TaxTMI 
TaxTMI 
CHARGE SHEET UNDER SECTION 132.
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....HARGE SHEET UNDER SECTION 132.<br> Query (Issue) Started By: - Sadanand Bulbule Dated:- 19-1-2025 Last Reply Date:- 10-6-2025 Goods and Services Tax - GST<br>Got 40 Replies<br>GST<br>Dear all Plz refer Para No 38 of the Hon'ble Madras High Court judgement reported in 2019 (5) TMI 895, which reads as under: 38. Thus, 'determination' of the excess credit by way of the procedure set out in Section 73 or 74, as the case may be is a prerequisite for the recovery thereof. Sections 73 and 74 deal with assessments and as such it is clear and unambiguous that such recovery can only be initiated once the amount of excess credit has been quantified and determined in an assessment. When recovery is made subject to 'determination' in an assessment, the argument of the department that punishment for the offence alleged can be imposed even prior to such assessment, is clearly incorrect and amounts to putting the cart before the horse.38. Thus, 'determination' of the excess credit by way of the procedure set out in Section 73 or 74, as the case may be is a prerequisite for the recovery thereof. Sections 73 and 74 deal with assessments and as such it is clear and unambiguous that such recove....
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....ry can only be initiated once the amount of excess credit has been quantified and determined in an assessment. When recovery is made subject to 'determination' in an assessment, the argument of the department that punishment for the offence alleged can be imposed even prior to such assessment, is clearly incorrect and amounts to putting the cart before the horse. Query: In the light of the above ruling, can a charge-sheet still be filed under Section 132[1][i] for the offences classified under Section 132[1] [b] & [c] without/before determination of tax evaded under Section 74? Assuming it is filed without adjudication under Section 74, is it tenable during trial in the court of law? Experts to throw light with more case laws. Reply By KASTURI SETHI: The Reply: Sh.Sadanand Bulbule Ji, Sir, Pl. go through the following case laws :- 2019 (4) TMI 1320 - TELANGANA AND ANDHRA PRADESH HIGH COURT - P.V. RAMANA REDDY Versus UNION OF INDIA [P.V. Ramana Reddy v. Union of India - 2019 (5) TMI 1528 - SUPREME COURT] 2023 (7) TMI 1008 - SUPREME COURT - STATE OF GUJARAT Versus CHOODAMANI PARMESHWARAN IYER Reply By KASTURI SETHI: The Reply: Sh. Sadanand Bu....
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....lbule Ji, Sir, My views are as under :- Q.No.1 In the light of the above ruling, can a charge-sheet still be filed under Section 132[1][i] for the offences classified under Section 132[1] [b] & [c] without/before determination of tax evaded under Section 74 ? Reply : NO. Q, No. 2 Assuming it is filed without adjudication under Section 74, is it tenable during trial in the court of law ? Reply : NO. Reason : If filed, that will be in violation of principles of natural justice. The object of framing law is to provide fair justice. We cannot forget that the burden of proof regarding establishing the elements of mens rea mentioned in Section 74 is cast upon the department. My reply may please be read in continuation of my reply posted against Issue ID No. 119513 Reply By Sadanand Bulbule: The Reply: Dear Sirji Thank you so much for validating my understanding. My supplementary query speaks as under: 132. (1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences namely:- (a) XXXX (b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made ther....
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....eunder leading to wrongful availment or utilisation of input tax credit or refund of tax; (c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill; shall be punishable-- (i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine; So what emerges from bare reading of offences under clause [b] & [c] together above is, without usage of tax invoice/bill issued under clause [b], the offence under clause [c] does not occur. It means tenability of offence under clause [c] depends upon offence under clause[b]. As such they are interlinked. Meaning, in the absence of usage of tax invoice/bill issued under clause[b], the offence under clause [c] does not take place. Further coming back to the quantum of punishment [supra]. it emphatically speaks about the occurrence of an event of evasion of tax or availment/utilisation of ITC wrongly etc. Since respect of offence under clause [b], there is no evasion tax....
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.... by the offender in the absence of underlying supply of goods/services/both, he cannot be subjected to adjudication under Section 74, but liable to penalty under Section 122 subject to Explanation 1[ii] to Section 74. Normally such chain of events happen in the cartel of bill traders. In the light this prevailing practice, CBIC in its Circular No.171/03/2022-GST dated 06/07/2022 has made clear that the offenders under clause [b] are not liable for adjudication under Section 74 but only for penalty under Section 122. Therefore in my considered understanding, since there is no evasion of tax/wrong availment/utilisation of ITC in the hands of offenders under Section 132[1] [b], they are not liable to punishment under Section 132, as quantification of tax evaded or ITC availed/utilised cannot be made. I have posted this consciously in the interest of natural justice and not for or against anyone. This is only for discussion and not for trail. Experts to comment in the larger interest. Reply By KASTURI SETHI: The Reply: Sh.Sadanand Bulbule Ji, Sir, I further opine as under :- Issuance of invoice without supply of goods and supply of goods without issuance invoice both are fatal t....
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....o the exchequer. What is worthwhile to mention here that the department cannot go beyond the scope of the word, ''commits''. The department cannot interpret the meaning, essence and scope of the word, ''commits" differently. Before sanction of prosecution against any person, the above serious charges have to be established by way of adjudication by the department. This is the essence of the word, ''commits'' mentioned in Section 132. Reply By Sadanand Bulbule: The Reply: Dear Sirji I fully agree with your expanded view. Effectively the offender under Section 132(1)(b), who issues tax invoices/ bills without underlying supply of goods/sevices/both, is not liable for adjudication under Section 74. And this has been even clarified by the CBIC in Circular No. 171/2022. Consequently the offender under Section 132(1)(b) is not be subjected to trial for punishment under Section 132. In fact, the fraudulent beneficiaries of ITC under Section 132(1)(c) who have really evaded tax are alone to be subjected adjudication under Section 74, followed by suitable amount of penalty under Section 122 and punishment under Section 132. The offence under Se....
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....ction 132(1)(c) and the quantification of evaded amount of tax is the focal point for punishment. Hope my understanding is in line with your expanded view. Reply By Sadanand Bulbule: The Reply: Dear all The ratio of following ruling is relevant as far as the distinction between the Investigation officer and the Prosecution complainant is concerned. 2024 (12) TMI 1511 - KARNATAKA HIGH COURT - M/S. VIGNESHWARA TRANSPORT COMPANY VERSUS ADDITIONAL COMMISSIONER OF CENTRAL TAX BENGALURU COMMISSIONER OF CENTRAL TAX MANGALURU, PRINCIPAL COMMISSIONER OF CENTRAL TAX BENGALURU. Challenge to SCN issued by Proper Officer - When the investigation, inspection, search and seizure is substantially completed by an improper Officer, is the show cause notice issued by a proper Officer under Section 74 of the CGST Act and KGST Act liable to be set aside? HELD THAT:- In the instant case, it is not in dispute that respondent no. 1 is the proper officer for inspection, search and seizure and also issuance of show cause notice and not respondent no. 2. Reading of Section 74 of the CGST Act shows that it is only a proper Officer who can investigate into evasion of ....
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....GST and inspection, search and seizure and arrest can be done only by the proper Officer failing which the same will have to be held invalid and based upon the inspection, search and seizure if the proper Officer comes to the conclusion that there is mens rea involved as contemplated under Section 74 of the CGST Act, he can issue a notice under Section 74 and not otherwise - In the instant case, admittedly, substantial part of the investigation including search and seizure of the materials has been done by respondent no. 2 who is not the proper Officer and under the circumstances, the said investigation, inspection, search and seizure in respect of the petitioner herein has to be considered ab initio void. When the same is considered as ab initio void, notice issued under Section 74 of the CGST Act based upon search, seizure and the statements recorded from the petitioner which has been relied upon, has to be considered illegal and that there is no satisfaction on part of the proper Officer for issuance of the notice under Section 74 of the CGST Act. If respondent no. 2 after investigation has transferred the case to resp....
