2017 (9) TMI 285 - HC - VAT and Sales Tax

Bail u/s 438 of the Code of Criminal Procedure, 1973 - false claim of sales against Form F, Form C, Form H under CST act - It is alleged that after obtaining the delivery of the goods in New Delhi under the guise of its branch transfer, the goods were in fact sold in the State of Gujarat; but a show was made as if the goods are sold in New Delhi, Haryana and Rajasthan by issuing Form C in the name of certain business people most of whom were dealing in ready made garments. It is alleged that, in fact, such persons had received ready made garments referable to Form C in question, but a wrongful claim was made as if tobacco / its products were sold to them. It is alleged that in some cases even the refund was claimed. Held that - It cannot be disputed that as and when necessary and if the facts of the case so requires, an authorized Police Officer can obtain the custody of a person for investigation / interrogation either with or without warrant as the case may be. The arrest, however, cannot be made on mere imagination; but it can always be made inter alia on reasonable suspicion on fortification of the reason to believe on the basis of the information of the person having committed the offence. The necessity of the arrest of a person would, therefore, depend upon the facts and circumstances of each case and no straight jacket formula can be laid for that purpose. It is a settled legal position that a person can be proceeded against and can be tried even without arresting him. In so far as facts of the present case are concerned, it appears that the petitioners are sought to be proceeded against for the offences in question not in individual capacity but as Directors of the Company afore stated. The FIR avers the commission of the offence particularly by the Company by allegedly employing dubious method for avoidance of the tax as above stated. The Company, however, is not made a party to the proceedings and the FIR does not specify as to which of the nine Directors of the Company had played an active role. In this context, it would be relevant to refer to Sections 85 (1)(b)(c)(e)(f)(g), 85 (2)(g), 85(4) and Section 85(6) of the Gujarat Value Added Tax Act, 2003 (for short VAT Act ), which deal with the procedure in relation to the offences by Company etc. The person incharge of the affairs of the Company at the time of commission of the offence and who was responsible to the Company for the conduct of its business is the person, who is deemed to be guilty of the offences; along with the Company. FIR contains averments in general against the directors and no other material is shown in agreement with above referred provision is placed on record of the case or shown to this Court. The petitioners are sought to be charged with offences under Sections 85(1)(b),(c),(e), (f),(g) as also Section 85(2)(g) and 85(C) of the VAT Act - It will be relevant to note that definition of dealer contained in Section 2(10) of the GST Act makes the dealer which would include CSA responsible for tax and the material has been produced on record indicating the movements of goods subsequent to issuance of Form F by the CSAs and not the petitioners. The needle of suspicion is, therefore, rightly directed by the investigator against the said dealers and in absence of strong suspicion, sufficient enough to divert such needle of suspicion to the Company or its Directors, it is not possible at this stage to say that if the dealer turns out to be fake, the Company or its Directors would be beneficiaries as argued by the learned PP. It is also required to be noted that in absence of the material against the petitioners, so far the petitioners were not contemplated to be arrested and in the opinion of this Court rightly so. It is true that the statement of coaccused can form the basis for investigation at preliminary stage of anticipatory bail. However, the foregoing discussion would show that prima facie, the case against the petitioners is based upon imagination rather than the suspicion contemplated under Section 41 of the Cr.P.C., and therefore, even if the statement of the coaccused is taken into consideration, the case for admitting the petitioners to bail is made out. This Court, therefore, orders bail for the petitioners in anticipation of their arrest. Bail application allowed - the applicants shall be released on bail on their furnishing a personal bond of ₹ 1,00,000/- each with one surety each of the like amount - decided in favor of applicant.

Summary

Issues Involved:
1. Bail under Section 438 of the Code of Criminal Procedure, 1973.
2. Allegations under Sections 406, 420, 467, 468, 471, 474, 120B of the Indian Penal Code.
3. Allegations under Sections 85(1)(b), (c), (e), (f), (g), 85(2)(g), 85(4), and 85(6) of the Gujarat Value Added Tax Act, 2003.
4. Role and liability of the Directors of the Company.
5. Necessity of custodial interrogation.
6. Parity in bail considerations.

Detailed Analysis:

1. Bail under Section 438 of the Code of Criminal Procedure, 1973:
The applicants sought anticipatory bail in connection with an FIR registered for various offenses under the Indian Penal Code and the Gujarat Value Added Tax Act. The court considered whether custodial interrogation was necessary and examined the prima facie material on record.

2. Allegations under Sections 406, 420, 467, 468, 471, 474, 120B of the Indian Penal Code:
The FIR alleged that the petitioners, who were Directors of the Company, were involved in a scam to avoid tax by using fictitious entities and documents. The scam involved the misuse of statutory forms (Form 'F', 'C', and 'H') to falsely show the movement of goods and avoid local tax liabilities.

3. Allegations under Sections 85(1)(b), (c), (e), (f), (g), 85(2)(g), 85(4), and 85(6) of the Gujarat Value Added Tax Act, 2003:
The FIR accused the petitioners of various offenses under the VAT Act, including furnishing false returns, invoices, and documents, and attempting to evade tax liability. The court noted that the FIR did not specify which Directors were responsible for these actions and lacked specific allegations against the Company or its Directors.

4. Role and liability of the Directors of the Company:
The petitioners argued that the FIR did not specify their individual roles in the scam and that the Company was not made a party to the proceedings. The court observed that the FIR contained general allegations against the Directors without specifying their involvement. It was noted that the petitioners had cooperated with the investigation and that the Company had deposited a significant amount with the taxing agency.

5. Necessity of custodial interrogation:
The court considered whether custodial interrogation was necessary for the investigation. It was argued that the case was based on documentary evidence and that the petitioners had cooperated with the investigation. The court found that there was no substantial material justifying the suspicion against the petitioners and that custodial interrogation was not necessary.

6. Parity in bail considerations:
The petitioners sought parity with other accused persons who had been granted bail. The court noted that the roles of the petitioners and other accused were different and that the petitioners' case was based on imagination rather than substantial suspicion. The court granted anticipatory bail to the petitioners, with conditions to ensure their cooperation with the investigation.

Conclusion:
The court allowed the applications for anticipatory bail, directing that the petitioners be released on bail in the event of their arrest, subject to certain conditions. The court emphasized that the trial court should not be influenced by the prima facie observations made while granting bail.