TaxTMI 
TaxTMI 
2024 (3) TMI 968
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....this case and without any sufficient reasons and basis and without assessing any tax liability the applicant has been arrested and detained in prison since 02.02.2024. 4. While drawing the attention of this Court on Sections 69, 73, 74 and 79 as well as Section 62 of the Central Goods and Services Tax Act, it is vehemently submitted that at first the department is required to assess the tax liability to be paid by an assesse and it is only thereafter any proceeding under Section 69 of the Central Goods and Services Tax Act with regard to the arrest of the accused person or assesse may be undertaken. It is vehemently submitted that till date no tax liability is shown to have been assessed by the department and without there being any sufficient or cogent reasons he has been placed behind the bars. 5. While drawing the attention of this Court towards the arrest-memo, a copy of which has been placed at Page No.23 of the paper book, it is vehemently submitted that no grounds have been shown in this arrest-memo which may justify the arrest of the applicant and a vague language has been used in the arrest memo in order to show that the provisions of the Central Goods and Services Tax A....
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....own to have been recorded before the investigating officer. Applicant undertakes that he will cooperate with the investigation as well as with the trial. 12. Learned Senior Counsel has relied on the law laid down by the Division Bench of this Court of date 13.07.2023 passed in Writ Tax No. 834 of 2023 (Ashish Kakkar vs. Union of India and another), a single Judge judgment of this Court dated 29.07.2022 passed in 'Paras Jain @ Rohan Jain vs. Union of India', a single Judge judgment of this Court of date 10.07.2023 passed in Criminal Misc. Bail Application No. 26376 of 2023 (Ravindra Nath Sharma @ Ravubder Sharma vs. Union of India). 13. Shri Dipak Seth, learned counsel appearing on behalf of Union of India vehemently opposes the prayer of bail of the applicant on the ground that the submission, which has been raised before this Court with regard to the fact that in absence of any tax liability, the criminal prosecution is not permissible, is not an argument which may have the support of the law as in all tax matters prosecution and adjudication are connected with each other and may go on simultaneously. In this regard reliance has been placed on the law laid down by the Ho....
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....nomic health of the country and are required to be dealt with iron hands. In this regard, the law laid down by the Hon'ble Supreme Court vide order dated 07.11.2023 passed in Criminal Appeal No. Nil of 2023, arising out of S.L.P. (Crl.) No. 10810 of 2023, 'The State of Jharkhand vs. Dhananjay Gupta @ Dhananjay Prasad Gupta' has been highlighted, wherein it is opined that at any rate mere claim of innocence or undertaking to participate in the trial or absence of specific allegation cannot be assigned as reasons for grant of bail in case of offences of serious nature. It is requested that having regard to the magnitude of the crime wherein the State has been inflicted loss of crores of rupees of input tax, the applicant is not entitled to be released on bail. 21. In rebuttal, learned Senior Counsel appearing for the applicant has drawn the attention of this Court towards Section 69 of the Central Goods and Services Act and submits that custody remand of the applicant has not been sought at the time of remand of accused by the department and also that the cooperation in the investigation doesn't mean that applicant should confess his guilt as proposed by the departme....
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....d more than 500 files, record books of fake firms, bilty books and other fake documents have also been found. The statement of the applicant was recorded under Section 70 of the CGST Act on 30.01.2024, 01.02.2024 and 02.02.2024, wherein he alleged to have confessed his guilt and by creating false/shell companies and without paying any tax, input tax credit to the magnitude of Rs. 14.87 crores is confessed to have been earned and utilized. It is also alleged that during the course of investigation, the statement of one Mohit Singh and Shubham Singh, proprietors of shell firms were recorded, wherein they admitted that these shell firms were established and managed by the applicant. During physical verification, 14 major suppliers and 06 transporters were also found to be non-existent and various Dharmkanta's also accepted that the weighing slips found during preliminary investigation were not issued by them. It is stated in para no.9 of the counter affidavit that till now the amount of fraud found by the investigation has reached Rs. 122.99 crores. 25. Learned Senior counsel appearing for applicant vehemently submits that without adopting the procedure, as provided under Section....
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....e dealt with differently and applicant is not entitled for bail. 29. Perusal of the provisions contained under Section 73 and 74 of the CGST Act would reveal that a mechanism has been provided therein with regard to the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilfull mis-statement or suppression of facts. Section 74 of the CGST Act provides for assessment of tax by the proper officer by issuing a notice to the assesee, however, sub-section 11 of Section 74 of the CGST Act would suggest that if the tax, which has been calculated along with the interest payable or the penalty is deposited, all proceedings in respect of the said notice shall be deemed to be concluded. However, perusal of explanation one attached with Subsection 11 of Section 74 of the 'Act' would reveal that the expression 'all proceedings' in respect of the said notice emerging under Sub-section 11 shall not include proceedings under Section 132 of the 'Act'. Thus, it may be inferred that even if all the tax liability including penalty, etc. has been deposited, it would be only the 'notic....
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....nt that before proceeding under 74 of the Act the applicant should not have been arrested or prosecuted. 31. Chapter XIV of the CGST Act deals with inspection, search, seizure and arrest. It comprises of sections 67 to 72. Section 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 subsection (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 22....