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....ondent no.3, for issuance of notice under Section 74, respondent no.3 was required to redo the investigation and come to an independent conclusion as contemplated under Section 74 of the CGST Act and only thereafter a fresh notice requires to be issued. Respondent no. 1 cannot issue a notice under Section 74 on the 'borrowed satisfaction'. Conclusion - It is only a proper Officer who can investigate into evasion of GST and inspection, search and seizure and arrest can be done only by the proper Officer failing which the same will have to be held invalid. The impugned show cause notice dated 11.04.2023 issued by respondent no. 1 (vide Annexure-G to the writ petition) is hereby set aside insofar as it relates to the petitioner - respondent no. 1 is directed to refund a sum of Rs. 50,00,000/- to the petitioner within eight weeks from the date of receipt of a certified copy of this order - petition disposed off. Reply By KASTURI SETHI: The Reply: Sh.Sadanand Bulbule Ji, Sir, Very useful judgement posted by you in the interest of the honest and sincere taxpayers. This case law proves that honesty, sincerity and integrity exist in India. Rep....
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....ly By KASTURI SETHI: The Reply: Sh, Sadanand Bulbule Ji, Sir, This is with reference to your views expressed at serial no.5. Extract of para no.2 of Board's Circular No. 171/03/2022-GST, dated 6-7-2022 is as follows : "---- in cases of issuance of invoices without supply of goods or services or both, leading to wrongful availment or utilization of input tax credit". In my view, the above sentence stands for Section 132 (1) (b) also because illegal availment of ITC also lays down foundation for evasion of tax. Thus Illegal availment of ITC is evasion of GST though technically there is a difference between the two terms. Further, by diving deep into the words, '"meaning of 'meaning', meaning of scope'', meaning of ''essence' and meaning of ''characteristic'' in relation to the phrase, '"commits or causes to commit" mentioned in Section 132 (1), unnecessary and avoidable harassment can be avoided. Reply By Sadanand Bulbule: The Reply: Dear Sirji In the concluding part of last post, you have rightly touched the umbilical cord to invoke jurisdiction under Section 132. Without that, tenability of prosecution complaint is at....
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.... stake. Facts of each case decide its own fate. This is the theme of Circular No. 171/2022 as well. Reply By KASTURI SETHI: The Reply: Sh.Sadanand Bulbule Ji, Sir, You mean to say that Board's Circular No.171/22 saves an assessee from noose of Section 132 (1) (b) except illegal availment of ITC. If it is so, I concur with your views. Reply By Sadanand Bulbule: The Reply: Dear Sirji In the light of definition of "Input Tax" under Section 2(62), real input tax arises only if there is underlying supply of goods/services/both. Otherwise it is notional input tax. Further the word "availment" is not defined under the GST Act. That being the point, how can an offender under Section 132(1)(b) avail notional input tax by issuing tax invoices without underlying supply of goods. Whether notional input tax causes real evasion of tax and loss of revenue? Of course it may enable the end user to evade tax who is listed in Section 132(1)(c), the ultimate beneficiary who is certainly liable for adjudication under Section 74, penalty under Section 122 and punishment under Section 132. So my concern is how can Circular No.171/22 define the offence under Section 132(1)(b) a fit....
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.... case for invoking Section 132, while clarifying that it is not liable for adjudication under Section 73/74? This is only for academic purpose. So your deep knowledge is solicited. Reply By Sadanand Bulbule: The Reply: Dear all To constitute a transaction liable to tax under Section 7 & 9, the transaction must have the following attributes: a) There must be goods available for supply; b) There must be a consensus ad idem as to the identity of the goods; c) The vendor should actually supply the goods and the buyer must actually receive the goods under valid tax invoice. d) There is payment of genuine "consideration" defined under Section 2[31] Only when these essential tests are tested on the touchstone of Section 16, there arises the entitlement for availment/ utilisation of "input tax" defined under Section 2[62]. Reply By Sadanand Bulbule: The Reply: Dear all For your additional perusal: In the case of State of Bihar & Ors. Vs Commercial Steel Engineering Corporation (2021 (8) TMI 1431 - SC ORDER), the Hon'ble Supreme Court has upheld order of Hon'ble Patna High Court which held that Interest is not payable under GST if ITC ava....
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....iled but not utilized. In Commercial Steel Engineering Vs State of Bihar - 2019 (7) TMI 1452 - PATNA HIGH COURT, Patna High Court held that ITC availed but not utilized for tax payment doesn't invite penal consequences of Section 73 of CGST Act, 2017 and interest cannot be recovered on mere availment of ITC which is not utilized. So in the light of the above , "availment of ITC" prescribed under Section 41 means the amount of tax actually paid to the supplier which in turn gives a sort of right or guarantee to the buyer for its further utilization to set off net tax payable. Unless such ITC is actually utilised, the availment of ITC remains dormant in the books of account. Probably in this backdrop, with effect from 01/01/2021, an amendment has been brought to Section 122 [1A] and to the beginning phrase to Section 132, underlining the essence of retention of benefits arising out of offences listed therein. Reply By Sadanand Bulbule: The Reply: Dear all For information: 2025 (1) TMI 1023 - GAUHATI HIGH COURT - DHARMENDRA AGARWAL VERSUS THE UNION OF INDIA AND 2 ORS, THE DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE GUWAHATI, INTELLIGENCE OFFICER O/O....
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.... DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE GUWAHATI Reply By Sadanand Bulbule: The Reply: Dear all As far as the ongoing discussion on punishment under Section 132 is considered, I take the help of following reference: "The law on the Input Tax Credit has long been settled by the Hon'ble Supreme Court in The Collector of Central Excise, Pune & Others Vs. Daichi Karkaria Ltd. & Ors. [1999 (8) TMI 920 - SUPREME COURT] wherein it has been held that 'There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for." Considering the subject of ITC covered by the above judgement, which is pari materia to the provisions of the GST Act, the offence of utilization of fake ITC under Section 132[1][c] carries more weightage than the offence of issue of tax invoice without supply of goods under Section 132[1][b], where there is no utilization of fake ITC, being an act of aiding or abetment for evasion of tax, for the purpose of punishment under Section 132[1][i]. This is my personal opinio....
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....n. Reply By Sadanand Bulbule: The Reply: Dear all Section 132. (1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences. So understand the meaning of "Accrual,arises and receipt", the following judgement may be referred: ED. SASSOON AND COMPANY LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY - 1954 (5) TMI 2 - SUPREME COURT Whether in the circumstances of the case the managing agency commission was liable to be apportioned between the Sassoons and their respective transferees in the proportion of the services rendered as managing agents by each one of them? Held that:- The whole difficulty has arisen because the High Court could not reconcile itself to the situation that the transferees had not worked for the whole calendar year and yet they would be held entitled to the whole income of the year of account ; whereas the transferors had worked for the broken periods and yet they would be held disentitled to any share in the income for the year. If the work done by the transferors as well as the transferees during the respective periods of the year were taken to be the criterion the result w....
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....ould certainly be anomalous. But the true test under Section 4(1)(a) of the Income-tax Act is not whether the transferors and the transferees had worked for any particular periods of the year but whether any income had accrued to the transferors and the transferees within the chargeable accounting period. It is not the work done or the services rendered by the person but the income received or the income which has accrued to the person within the chargeable accounting period that is the subject-matter of taxation. That is the proper method of approach while considering the taxability or otherwise of income and no considerations of the work done for broken periods or contribution made towards the ultimate income derived from the source of income nor any equitable considerations can make any difference to the position which rests entirely on a strict interpretation of the provisions of Section 4(1)(a) of the Income-tax Act. The result therefore is that the question referred by the Tribunal to the High Court must be answered in the negative. All the appeals will accordingly be allowed. Reply By Sadanand Bulbule: The Reply: Expression "Tax evasion" In the Black Law D....
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....ictionary, 9th Edition as follows: "tax evasion. The willful attempt to defeat or circumvent the tax law in order to illegally reduce one's tax liability." Thus, it emerges that tax evasion has been defined as a willful attempt to defeat or circumvent the tax law in order to illegally reduce ones tax liability. The word "willful" would mean a deliberate attempt to circumvent the tax law. [DURGA STEEL ROLLING MILLS THRU. PARTNER AMIT ARORA- 2024 (3) TMI 791 - ALLAHABAD HIGH COURT] Reply By Sadanand Bulbule: The Reply: Definition of 'Fraud' in the Black's Law Dictionary, which is as under: Fraud means: (1) A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. Fraud is usually a tort, but in some cases (esp. when the conduct is willful) it may be a crime. (2) A misrepresentation made recklessly without belief in its truth to induce another person to act. (3) A tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment. (4) U....
