AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1383
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicant was produced before the court of Additional Chief Judicial Magistrate, 19th Court, Esplanade, Mumbai, who remanded the applicant to judicial custody. The allegations involve GST evasion of worth INR 445.96 Crores. 3. The applicant thereafter on 12.08.2025 preferred a bail application before the additional Chief Judicial Magistrate and same was rejected vide order dated 22.08.2025. 4. It is submitted that the arrest of the applicant is ex facie illegal, arbitrary and contrary to law. The applicant was kept under illegal detention for over 49 hours prior to being formally arrested, thereby violating the provisions of Article 22(2) of the Constitution of India and Section 58 of the BNSS. Further, the reasons to believe for authorization to arrest issued by the Additional Director General DGGI, Gurugram Zonal Unit fails to disclose cogent "reasons to believe" as mandated by law and precedents of the Hon'ble Supreme Court of India, rendering the arrest of the applicant bad in law. The alleged liability is speculative based on unverified entries in the WinMoney software, without any corroborative evidence or determination of tax liability under Sections 74 and 76 of the CG....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... searched on 05.08.2025 by the officers of DGGI, GZU, Gurugram on the strength of authorization to search dated 04.08.2025 issued under Section 67(2) CGST Act by the Additional Director, GZU, DGGI, Gurugram. On reaching entrance gate of the premises one person namely Hasti Mal Jain came forward and introduced himself as Manager of M/s Payal Gold Pvt Ltd. Mr. Ompal, Intelligence officer and other team members introduced themselves to Hasti Mal Jain by showing identity cards. Thereafter Mr. Ompal has shown INS-01 authorization to search. Same was acknowledged by Mr. Hasti Mal Jain and there after search proceeding started. At around 21:10 hrs on 05.08.2025, the applicant came on his own and joined the search proceedings voluntarily. 9. During search, it was found that M/s Payal Gold Pvt Ltd was maintaining a dual accounting system. One system (WinMoney) contained records of the actual business transactions, while the other (Prime) reflected only a portion of those transactions. This parallel system appeared to have been maintained with the intent to carry out clandestine sales and purchases, thereby evading payment of GST, while simultaneously preserving accurate accounts for inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents, if released on bail. The possibility of so happening is highly likely given that the accused has already mislead the officers during the investigation, evidence was destroyed and further the accused on his own accord has given submissions on behalf of his employees. It is to mention that the employees of the accused and the applicant's son who is also a director in the company have not responded to the summons issued to them U/S 70 of the CGST Act. 13. The applicant/accused has tendered two statements before the investigating authority. In his first statement, he attempted to shift the entire responsibility upon his son Mr. Rushabh Sanghvi, by stating that only his son had knowledge of the said "WinMoney" software. However, in his subsequent statement, the accused has himself admitted that he also had knowledge of the software. Despite such admission, the accused has deliberately refused to disclose details of the software and its use in effecting clandestine sales. The custodial presence of the accused is necessary both for confronting him with documentary and digital evidence and for securing truthful disclosures regarding the modus operandi of the alleged tax evasion. G....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the accused that the "Win Money" software was used merely for recording the movement of gold and gold ornaments stands falsified upon comparison with the "Prime" software". It has been observed that while all entries recorded in "Prime" are also reflected in "Win Money," several supply entries in "Win Money" are absent in "Prime," thereby evidencing unreported supplies effected without issuance of proper GST documentation, in direct violation of the CGST Act. The further assertion of the accused that "Sales Issue (SI)" entries in "Win Money" represent only estimates is wholly untenable, as the said software does not provide any mechanism for generating estimates; rather, such entries denote actual physical issuance of gold and ornaments. This fact is corroborated by the statements of employees of the accused, who have deposed that issued vouchers/approval notes accompanying goods dispatched through courier agencies were destroyed after delivery in order to suppress the true movement of goods. 16. These findings are further reinforced by confirmations from courier agencies and customers of M/s. Payal Gold Pvt. Ltd. who, upon verification of "Win Money" records, affirmed actual....