2021 (6) TMI 1001 - HC - GST

Grant of Anticipatory Bail - defalcation in accounting of input tax credit - false and fabricated invoices so to take advantage of input credit, without supply of goods - HELD THAT - 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. Application dismissed.

Summary

Issues:
Grant of anticipatory bail based on apprehension of arrest in a GST case.

Analysis:
The judgment pertains to an application for anticipatory bail filed by the applicant, who is a Director of a company involved in trading cement. The applicant feared arrest after summons were issued to a Director of another company for alleged defalcation in accounting of input tax credit. The applicant argued that proceedings under section 74 of the Central Goods Service Tax Act, 2017, were initiated, which does not warrant arrest under section 69 of the Act. The respondent, however, contended that summons were issued under section 70 of the Act to gather evidence and documents before initiating proceedings under chapter XV for demand and recovery. The respondent clarified that the intention behind summoning was not to arrest but to enable the party to provide evidence and documents to address tax evasion concerns.

The respondent further explained the provisions of the Act related to compounding of offenses and the authority of officers to inspect, search, and seize in case of suspected tax evasion. It was emphasized that the power to summon does not equate to the power to arrest or punish, which can only be exercised after determining liability as per the Act. The respondent assured the court that no arrest action would be taken until evidence and documents provided by the applicant were thoroughly examined for any suppression of facts or improper tax credit utilization. The court, based on the respondent's statements, concluded that the application for anticipatory bail was premature as there was no immediate intention to arrest the applicant at the summoning stage. The court dismissed the application considering it not maintainable at that point.

In summary, the judgment delves into the distinction between summoning and arrest in GST cases, highlighting the procedural steps involved in addressing tax evasion allegations. The court's decision to dismiss the anticipatory bail application was based on the assurance provided by the respondent's counsel regarding the absence of immediate arrest intentions and the need to assess evidence before taking any further action.