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....nconscionable dealing; esp., in contract law, the unconscientious use of the power arising out of the parties' relative positions and resulting in an unconscionable bargain. Halsbury's Law of England has defined fraud as follows: "Whenever a person makes a false statement which he does not actually and honestly believe to be true, for purpose of civil liability, the statement is as fraudulent as if he had stated that which he did know to be true, or know or believed to be false. Proof of absence of actual and honest belief is all that is necessary to satisfy the requirement of the law, whether the representation has been made recklessly or deliberately, indifference or reckless on the part of the representor as the truth or falsity of the representation affords merely an instance of absence of such a belief." In KERR on the Law of Fraud and Mistake, fraud has been defined thus: "It is not easy to give a definition of what constitutes fraud in the extensive significance in which that term is understood by Civil Courts of Justice. The Courts have always avoided hampering themselves by defining or laying down as a general proposition what shall be held to constitute frau....
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....d. Fraud is infinite in variety... Courts have always declined to define it, ... reserving to themselves the liberty to deal with it under whatever form it may present itself. Fraud ... may be said to include property all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another. Al surprise, trick, cunning, dissembling and other unfair way that is used to cheat anyone is considered as fraud. Fraud in all cases implies a willful act on the part of anyone, whereby another is sought to be deprived, by illegal or inequitable means, of what he is entitled too." [SATLUJ JAL VIDYUT NIGAM - 2018 (9) TMI 2025 - SUPREME COURT] In Ram Chandra Singh v. Savitri Devi, 2003 (10) TMI 610 - SUPREME COURT, wherein it was observed that fraud vitiates every solemn act. Fraud and justice never dwell together and it cannot be perpetuated or saved by the application of any equitable doctrine including res-judicata. This Court observed as under: "15. Commission of fraud on court and suppression of material fact....
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....s are the core issues involved in these matters. Fraud, as is well-known, vitiates every solemn act. Fraud and justice never dwell together. 16. Fraud is a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. 17. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. 18. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. 23. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. 25. Although in a given case a deception may not amount to ....
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....fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res-judicata." Reply By Sadanand Bulbule: The Reply: Distinction between "Burden Of Proof" and "Onus Of Proof"; Burden Of Proof lies upon a person who has to prove the fact and which never shifts but onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. For instance, in a suit for possession based on the title, once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant, it is for the defendant to discharge his onus and in the absence thereof, the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff's title vide RVE Venkatachala Gounder vs. Arulmigu Viswesaraswami and VP Temple- 2003 (10) TMI 639 - SUPREME COURT. Section 103 of the Evidence Act, 1872 states that- "....the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that ....
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....the proof of that fact shall lie on any particular person. This Section enlarges the scope of the general rule in Section 101 that the burden of proof lies on the person who asserts the affirmative of the issue. Further, Section 104 of the said Act states that the burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence. The import of this Section is that the person who is legally entitled to give evidence has the burden to render such evidence. In other words, it is incumbent on each party to discharge the burden of proof, which rests upon him. In the context of insurance contracts, the burden is on the insurer to prove the allegation of non-disclosure of a material fact and that the non-disclosure was fraudulent. Thus, the burden of proving the fact, which excludes the liability of the insurer to pay compensation, lies on the insurer alone and no one else." (MAHAKALI SUJATHA - 2024 (11) TMI 1 - SUPREME COURT) Reply By Sadanand Bulbule: The Reply: The following judgement speaks more about "prosecution complaint" [charge-sheet] under Section 132 of the CGST....
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.... Act: 2025 (2) TMI 1162 - SUPREME COURT (LB) - RADHIKA AGARWAL VERSUS UNION OF INDIA AND OTHERS Power to arrest under the Customs Act, 1962 and the Central Goods and Services Tax Act, 2017 - reasons to believe - non-cognizable offences - Jurisdictionary powers of judicial review under Article 32 and Article 226 of the Constitution of India. As per Sanjiv Khanna, CJI HELD THAT:- Section 41-D of the Code is applicable for offences under the Customs Act. Accordingly, a person arrested by a customs officer has the right to meet an advocate of his choice during interrogation, but not throughout interrogation - In Senior Intelligence Officer, Directorate of Revenue Intelligence v. Jugal Kishore Samra, [2011 (7) TMI 910 - SUPREME COURT]. This Court held that an advocate/authorised person may be present within visual distance during interrogation, but he cannot be within hearing distance of the proceedings nor can there be any consultations with such advocate/authorised person during the course of the interrogation. Reference can also be made to Section 50A of the Code, which states that every police officer or other person making an arrest under the Code shall forthwith giv....
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....e information regarding such arrest and place where the arrested person is being held to any of his friends, relatives, or other person as may be disclosed or nominated by the arrested person for the purpose of giving such information. The arrested person must be informed of this right - the details of compliance with this mandate must be entered into the diary maintained by customs officer. It is the duty of the Magistrate, when an arrested person is produced, to satisfy himself that the requirements of Section 50A(2) and (3) have been complied with. Thus, these stipulations will apply in cases of arrests made by the customs officers. Arvind Kejriwal v. Directorate of Enforcement, [2024 (7) TMI 760 - SUPREME COURT] a recent judgment authored by one of us (Sanjiv Khanna, J.), is a dictum relating to the Prevention of Money Laundering Act, 2002. This Court held that the power of arrest granted to the Directorate of Enforcement under Section 19 of the PML Act is fenced with certain pre-conditions. These pre-conditions act as stringent safeguards to protect the life and liberty of individuals. In Arvind Kejriwal, a combined reading of Pankaj Bansal v. Union of India and Others,....
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.... [2024 (7) TMI 760 - SUPREME COURT] Prabir Purkayastha v. State of NCT of Delhi, [2024 (5) TMI 1104 - SUPREME COURT] and Vijay Madanlal Choudhary and Others v. Union of India and Others [2022 (7) TMI 1316 - SUPREME COURT (LB)] was adopted by this Court. It was held that the power to arrest a person without a warrant and without instituting a criminal case is a drastic and extreme power. Therefore, the legislature had prescribed safeguards in the language of Section 19 itself which act as exacting conditions as to how and when the power is exercisable. These safeguards include the requirement to have "material" in the possession of DoE, and on the basis of such "material", the authorised officer must form an opinion and record in writing their "reasons to believe" that the person arrested was "guilty" of an offence punishable under the PML Act. The "grounds of arrest" are also required to be informed forthwith to the person arrested. Arvind Kejriwal also holds that the courts can judicially review the legality of arrest. This power of judicial review is inherent in Section 19 as the legislature has prescribed safeguards to prevent misuse. After all, arrests cannot be....
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.... made arbitrarily on the whims and fancies of the authorities. This judicial review is permissible both before and after criminal proceedings or prosecution complaints are filed. The investigating officer is also required to look at the whole material and cannot ignore material that exonerates the arrestee. A wrong application of law or arbitrary exercise of duty by the designated officer can lead to illegality in the process. The court can exercise judicial review to strike down such a decision. There is substantively no difference between a person being guilty of an offence and a person committing an offence. In a catena of judgments of this Court, it has been held that words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary - given the framework of the Customs Act, which explicitly classifies offences into bailable and non-bailable, as well as cognizable and noncognizable, the "reasons to believe" must reflect these classifications when justifying a....
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....n arrest. The reasoning must weigh in why an arrest is being made in a specific case, particularly given the specific severity assigned to the offence by the legislature. The reasoning must also state how the monetary thresholds outlined in the Act are met. There are no inconsistency between Section 19(1) of the PML Act and Section 104(1) of the Customs Act. We are of the opinion that principles and ratio developed in the case of Arvind Kejriwal, and the principles specifically discussed and delineated in paragraphs 30 to 45 of this judgment, are equally applicable to the power of arrest under Section 104 of the Customs Act. The respondent authorities are, therefore, directed to comply with the mandate of this judgment and that of Arvind Kejriwal. The challenge to the amendments as well as provisions of the Customs Act is rejected. Reliance placed by the petitioners on the decision of this Court in Om Prakash [2011 (9) TMI 65 - SUPREME COURT] is misconceived as the statutory provisions have undergone amendments to bring them in consonance with the law of the land. Moreover, the provisions themselves provide enough safeguards against arbitrary and wrongful arrests. Section 1....