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions. * State of Karnataka Vs. Sri Darshan etc. in Cr. Appeal Nos. 3528-3534 of 2025, arising from SLP (Crl.) Nos. 516-6 pt522 of 2025 [Hon'ble Supreme Court of India] * Ankil Bansal Vs. Union of India in S.B. Cri. Misc. Bail Application No. 4836 of 2025 [Hon'ble Rajasthan High Court] * Amit Kumar Shukla Vs. Union of India & Ors., in Writ Petition (ST) No. 9335 of 2021 [Hon'ble Bombay High Court] * Basudev Mittal Vs. Union of India, in MCRC No. 3919 of 2022 [Hon'ble Chhattisgarh High Court] * Radhika Agarwal Vs. Union of India & Ors., in Writ Petition (Criminal) No. 336 of 2018 [Hon'ble Supreme Court of India] 19. Heard the learned Senior Advocate for the applicant and learned SPP. Read application, reply, documents, rejoinder, clarification notes, written submissions and rulings relied upon the parties. On 08.09.2025, vide Exhibit-5 the applicant filed written submissions. On 11.09.2025, vide Exhibit-6 the respondent filed short point arguments in reply to oral arguments advanced by the applicant and filed certified copies of summons dated 06.08.2025 and 07.08.2025 issued to the applicant, reasons to believe note/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication dated 07.08.2025 filed at Exhibit-C and same is having calculation of tax short paid (GST) approximately Rs. 445,95,83,124/- for the period of 2022-2023, 2023-2024, 2024-2025 and April 2025 to June 2025. 22. In reply arguments the applicant submitted that the allegations pertaining to two parallel accounting system is totally baseless. The allegations pertaining to un-accounting sale of 3,053 kg. Gold during the period of April 2025 to June 2025 is baseless. However, such allegations are not recorded in panchnama. The calculations of the figures in respect of the GST evasion are hypothetical and are very high. The other well known jewellers in India in the financial year 2024-2025 are not having that much sales. As per their annual reports they are having less sales than the applicant's company. Learned advocate pointed out the provision of scope of supply as contemplated U/s. 7 of the CGST Act and submitted that there are no particulars about the consideration by a person in the course or furtherance of business. 23. Here at this point, I find it just and proper to mention the observations of three-judge bench of the Hon'ble Supreme Court, in the case of Radhika Aga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnment's ability to act quickly against tax fraud and ensure compliance. 25. In Radhika Agarwal's case, Hon'ble Justice Bela M. Trived J concurring opinion observed that, "Though, 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 noncompliance 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. 26. The Hon'ble Supreme Court in P. Chidambaram V/s. The Directorate of Enforcement (2020) 13 Supreme Court Cases 791 observed that, "Though we have heard the matter elaborately and also have narrated the contention of both sides in great detail includin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the applicant is illegal and it is observed by the learned Magistrate that, "Today as per the order below bail application the Court has rejected the contention that the accused has been illegally arrested and detained by the officer of the complainant. Thus, while passing bail order this applications seems to be finally decided on merit. Hence, same stands disposed of as per order below bail application". 28. Serious efforts were taken on record for demonstrating that the WinMoney software is used as non-accounting software which is more in the form of a goods track and trace software. However, there is no document to show that WinMoney is licensed and sanctioned software. There is no document to show that the software is developed by an authorized entity, it includes a license for end-user use, along with a product key to verify its authenticity. As Winmoney software does not provide any mechanism for generating estimates; rather, such entries denote actual physical issuance of gold and ornaments as per the contentions of the respondent. This fact is corroborated by the statements of employees of the accused, who have deposed that issued vouchers/approval notes acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gent legal provisions that require proper authorization and are guided by a structured procedural framework to protect the rights of businesses while enabling effective tax administration. It is not the case that the applicant was called at his office before search operations or during search operations. On first production of the applicant before the learned Magistrate, on being satisfied with the statutory compliance the applicant / accused was remanded to judicial custody. It is pertinent to note that the applicant was produced before the Magistrate at 8.10 pm on 07.08.2025 i.e. within a span of 2 hours from time of his arrest. This court while deciding the bail application under Section 483 of the BNSS can not interfere with the order passed by the learned Magistrate holding that arrest of the applicant is not illegal. 31. Appreciating the relevant considerations for grant of bail with the present set of circumstances the evasion of GST as contemplated by the respondent more specifically set out in the remand application dated 07.08.2025 is to the tune of Rs. 445,95,83,124/-. It has come on record during investigation that the applicant accused is having and using two softwa....