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.... are below five years. Therefore, the maximum penalty that can be imposed for committing offences under clauses (c) and (b) of sub-section (1) of section 132 is imprisonment for a term which may extend to five years and with fine.As per sub-section (5), the offences specified in clause (a) or (b) or (c) or (d) of sub-section (1) are punishable under clause (i) of that section are cognizable and nonbailable. 32. Reverting to the facts of the present case, it appears to be not disputed that summons were issued to the petitioner under section 70 of the CGST Act and responding to the summons, applicant had appeared before the investigating officer where after his statements were recorded on 31.01.2024,01.02.2024 and on 02.02.2024. I have perused the statements of the applicant which have been produced with the counter affidavit filed by Union Of India. It may also be noticed that on 02.02.2024 the applicant was arrested and produced before the Magistrate on 03.02.2024 and no custody remand was requested by union of India and the applicant was remanded to judicial custody for 14 days. It is admitted in para no. 17 of the counter affidavit filed by the respondent that the custody remand....
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....l for prearrest bail. An accused, while joining investigation as a condition for remaining enlarged on bail, is not expected to make self-incriminating statements under the threat that the State shall seek withdrawal of such interim protection." 35. Thus the cooperation in the investigation may not be taken that accused applicant while under interrogation must make statements in favour of the department or make statements which are self incriminatory. 36. In order to canvass the necessity of the further detention of the applicant in prison the Department has relied on the statements of the applicant in order to show that there is clear admission on the part of the applicant to the wrong doing and thus committing offences under section 132(1)(c) and (b) of the CGST Act and, therefore, his arrest has been justified. Though section 25 of the Indian Evidence Act, 1872 is not attracted to recording of statements by revenue officers under the CGST Act, nonetheless at this stage section 136 of the CGST Act may be recalled which , in the considered opinion of this Court may have a bearing on this aspect. Section 136 of the CGST Act says that a statement made and signed by a person on app....
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....that such person has committed the offence punishable as aforesaid. A 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 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. 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 o....
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....Procedure relating to search and seizure, apply to searches and seizures under this Act, subject to the modification that the word "Commissioner" shall substitute the word "Magistrate" appearing in Section 165(5) of Code of Criminal Procedure, in its application to CGST Act, 2017. 40. Therefore, (1) in the light of the fact that Section 69(1) of the CGST Act, 2017 authorizes the arrest only of persons who are believed to have committed cognizable and non-bailable offences, but Section 69(3) of the CGST Act, 2017 deals with the grant of bail and the procedure for grant of bail even to persons who are arrested in connection with non-cognizable and bailable offences and (2) in the light of the fact that the Commissioner of GST is conferred with the powers of search and seizure Under Section 67(10) of the CGST Act, 2017, in the same manner as provided in Section 165 of the Code of Criminal Procedure, 1973, the contention of the Additional Solicitor General that the Petitioners cannot take umbrage Under Sections 41 and 41A of Code of Criminal Procedure may not be correct. 41. Though for the purpose of summoning of witnesses and for summoning the production of documents, the Proper O....
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.... Code of Criminal Procedure, does not provide an absolute irrevocable guarantee against arrest. Despite the compliance with the notices of appearance, a Police Officer himself is entitled Under Section 41A(3) Code of Criminal Procedure, for reasons to be recorded, arrest a person. At this stage, we may notice the difference in language between Section 41A(3) of Code of Criminal Procedure and 69(1) of CGST Act, 2017. Under Section 41A(3) of Code of Criminal Procedure, "reasons are to be recorded", once the Police Officer is of the opinion that the persons concerned ought to be arrested. In contrast, Section 69(1) uses the phrase "reasons to believe". There is a vast difference between "reasons to be recorded" and "reasons to believe." 40. The department in its Counter Affidavit has enclosed the copy of the order of arrest passed by the Principal Additional Director General authorizing the intelligence officer to arrest the applicant the reasons recorded by the Principal Additional Director General while authorizing arrest of the applicant are placed as CA5 to the Counter Affidavit. Perusal of this order will reveal that what has weighed with the Principal Additional Director Genera....
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....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 officer 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 and one or the other con....
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....e field:- Precedents * P. Chidambaram v. Directorate of Enforcement, MANU/SC/1670/2019 : (2020) 13 SCC 791: 23. Thus, from cumulative perusal of the judgments cited on either side including the one rendered by the Constitution Bench of this Court, it could be deduced that the basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial. However, while considering the same the gravity of the offence is an aspect which is required to be kept in view by the Court. The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case. Keeping in view the consequences that would befall on the society in cases of financial irregularities, it has been held that even economic offences would fall under the category of "grave offence" and in such circumstance while considering the application for bail in such matters, the Court will have to deal with the same, being sensitive to the nature of allegation made against the accused. One of the circumstances to consider the gravity of the offence is also the ter....
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.... to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court, whether before or after conviction, to assure that he will submit to the jurisdiction of the court and be in attendance thereon whenever his presence is required. xxxxxxxxx 46. We are conscious of the fact that the accused are charged with economic offences of huge magnitude. We are also conscious of the fact that the offences alleged, if proved, may jeopardise the economy of the country. At the same time, we cannot lose sight of the fact that the investigating agency has already completed investigation and the charge-sheet is already filed before the Special Judge, CBI, New Delhi. Therefore, their presence in the custody may not be necessary for further investigation. We are of the view that the appellants are entitled to the grant of bail pending trial on stringent conditions in order to ally the apprehension expressed by CBI." 44. Thus, keeping in view the fact that applicant has appeared before the department on 30, 31 January 2024 and on 01st February and his statements have been....