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....62(1) of the GST Acts permits compounding of offences and therefore, the ratio in Makemytrip [2016 (9) TMI 52 - DELHI HIGH COURT] should be applied to the GST Acts. The decision in Makemytrip, itself carves out an exception when an assessment order under the Finance Act may not be required, namely cases where a person who is shown to be a habitual evader as one who has not filed service tax returns for a continuous period of time, who has a history of repeated defaults for which there have been fines, penalties imposed, and prosecutions launched, etc. - there are sufficient safeguards to ensure that no arrests are made till the Commissioner is able to show and establish, on the basis of material and evidence, that the conditions of clauses (a) to (d) as well as clause (i) of sub-section 1 to Section 132 of the GST Acts are satisfied and therefore the offences are non-bailable. Constitutional validity of Sections 69 and 70 of the GST Acts - HELD THAT:- The Parliament, under Article 246-A of the Constitution, has the power to make laws regarding GST and, as a necessary corollary, enact provisions against tax evasion. Article 246-A of the Constitution is a comprehensive provisio....
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....n and the doctrine of pith and substance applies. The impugned provisions lay down the power to summon and arrest, powers necessary for the effective levy and collection of GST. Time and again this Court has held that while deciding the issue of legislative competence, entries should not be read in a narrow or pedantic sense but given their broadest meaning and the widest amplitude because they are intrinsic to a machinery of government. A penalty or prosecution mechanism for the levy and collection of GST, and for checking its evasion, is a permissible exercise of legislative power. The GST Acts, in pith and substance, pertain to Article 246-A of the Constitution and the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid, the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected. The challenge to the constitutional validity as also the right of the authorised officers under the Customs Act and the GST Acts to arrest are rejected and dismissed with elucidation and clarification on the pre-conditions and when and how the power of arrest is to be ....
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....exercised. The matters are directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal. As per Bela M. Trivedi, J HELD THAT:- Whenever the jurisdiction of the High Court or the Supreme Court is invoked under Article 226 or Article 32 as the case may be, challenging the punitive or preventive detention, the Court is expected to take into consideration the nature of right infringed, the scope and object of the legislation under which such arrest or detention is made, the need to balance the rights and interests of the individual as against those of the society, the circumstances under which and the persons by whom the jurisdiction is invoked etc. In exercise of their discretionary jurisdiction, the High Courts and the Supreme Court do not, as courts of appeal or revision, correct errors of law or of facts. The judicial intervention is warranted only in exceptional circumstances when the arrest is prima facie found to be malafide; or is prompted by extraneous circumstances, or is made in contravention of or in breach of provisions of the concerned statute; or when the authority acting under the concerned statute does not have t....
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....he requisite authority etc. The power of judicial review keeps a check and balance on the functioning of the public authorities and is exercised for better and more efficient and informed exercise of their powers, such power has to be exercised very cautiously keeping in mind that such exercise of power of judicial review may not lead to judicial overreach, undermining the powers of the statutory authorities. To sum up, the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the special Acts, required to be followed by the authorized officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act. Conclusion - i) The amendments to the Customs Act and GST Act are valid. ii) The procedural safeguards under the CrPC apply to arrests under the Customs Act and GST Act, ensuring protection of individual rights. iii) Customs officers must exercise their arrest powers with caution, ensuring compliance with statutory and constitutional safeguards. iv) The power of arrest under these Acts is subject to judicial review to ....
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....prevent arbitrary or unlawful arrests. v) The constitutional validity of Sections 69 and 70 of the GST Acts is upheld, affirming the legislative competence to enact such provisions. Reply By Sadanand Bulbule: The Reply: 2025 (2) TMI 1152 - MADRAS HIGH COURT - TVL. R.M.K. ENTERPRISES, REPRESENTED BY ITS PROPRIETOR MR. R. MALIK VERSUS THE STATE TAX OFFICER, THE ASSISTANT COMMISSIONER (ST), CHENNAI Liability to pay GST demand for the Assessment Years 2017-2018, 2018-2019, and 2019-2020 - it is alleged that petitioner was indulging in passing Input Tax Credit to facilitate evasion of tax - respondent submit that entire tax liability has been borne by the petitioner out of the Input Tax Credit availed by the petitioner which was passed on by the respective dealers. HELD THAT:- The law on the subject has been settled by the Division Bench of this Court in Sahyadri Industries Limited Vs. State of Tamil Nadu [2023 (4) TMI 912 - MADRAS HIGH COURT]. Although the said decision was rendered in the context of Tamil Nadu Value Added Tax (TNVAT) Act, 2006, the ratio therein will squarely apply to the facts of the case under the Central Goods and Services Tax (CGST) Act, 2017 and the Tamil Nad....
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....u Goods and Services Tax (TNGST) Act, 2017. The fact remains that the petitioner has discharged the entire tax liability from and out of the Input Tax Credit availed from the invoices raised by the above mentioned suppliers. There is no payment of tax in cash by the petitioner. Prima facie, there are indications that the petitioner acted as an accessory to pass an ineligible Input Tax Credit. Petition dismissed. Reply By Sadanand Bulbule: The Reply: Plz refer the following to understand the academic meaning of "benefit" in conjunction with the opening phrase of Section 132 of the CGST Act: 2013 (8) TMI 45 - ALLAHABAD HIGH COURT - COMMISSIONER OF INCOME TAX-I VERSUS M/S BHARAT SEWA SANSTHAN Institution established for charitable purposes - Entitlement for Exemption u/s 11 - benefit of statutory accumulation u/s 13 - Nature of donations/grants to organizations - Word "benefit" - exgratia expenditure - huge expenditure on non-charitable activities - misappropriation of funds. HELD THAT:- There is no basis for assuming it for the reasons that the amounts passed on to other organizations were in nature of donations/grants to organizations carrying on charitable ac....
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....tivities of which the members of the Governing Council of the Sansthan would not be beneficiaries. The establishment expenditure incurred at the Head Office was only a fraction of the total of such expenditure, a major portion of which had been incurred on the units carrying on charitable activities. The conclusion of the AO that the bulk of the expenditure was on non-charitable activities is, therefore, by no means sustainable. Further, the beneficiaries i.e. the President and the Treasurer, who got the accommodation were also the office bearer of the Motilal Memorial Society. Thus, if at all there is a case of providing benefit to the persons of prohibited category, then it should be invoked in the case Motilal Memorial Society and certainly not in the case of the assessee. Needless to mention that the Hon'ble Allahabad High Court in the case of CIT vs. Kamla Town Trust- 2005 (8) TMI 90 - ALLAHABAD HIGH COURT], has held that it has to be shown by the Department that trust has provided land and building or other property of the trust for use of the persons of prohibited category for any period during the previous year without charging adequate rent or other compensation....
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..... Therefore, the term "benefit" would cover a case of one way flow of privilege and advantages to the persons of prohibited category, out of the funds, property or income of the trust. In the instant case, it has not been mentioned that the funds were misappropriated and were not utilized for the purpose according to the objects of the society, so the registration cannot be cancelled. The registration was not cancelled, but the benefit of exemption was not given by the AO, which is not allowable as per the ratio laid down in the case of American Hotel and Lodging Association vs. CBDT, [2008 (5) TMI 17 - SUPREME COURT]. On the plain language of Section 11(1)(i) of the Act, the assessee was entitled to accumulate 25% of the donation received should be the income of the trust. Thus, the assessee-society is entitled to accumulate 25% of its income from the property/donation etc. held in the trust as rightly observed by the Tribunal. Hence, we do not find any reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with reasons mentioned therein. The answer to the substantial question of law is in favour of the assessee and ag....
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....ainst the revenue. In the result, the appeals filed by the appellant-Department are hereby dismissed. Reply By Sadanand Bulbule: The Reply: 2025 (3) TMI 1022 - KARNATAKA HIGH COURT - VIRAL NARENDRA GOSALIA VERSUS THE SENIOR INTELLIGENCE OFFICER DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE, BANGALORE ZONAL UNIT. Challenge to petitioner's arrest and subsequent judicial custody - non-compliance with the statutory requirement for the issuance of a notice under Section 35 (3) of BNSS, 2023. HELD THAT:- It is well established in modern criminal jurisprudence and constitutional law that any challenge to the legality of an arrest involves a contest between the entrenched right to life and liberty and the larger public interest and state obligation to punish the guilty. Thus, any interpretative exercise by this Court-whether under its writ jurisdiction or inherent powers-must employ a "test of proportionality." In the case of Satender Kumar Antil v. CBI [2022 (8) TMI 152 - SUPREME COURT], the Apex Court observed in respect of grant of bail to persons accused of offences punishable with less than seven years of imprisonment that "one would expect a better exercise of ....
