2019, 15.02.2019 and 21.01.2021. We have perused the statements which are part of the record produced before us by Mr. Mishra. We also notice that after recording of the statement of the petitioner on 15.02.2019, his statement was again recorded after almost two years on 21.01.2021. What happened in the interregnum is not known. The record does not disclose that during this period or even prior to that after the first statement of the petitioner was recorded on 05.12.2018, there was any incident of the petitioner tampering with the evidence or threatening or inducing any witness. There is nothing on record to show that the petitioner had avoided the investiga....
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....es belief and the existence of reasons for that belief. The belief must be held in good faith: it cannot be merely a pretence. Reasons to believe does not mean a purely subjective satisfaction. It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion; it must be founded upon information. Such reasons to believe can be formed on the basis of direct or circumstantial evidence but not on mere suspicion, gossip or rumour. It is open for a court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief. A rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the officer and the formation of his belief. Courts have also held that recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. 28. Having noticed the above, we may now examine the reasons recorded by the Principal Additional Director General while authorizing arrest o....
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....disclosing such facts to the court or to the police officer or unless such accused person is arrested, his presence in the court whenever required cannot be ensured. These are the conclusions, which one may reach based on facts. 29.2. In this context, Supreme Court also referred to section 41-A Cr.P.C. particularly sub-section (3) thereof which says that where such person complies and continues to comply with the notice, he shall not be arrested in respect of the offence referred to in the notice unless for reasons to be recorded, the police officer is of the opinion that he ought to be arrested. Supreme Court emphasized that the practice of mechanically reproducing in the case diary all or most of the reasons contained in Section 41 Cr.PC for effecting arrest be discouraged and discontinued. 29.3. Relevant portion of the judgment of the Supreme Court in Arnesh Kumar (supra) is extracted hereunder:- "5. Arrest brings humiliation, curtails freedom and cast scars forever. Law makers know it so also the police. There is a battle between the law makers and the police and it seems that police has not learnt its lesson; the lesson implicit and embodied in the Cr.PC. It has not come o....
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....erson accused of offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without fine, cannot be arrested by the police officer only on his satisfaction that such person had committed the offence punishable as aforesaid. Police officer before arrest, in such cases has to be further satisfied that such arrest is necessary to prevent such person from committing any further offence; or for proper investigation of the case; or to prevent the accused from causing the evidence of the offence to disappear; or tampering with such evidence in any manner; or to prevent such person from making any inducement, threat or promise to a witness so as to dissuade him from disclosing such facts to the Court or the police officer; or unless such accused person is arrested, his presence in the court whenever required cannot be ensured. These are the conclusions, which one may reach based on facts. * * * * * 7.3. In pith and core, the police office before arrest must put a question to himself, why arrest? Is it really required? What purpose it will serve? What object it will achieve? It is only after these questions are addressed a....
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....an enactment for collection of revenue which is the primary objective of the said legislation. Arrest is only incidental to achieve the above objective. Therefore, we find in sub-section (3) of section 138 that on payment of the compounding amount, no further proceeding shall be initiated against the accused person in respect of the same offence under the CGST Act and any criminal proceedings if already initiated shall stand abated. Use of the word "shall" is quite instructive as it conveys the legislative intent that once compounding takes place, no further proceeding shall be initiated against the accused person in respect of the same offence and if any criminal proceeding has been initiated, the same would stand abated. 33. In P. V. Ramana Reddy (supra), a Division Bench of the Telangana High Court was examining the challenge to the summons issued by the GST Commissionerate under section 70 of the CGST Act and invocation of the penal provisions under section 69 thereof. Writ petition was basically in the nature of a pre-arrest bail application. After holding that even in case of a pre-arrest bail, a writ petition cannot be said to be not maintainable, the question posed by the ....
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....ered by the High Court while considering an application for grant of bail under Article 226 of the Constitution of India. It was held as under:- "57. While considering an application for the grant of bail under Article 226 in a suitable case, the High Court must consider the settled factors which emerge from the precedents of this Court. These factors can be summarized as follows: (i) The nature of the alleged offence, the nature of the accusation and the severity of the punishment in the case of a conviction; (ii) Whether there exists a reasonable apprehension of the accused tampering with the witnesses or being a threat to the complainant or the witnesses; (iii) The possibility of securing the presence of the accused at the trial or the likelihood of the accused fleeing from justice; (iv) The antecedents of and circumstances which are peculiar to the accused; (v) Whether prima facie the ingredients of the offence are made out, on the basis of the allegations as they stand, in the FIR; and (vi) The significant interests of the public or the State and other similar considerations." 37.1. Supreme Court observed that the above principles have evolved over a period of t....