2021 (6) TMI 912 - HC - GST

Seeking grant of Anticipatory Bail - power to summon - compounding of offence - evasion of tax/duty - HELD THAT - In view of the statement given by Sri D.C. Mathur, counsel for respondent no. 2, application for grant of anticipatory bail application is premature. This court has no reason to doubt the undertaking given by Sri Mathur that unless and until after receiving evidence and documents produced by the applicant, if satisfaction is arrived in terms of their being any suppression of fact or mis-statement or improper availment of input tax credit, no action is warranted to be taken to arrest the applicant. The application is premature and is not maintainable at this stage - application dismissed.

Summary

Issues:
Grant of anticipatory bail based on apprehension of arrest in a GST case involving defalcation in accounting of input tax credit.

Analysis:
The counsel for the applicant sought anticipatory bail due to apprehension arising from the arrest of a director of a trading company, M/S BCC Cement Pvt. Ltd, in connection with alleged defalcation in accounting of input tax credit. The applicant, a director of a purchaser company, Roshan Real Estate Pvt. Ltd, which procures cement from M/S BCC Cement Pvt. Ltd, was summoned in April 2021. The allegation against M/S BCC Cement Pvt. Ltd involves generating false invoices to take advantage of input credit. The proceedings have been initiated under section 74 of the Central Goods Service Tax Act, 2017, for determination of tax discrepancies.

The respondent's counsel argued that the summons were issued under section 70 of the Act to enable the party to provide evidence and produce documents. The purpose was to gather information before initiating proceedings under chapter XV for demand and recovery. The counsel emphasized that the summoning authority's intention was not to arrest but to gather evidence. The power to summon does not equate to the power to arrest, which can only be exercised after determining liability under the Act.

The respondent's counsel further highlighted the provision for compounding of offenses under section 139 of the Act. The scheme of the Act empowers an officer not below the rank of Joint Commissioner to inspect, search, and seize if there are reasons to believe that a taxable transaction has been suppressed. The power of arrest is contingent upon determining liability as per the Act's provisions.

Considering the submissions, the court found the anticipatory bail application premature. The court accepted the respondent's undertaking that no action would be taken to arrest the applicant until evidence and documents are reviewed. The court concluded that the application was not maintainable at this stage and dismissed it based on the assurance provided by the respondent's counsel regarding the absence of immediate arrest intentions.