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....discretion on the part of the court in favour of the accused". The Apex Court, in Ashok Munilal Jain and Anr. v. Assistant Director, Directorate of Enforcement [2017 (3) TMI 1642 - SUPREME COURT] held that the procedure prescribed under the Criminal Procedure Code (CrPC), 1973 is equally applicable to criminal proceedings arising under the CGST Act, 2017. The inherent powers of a High Court are not negated by any overlap with the judicial review powers conferred under Articles 226 and 227. Writs are extraordinary constitutional remedies and operate independently of the statutory right under Section 528 to address grievances not specifically provided for in the Sanhita - The High Court may, at its discretion, entertain a petition under Article 227 of the Constitution or under Section 528 of BNSS to address a substantial question of law that goes to the root of the matter or the genesis of the prosecution. A perusal of Section 69 (3) (a) of CGST Act, 2017 reveals that the said Act envisages that the arrestee charged with a cognizable and non-bailable offence as under Section 132 (4) of the said Act shall be forwarded to the custody of the Magistrate, in default of bail. The statut....
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....e does not provide for custody of the arrestee to either police or the proper officer. Therefore, the authority of the Magistrate to, either admit the said arrestee on bail or remand him to judicial custody, is to be necessarily exercised in accordance with the provisions of the BNSS, 2023 (i.e. CrPC, 1973) - the instant petition is maintainable under Section 528 of BNSS, 2017, particularly where the grounds of challenge to the arrest include non-compliance with the statutory provision of Section 35 (3) of BNSS, 2017. The Apex Court in Arnesh Kumar v. State of Bihar, [2014 (7) TMI 1143 - SUPREME COURT] held that an arrest without a warrant by a police officer for a cognizable offence punishable with imprisonment of up to seven years must satisfy not only the requirement of having 'reason to believe' that the arrestee has committed the alleged offence but also that the arrest is necessary for one or more of the purposes enumerated in sub-clauses (a) to (e) of clause (1) of Section 41 CrPC (with Section 35(1) of BNSS corresponding to Section 41 CrPC). As to the issue of notice of appearance under Section 35 (3) of BNSS (i.e., Section 41-A of CrPC), the Court observed that such notic....
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....e must be served on the accused within two weeks from the date of institution of the case, with an extension by the Superintendent of Police possible for reasons recorded in writing. In the case at hand, the petitioner however, is an arrestee, who has been in custody since 30.01.2025 who had tendered evidence and cooperated with the conduct of inquiry, and thus, had compiled with the summons issued on 02.01.2025 - under Section 70 of the CGST Act, 2017. The subject of challenge herein is not the issuance of summons, but the arrest effected in pursuance of the said summons, when the same was so made without issuance of the notice of appearance under Section 35 (3) of BNSS, 2023 (or section 41-A(1) of CrPC, 1973). The case at hand involves a complaint of wrongful availment of ITC by the petitioner to the tune of INR 5.10 crores only, and the petitioner has been in remand since the date of his arrest on 30.01.2025 - The CGST, Act 2017 provides for assessment under Section 59, provisional assessment under section 60, scrutiny of returns under Section 61, assessment of persons who do not file returns under Section 62, assessment of unregistered persons under Section 63, summary assess....
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....ment in special cases under Section 64, and audit under Sections 65 and 66. It is undisputed that while a prosecution can be launched prior to conduct of summary assessment or special audit determining liability, no offence can be said to be made out in respect of purported discrepancies in the furnished returns, until completion of the said audits. In light of the fact that the petitioner-arrestee was arrested against the offence punishable with no more than five years of imprisonment plus fine, but without the issuance of notice of appearance directing him to appear before the officer authorised under Section 69(1) of the CGST Act, and the fact that the petitioner has been incarcerated since 30.1.2025, coupled with the settled bail jurisprudence to exercise discretion in favour of accused of such nature, it is deemed fit that the petitioner be enlarged on bail. Conclusion - The petitioner's arrest is vitiated due to non-compliance with Section 35 (3) of BNSS. Petition is granted bail subject to fulfilment of conditions imposed - application allowed. Reply By Sadanand Bulbule: The Reply: The following judgement signifies the serious threat to the national economy in ....
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....the absence of co-operation of the accused of economic offences: 2025 (4) TMI 640 - SUPREME COURT - SERIOUS FRAUD INVESTIGATION OFFICE VERSUS ADITYA SARDA Grant of anticipatory bail - Avoidance of legal proceedings - no non-bailable warrant issued against the respondent - HELD THAT:- It is no more res integra that economic offences constitute a class apart, as they have deep rooted conspiracies involving huge loss of public funds, and therefore such offences need to be viewed seriously. They are considered as grave and serious offences affecting the economy of the country as a whole and thereby posing serious threats to the financial health of the country. The law aids only the abiding and certainly not its resistants. When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail, particularly when the Court taking cognizance has found him prima facie involved i....
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....n serious economic offences or heinous offences - The High Courts should also consider the factum of issuance of non-bailable warrants and initiation of proclamation proceedings seriously and not casually, while considering the anticipatory bail application of such accused. In the instant case, as stated earlier, the Ministry of Corporate Affairs had directed the Appellant - SFIO to investigate into the affairs of 125 companies and on the completion of the investigation, the SFIO had lodged the private complaint before the Special Court against the accused including the respondents, alleging various serious offences under the Companies Act including Section 447 thereof and the offences under the IPC. It is pertinent to note that as per sub-section (6) of Section 212 the offence covered under Section 447 of the Companies Act has been made cognizable and the person accused of the said offence is not entitled to be released on bail or on his bond, unless twin conditions mentioned therein are satisfied. In a recent case in Union of India through Assistant Director vs. Kanhaiya Prasad, [2025 (2) TMI 563 - SUPREME COURT] it has been observed by this Court that cryptic orders granting b....
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....ail without adverting to the facts or the consideration of such restrictive conditions with regard to the bail are perverse and liable to be set aside. Coming back to the facts of the present case, though the Special Court had taken cognizance of the alleged offences under the Companies Act including under Section 447 and other offences under the IPC, and even though the non-bailable warrants were issued from time to time against the Respondents, and even though the proclamation proceedings were initiated against them, the High Court has passed the impugned orders. In none of the impugned orders, the High Court has bothered to look into the proceedings conducted, and the detailed orders passed by the Special Court for securing the presence of the Respondents - Accused. It cannot be gainsaid that the judicial time of every court, even of Magistrate's Court is as precious and valuable as that of the High Courts and the Supreme Court. The accused are duty bound to cooperate the trial courts in proceeding further with the cases and bound to remain present in the Court as and when required by the Court. Not allowing the Courts to proceed further with the cases by avoiding execution of....
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.... summons or warrants, disobeying the orders of the Court, and trying to delay the proceedings by hook or crook, would certainly amount to interfering with and causing obstruction in the administration of justice. In the instant case, the Special Court considering the seriousness of the alleged offences had initially issued bailable warrants, however, the Respondents kept on avoiding the execution of such warrants and did not appear before the Special Court though fully aware about the pendency of the complaint proceedings against them. The Special Court therefore had to pass detailed orders from time to time for the issuance of non-bailable warrants, and thereafter had also initiated the Proclamation proceedings under Section 82 of the Code, for requiring respondents to appear before it. The High Court however without paying any heed to the proceedings conducted by the Special Court against the respondents, and ignoring the well settled legal position, granted anticipatory bail to the Respondents vide the impugned orders. As discussed earlier, the said Orders being perverse and untenable at law, cannot be allowed to be sustained, and deserve to be set aside. Conclusion - The....
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.... High Court's orders granting anticipatory bail were in disregard of the mandatory conditions of Section 212(6) of the Companies Act and were therefore perverse and untenable. The impugned orders set aside - appeal allowed. Reply By Sadanand Bulbule: The Reply: I wish to add here that, there is not a single day where we don't come across the news of fraudulent availment of input tax credit by way of issuing fake tax invoices without actual supply of goods/services/both. In a way this has become incurable disease despite the Governments' innovative controlling measures. Normally the dormant registered persons without any verifiable antecedents are engaged in such frauds with short shelf-life and later they disappear without leaving their footprints. Or else even if they are found, they would have nothing to recover anything from them. Of course the master minds and the real beneficiaries of ITC are causing such frauds sitting behind the opaque curtains. And the corresponding money is circulated in a camouflaged manner. This is the SOP PAN India. The moot question here is, against to whom the charge sheet under Section 132 is to be filed, the penalty is to be imposed u....
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....nder Section 122 and adjudication under Section 74/74A to be concluded for such fraudulent activities? In my opinion this is the crucial issue for the IOs/AOs to be prudent enough first to understand the essence of opening phrase of Section 132 brought into force with effect from 01/01/2021 and it reads as under: Punishment for certain offences. 132. (1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences, namely:- (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax; (b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; (c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill; So what emerges from the bare reading of the above opening phrase is, the person who has caused and retained the benefit of ITC arising out of such offence s....
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....hall be real offender and he alone shall be liable for applicable punishment. Here again the courts have held that, the retention of benefit means the subject ITC must have been actually utilised to reduce/pay out the actual output tax by the recipient of such fake tax invoices without actual supply of goods/services/both. And such beneficiaries are categorised under Section 132(1)(c) of the CGST Act. The persons falling under Section 132(1)( b) not being the retainers of the benefit of ITC to reduce/pay out the actual output tax are outside the scope of the opening phrase of Section 132 [supra]. This analysis is significant to determine the adjudication proceedings under Section 74/74A and also the quantum of punishment, if liable, under Section 132 as well. This equally applies to Section 69 for arresting the real offenders as listed under Section 132 as well. The above analogy precisely applies to the amount of penalty to be imposed under Section 122 which has also the similar opening phrase with effect from 01/01/2021. In simple words, if the real beneficiaries of ITC arising out of such frauds are not established with incontrovertible evidences, then they are liable to minimu....
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....m penalty under Section 122 and not equal to the tax amount. Therefore the authorities who arrest a person under Section 69, file charge sheet under Section 132, levy penalty under Section 122 and adjudicate under Section 74/74A must be very careful and prudent to take more than enough precautions before initiating such proceedings. Otherwise the entire proceedings tremble for lack of proper sufficient evidences in the direction of establishing the charge of retention of benefit of ITC, the essence of crime. The superior courts diligently weigh the intent of the law and corresponding evidences to indicate who exactly has caused the loss of revenue. Nothing else counts. Here reliance is placed upon the judgement dated June 11, 2024 of the Hon'ble Madras High Court rendered in the case of M/S. GREENSTAR FERTILIZERS LIMITED, REP. BY ITS CHIEF OPERATING OFFICER, E. BALU VERSUS THE JOINT COMMISSIONER (APPEALS), THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, TUTICORIN. 2024 (6) TMI 667 - MADRAS HIGH COURT [Disclaimer: These are my personal views for academic interest and not for use in the court of law]. Reply By Sadanand Bulbule: The Reply: Plz refer the following rele....
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....vant for the subject under discussion: 2025 (4) TMI 933 - DELHI HIGH COURT - SUNIL GULATI VERSUS ADDITIONAL COMMISSIONER CGST DELHI SOUTH COMMISSIONERATE & ANR. Imposition of penalty by the CGST Department under Section 122(1A) of the CGST Act - vailability of an appellate remedy under Section 107 of the CGST Act - HELD THAT:- The stand of other entities and individuals against whom demands have been raised and penalties have been imposed may also be necessary in the adjudication in the present case. The appellate jurisdiction would be the appropriate jurisdiction to comprehensively adjudicate the matter. In so far as the stand of the Petitioner that he has not retained the benefit of any transaction is concerned, the same would also be a factual issue which cannot be gone into in writ jurisdiction by this Court. The Petitioner would be free to raise this issue in appeal. Further, the argument that penalty could not have been imposed on the Petitioner for the Financial Years from 2017 can also be raised in appeal by the Petitioner. Conclusion - Considering that all the issues which have been raised can be clearly raised before the appellate authority, ....
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....this is a fit case for directing the Petitioner to avail of his remedies under Section 107 of the CGST Act. Entertaining the present writ petition would in fact mean that all the factual issues would have to be gone into by this Court which would not be permissible. The Petitioner had full knowledge of the proceedings in the SCN. Petition disposed off. Reply By Sadanand Bulbule: The Reply: 2025 (4) TMI 1236 - BOMBAY HIGH COURT - MR. AMIT MANILAL HARIA & ORS. VERSUS THE JOINT COMMISSIONER OF CGST & CE & ORS. Levy of penalty u/s 122(1A) - relevant statute can be applied retrospectively for periods prior to its enforcement date of 1st January 2021, specifically for the period from July 2017 to December 2020 - HELD THAT:- As far as ad-interim relief is concerned, a prima facie case is made out for grant of ad-interim relief. Atleast prima facie, there are substance in the argument canvassed on behalf of the Petitioners. It is not in dispute that Section 122 (1A) was brought on the statute book only with effect from 1st January 2021 and yet penalty is sought to be imposed on the Petitioners for a period much prior thereto. Also, prima facie, we find that one of the issues ....
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....raised in the present Petition is squarely covered by a decision of this Court in the case of Shantanu Sanjay Hundekari [2024 (3) TMI 1277 - BOMBAY HIGH COURT]. A strong prima facie case is made out - the balance of convenience is in favour of the Petitioners - Petition disposed off. Reply By Sadanand Bulbule: The Reply: 2025 (4) TMI 1282 - CALCUTTA HIGH COURT - SANTOSH KUMAR SAH VERSUS UNION OF INDIA Legality of arrest of the petitioner under Section 132(1)(c) read with Section 132(1)(i) and Section 132(5) of the Central Goods and Services Tax Act, 2017 (CGST Act) - absence of a prior adjudication or quantified demand under Section 74 of the CGST Act - fraudulent availment of Input Tax Credit (ITC) on the basis of allegedly fake invoices and non-physical receipt of goods - HELD THAT:- The service Tax Authorities before proceeding against the tax payer either for recovery of tax due or penalty or before deciding to lodge a criminal complaint must consider all the relevant documents in relation to receipt of goods and services and in case of contravention of Section 132 (1) (c) of Central Goods and services Tax Act if the Authorities are of the view that on offence under th....
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....e said section is committed should either cause inspection at the business premises of the tax payer to satisfy themselves or ask the tax-payer for clarification before deciding to proceed against the tax-payer under Section 132 of CGST Act. It is to be remembered that the reputation of a business man tarnishes when a complaint is lodged against him and he is arrested in connection with his business activity. As CGST Authority is not an individual but Government Authority and 'State' within the meaning of Article 12 of the Constitution it is not only their duty to ensure revenue of the state in accordance with law but also to see that business men, tax payers are not unnecessarily harassed and their reputation is not tarnished and personal liberty is not unnecessarily infringed. Thus the Authority should proceed in a reasonable manner and apply their mind before deciding to set the criminal law in motion against a tax-payer. In the instant matter the CGST Authority upon receiving the report of panchanama dated 30/03/2025 ought to have applied their mind and could have conducted further enquiry or give an opportunity to the petitioner of being heard before lodging the complaint on ....
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....31/03/2025 and arresting the petitioner. However as the CGST Authority has on enquiry collected some information and documents before lodging the complaint it would not be proper to make any further observation with regard to the merits of the case but it is necessary to decide as to whether petitioner should be granted bail. In the instant case the petitioner is charged with committing an offence the maximum punishment of which, is five years. Now considering the materials on record, it appears that the relevant documents and information is with the respondent authority thus there is no scope for tampering evidence. As the petitioner has his business there is no chance to abscond. Moreover it appears from record that the petitioner has-co-operated with the respondent authority. As a question of law is raised that once the petitioner has filed bail application before the Learned Sessions Court the bail application before this Court is not maintainable and the Learned Advocate for the petitioner submits that the bail application before Sessions Court is filed due to miscommunication and petition before session court will be withdrawn as not pressed, it is necessary to address on t....
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....his issue - In this regard it is to be noted that although Section 439 CrPC read with Section 483 of Bharatiya Nagarik Suraksha Sanhita 2023 confers special power upon High Court and Court of Session to grant bail but once an application is filed before Court of Session another should not be filed in High Court, without withdrawal from sessions Court However as bail applications are not affirmed by the accused and the accused simply executes vokalatnama being in custody without having knowledge what specific steps are taken he cannot be made to suffer for no laches on his part. The petitioner be released on bail with 2 sureties of Rs. 10,000/- each subject to satisfaction of Learned ACJM Siliguri. Conclusion - The arrest was effected without any judicial warrant and significantly before any formal complaint had been filed before the Learned Magistrate. No adjudication proceedings show cause notice or quantification of demand under Section 74 of the CGST Act preceded the arrest, nor was there any material indicating culpable intent. The arrest therefore is not only disproportionate but wholly unjustified in law and facts. Bail application allowed. Reply By Sadanand Bulbule:....
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.... The Reply: 2025 (4) TMI 1466 - ALLAHABAD HIGH COURT - ANKUR GARG VERSUS UNION OF INDIA Seeking grant of regular bail - offence under Sections 132(1)(b), 132(1)(c), 132(1)(i) of Central Goods and Services Tax Act, 2017 - availing ineligible Input Tax Credit on the basis of invoices issued by non-existent firms, and without receipt of concomitant goods the fake Input Tax Credit was further passed on to various buyers - Admissibility of Applicant's Statement under Section 70 CGST Act - HELD THAT:- This Court finds that the prosecution case is primarily based upon the documentary evidence relating to alleged involvement of M/s Aadya Trading Company in availing ineligible Input Tax Credit and further passing it on to three other beneficiary firms noticed above. During the course of hearing, it is fairly stated by learned Counsel that as per records of M/s. Aadya Trading Company, Ghanshyam Aggarwal is the proprietor of the said firm, but according to him, the applicant is the person who is actually managing the affairs of the said firm. Learned counsel for the opposite party has also not disputed this fact that the applicant is at least not involved in creation of the al....
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....leged 21 non-existent firms, which were utilized for availment and further passing on ineligible Input Tax Credit. As far as the statement of applicant recorded under Section 70 CGST Act 2017, is concerned, its admissibility or evidentiary value would be tested during trial. A perusal of the zimni orders passed by the trial court would show that after filing of the charge-sheet in January, 2025, the case is being adjourned for recording pre-charge evidence and no witness has been examined so far by the prosecution. Thus, it is evident that the trial has not yet started. Conclusion - Admittedly, the alleged offences are triable by Magistrate and provide for a maximum punishment of five years imprisonment, and trial is likely to consume considerable time to conclude, therefore, this Court has no hesitation in holding that the further detention of the applicant behind the bars would not serve any useful purpose, who has already spent more than five months in judicial custody since his arrest on 19.11.2024. Further, the prosecution witnesses are official witnesses and presently there does not appear to be any possibility of their being won over, therefore, considering ....
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....the nature of the trial as well as period of more than five months undergone by the applicant as an undertrial, this Court deems it appropriate to extend the concession of regular bail to the applicant. It is ordered that the applicant- Ankur Garg be released on regular - Bail application allowed. Reply By Sadanand Bulbule: The Reply: 2023 (3) TMI 533 - SUPREME COURT - THE STATE OF KARNATAKA VERSUS M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED Input Tax Credit (ITC) - Genuineness - Onus to prove / burden of proof - Interpretation of statute - Section 70 of the Karnataka Value Added Tax Act, 2003 - Input Tax Credit claimed by the respective purchasing dealers - HELD THAT:- The provisions of Section 70, in its plain terms clearly stipulate that the burden of proving that the ITC claim is correct lies upon the purchasing dealer claiming such ITC. Burden of proof that the ITC claim is correct is squarely upon the assessee who has to discharge the said burden. Merely because the dealer claiming such ITC claims that he is a bona fide purchaser is not enough and sufficient. The burden of proving the correctness of ITC remains upon the dealer claiming such ITC. Such a burden of proof ca....
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....nnot get shifted on the revenue. Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The genuineness of the transaction has to be proved as the burden to prove the genuineness of transaction as per section 70 of the KVAT Act, 2003 would be upon the purchasing dealer. It is observed and held that mere production of the invoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70 of the Act, 2003. In the present case, the respective purchasing dealer/s has/have produced either the invoices or payment by cheques to claim ITC. The Assessing Officer has doubted the genuineness of the transactions by giving cogent reasons on the basis of the evidence and material on record. In some of the cases,....
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.... the registration of the selling dealers have been cancelled or even the sale by the concerned dealers has been disputed and/or denied by the concerned dealer - over and above the invoices and the particulars of payment, the purchasing dealer has to produce further material like the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods including actual physical movement of the goods, alleged to have been purchased from the concerned dealers. In absence of any further cogent material like furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. and the actual physical movement of the goods by producing the cogent materials, the Assessing Officer was absolutely justified in denying the ITC, which was confirmed by the first Appellate Authority. Both, the second Appellate Authority as well as the High Court have materially erred in allowing the ITC despite the concerned purchasing dealers failed to prove the ge....
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....nuineness of the transactions and failed to discharge the burden of proof as per section 70 of the KVAT Act, 2003. The impugned judgment(s) and order(s) passed by the High Court and the second Appellate Authority allowing the ITC are unsustainable and deserve to be quashed and set aside and are hereby quashed and set aside - Appeal allowed. No.- CIVIL APPEAL NO. 230 OF 2023 (Arising from SLP(Civil) No. 2572/2022) Dated.- March 13, 2023 ******** My take: If one carefully applies the ratio of above judgement to the provisions of Section 7, 9 and 16 of the CGST Act, what emerges is that in the absence of actual movement/supply of goods, there is no entitlement of ITC to the recipient, as there is no OPT liability in the hands of the person who issues only tax invoice without supply of goods. That being the factual and legal position, mere issue of fake bills without the supply of goods/services/both does not attract arrest under Section 6....
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....9, penalty equal to the tax amount under Section 122 and punishment under Section 132 of the CGST Act. However the recipient of such fake invoices who retains the benefit of ITC arising out of such fake invoices to reduce the actual output tax payable is alone liable for arrest under Section 69, penalty equal to tax under Section 122, adjudication under Section 74/74A and punishment under Section 132(1)(c) of the CGST Act. [ NOTE: This is for academic purpose and not for use in the court of law.] Reply By Sadanand Bulbule: The Reply: 2025 (5) TMI 301 - ALLAHABAD HIGH COURT - PRAVEEN KUMAR VERSUS DIRECTORATE GENERAL OF GST INTELLIGENCE Seeking grant of regular bail, during the pendency of trial - passing on fradulent Input Tax Credit (ITC) and during search the said firm was found to be non-existent - reliability of the applicant's confession recorded under Section 70 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- This Court finds that the case of the prosecution is based upon documentary material or the statement of accused recorded under Section 70 of Central Goods and Services Tax Act, 2017 - Further, no documentary evidence connectin....
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....g the applicant with 232 firms has been collected and the reliance has been placed upon the confession of applicant recorded during his custodial interrogation, but in the considered opinion of this Court, the truthfulness of the same or its evidentiary value would be tested during trial which is yet to commence. Admittedly, the offence alleged in the complaint are triable by Magistrate and the same provides for maximum punishment of 5 years. The investigation in the case is complete as the complaint/charge-sheet dated 07.03.2024 already stands filed before the trial court and the charges against the applicant has not been framed so far. During the course of hearing, it is not disputed by Mr. Parv Agarwal, learned counsel that though the case is fixed for recording of pre-charge evidence under Section 244 Cr.P.C., but no prosecution witnesses has been examined till date. Thus, it is clear that the conclusion of trial would consume considerable time, and further detention of the applicant behind the bars would not be justified keeping in view the period of more than a year and three months already undergone by him. The applicant is ordered to be released on regular bail in the abo....
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....ve case subject to his furnishing the requisite bail bond and surety bond to the satisfaction of the trial court. Conclusion - The conclusion of trial would consume considerable time and further detention of the applicant behind bars would not be justified keeping in view the period of more than a year and three months already undergone by him. Bail application allowed. Reply By Sadanand Bulbule: The Reply: SECTION 136 of the Customs Act, 1962 reads as under: Offences by officers of customs. - (1) If any officer of customs enters into or acquiesces in any agreement to do, abstains from doing, permits, conceals or connives at any act or thing, whereby any fraudulent export is effected or any duty of customs leviable on any goods, or any prohibition for the time being in force under this Act or any other law for the time being in force with respect to any goods is or may be evaded, he shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both. (2) If any officer of customs, - (a) requires any person to be searched for goods liable to confiscation or any document relating thereto, without having reason to believe that....
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.... he has such goods or document secreted about his person; or (b) arrests any person without having reason to believe that he has been guilty of an offence punishable under section 135; or (c) searches or authorises any other officer of customs to search any place without having reason to believe that any goods, documents or things of the nature referred to in section 105 are secreted in that place, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both. (3) If any officer of customs, except in the discharge in good faith of his duty as such officer or in compliance with any requisition made under any law for the time being in force, discloses any particulars learnt by him in his official capacity in respect of any goods, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both. My Take; Had the similar provisions [supra] were to be included under the GST Act, I am confident that, evasion of tax and mounting litigation would have been curbed drastically. And it would have brought a sense o....
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....f prudence, agility and integrity in the day to day functioning of the GST Officers at all levels. The concerned authorities to think of this. Reply By Sadanand Bulbule: The Reply: Dear all Many visitors might be thinking why there are continuous posts by me on this topic. The reason is simple. Since the power to arrest a person under Section 69 mandates that, the person should have committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 are very serious in nature shaking the foundational and fundamental right of the citizens guaranteed under the Constitution of India, if not judicially calibrated before arresting such person and prosecuting him on specific charge. Meaning the incontrovertible evidences shall be manifest on records establishing the specific offence to satisfy the mandatory requirement of opening phrase of Section 132- Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences,.. So the visitors will find that many of these landmark judicial rulings and suggestions are for the purpose of making the authorities to think, feel, and act, as ....
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....the the law want them to and in ways that are to their advantage. Otherwise reverse engineering begins in the court of law. Reply By Sadanand Bulbule: The Reply: Dear all Here I wish to add the following provision of Section 122 of the CGST Act which is on par with the opening phrase of Section 132: (1A) Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on. My take: 1] In this regard, the CBIC Circular No.171/03/2022-GST dated 06/07/2022 highlights the above provision while clarifying the legal position as regards to adjudication, levy of penalty and launching of prosecution under Section 132 of the Act wherever applicable. 2] So considering both the legal position and the circular clarification [supra], what comes to my mind, essentially the person who has retained the benefits [of ITC] arising out of fake tax invoices is alone liable for adjudication under Section 74/74A, penalty under Section 122(1A) and prosecution under Section ....
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....132 of the Act. 3] Further the persons engaged in issuing fake tax invoices but NOT falling under the provision of Section 122(1A) are liable to a minimum penalty of Rs. 10,000/- Meaning such persons are not liable to penalty equal to tax amount involved, much less liable for adjudication under Section 74/74A and prosecution under Section 132. 4] Therefore any proceedings without establishing the essential element of the person who has retained the benefits as provided under the opening phrase of Section 132 and Section 122(1A) is based upon the foundation of sand. Much of the superstructure stands crumbled this way at the initial stage only. What remains is likely to fall away once the matter enters the corridors of judicial courts. 5] So the authorities must be very careful and prudent enough before initiating such proceedings so that the real culprits cannot escape the web of Section 74/74A, Section 122(1A) and Section 132 of the Act. Reply By Sadanand Bulbule: The Reply: To put the entire matrix of the issue under discussion in a simple line: it is like this," in order to change the images on the screen, one must change the projection reel". Reply By Sadanand Bu....
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....lbule: The Reply: 2025 (5) TMI 227 - DELHI HIGH COURT - GURUDAS MALLIK THAKUR AND DINESH KUMAR RAGHAV VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX & ANR. Taxable persons - Liability of Petitioners, as directors of the company for short payment of GST, inadmissible input tax credit (ITC) availed, and non-filing of GST returns - HELD THAT:- Section 107 of the CGST Act starts with the expression 'any person'. Thus, the filing of appeal is permissible by any person and not merely by a taxable person - The statements which have been recorded by the directors i.e., the Petitioners show that each of them is trying to shrug off their responsibility. In the opinion of this Court, the matter requires closer scrutiny on facts by the Appellate Authority as to who was responsible for running the company and who was taking decisions including relating to generation of invoices, making payments, etc. However, the same is beyond the scope of a writ petition. The purpose of Section 122 (1A) of the CGST Act is clearly to make persons who may be responsible for having created bogus invoices and having utilised ITC without the receipt of goods and services and for distributin....
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....g ITC in contravention of Section 20 of the CGST Act. It can be seen that the manner in which companies function is that there is a management who would be taking the decisions on behalf of taxable persons. These companies being inanimate, the responsibility has, by the wisdom of the legislature, been fixed under Section 122 (1A) of the CGST Act upon any person who retains the benefits of a transaction. The question as to which person has retained the benefit and who has not would again be a factual issue. Directors of a company and others who manage such companies owe a responsibility to ensure that companies do not engage in such fraudulent activity for availment of ITC without actual supply of goods, distribution of ITC to persons who have raised fake invoices and non-filing of GST returns - The impugned order clearly reveals that in various places the Petitioners as also the other two persons i.e. Mr. Arindam Chaudhary and Mr. Varun Khanna are clearly not owning up the responsibility as to who took the decisions in respect of the availment of ITC and non-filing of the GST returns. This Court is of the view that the impugned order can be clearly appealed against by the Petitio....
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....ners, who were directors of the company. Insofar as the order passed by the Supreme Court in Shantanu Sanjay [2025 (1) TMI 1249 - SC ORDER] is concerned, the Supreme Court clearly observes that the Petitioner therein was also only an employee and he could not have been fastened with the liability of Rs.3731 Crores. Moreover, the questions of law were left open by the Supreme Court in the said case - In the present case, the penalties have been imposed on various directors of the company who were having an active role as per impugned order. The correct remedy for the Petitioners would be to approach the Appellate Authority in accordance with law. Let the Department communicate to the Petitioners within two weeks the mechanism in which they can avail of their appellate remedies - Upon receiving the intimation, the Petitioners shall file the appeal within 30 days - The appeal, if so filed as directed above, shall not be dismissed on the ground of limitation and shall be adjudicated on merits. Conclusion - The impugned order can be clearly appealed against by the Petitioners, who were directors of the company. The correct remedy for the Petitioners would be to approach the Appe....
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....llate Authority in accordance with law. There is a need for factual adjudication by the Appellate Authority to determine the extent of control and benefit derived by the Petitioners. No.- W. P. (C) 5083/2025, W. P. (C) 5133/2025 & CMAPPL. 23413/2025 Dated.- April 23, 2025 Reply By YAGAY andSUN: The Reply: Dear Sir, It is advisable to compile all relevant information, including settled legal positions, professional views, interpretations, and related inputs, into a concise publication on the subject matter under consideration. Such a publication would serve as a valuable reference for GST professionals and could also yield substantial royalty income and professional recognition at a pan-India level. Regards, YAGAY & SUN (Consultant, Cyclist🚴, Environmentalist🌍, & Proud Father) Reply By Sadanand Bulbule: The Reply: Dear Sir Thanks for your motivational and sagacious suggestion. . Regards. Reply By Sadanand Bulbule: The Reply: Dear Yagay & Sun Sir In continuation of your inspring words, I wish to put my consolidated thoughts on the subject in few words as under : Section 69, 74/74A, 122 & 132: Mere a "Puppet" in the hands of the ....
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....actual beneficiary of ITC derived out of fake tax invoices who is backing and bankrolling the fraudulent evasion of tax cannot be subjected to arrest under Section 69, adjudication under Section 74/74A, penalty equal to tax under Section 122 and prosecution under Section 132 of the CGST Act. However it is the planner, handler, backer and the actual beneficiary of ITC derived out of fake tax invoices is alone liable for arrest under Section 69, adjudication under Section 74/74A, penalty equal to tax under Section 122 and finally prosecution under Section 132 of the CGST Act. But the fundamental onus lies on all the authorities before invoking jurisdiction under the respective sections. Since such proceedings are liable to trial in the Court of Law, justification is possible only when there are incontrovertible evidences manifest on records against the accused. Hope you validate it with your unique comments. Reply By Sadanand Bulbule: The Reply: M/S. OM LOGISTICS LTD. VERSUS THE DEPUTY STATE TAX OFFICER, THE STATE TAX OFFICER AND THE JOINT COMMISSIONER (ST), VELLORE - 2025 (6) TMI 662 - MADRAS HIGH COURT<br> Discussion Forum - Knowledge Sharing ....