2021 (10) TMI 803 - HC - GST

Seeking grant of anticipatory bail - wrongful availment of Input Tax Credit - fake bills - compliance with the mandatory procedure under Chapter XII of the Code of Criminal Procedure, 1973 including Section 154, 157,167,172 etc. for valid commencement and continuation of the investigation into any offence qua the petitioners in respect of investigation - vires of section 69 of the Central Goods and Service Tax Act, 2017 - HELD THAT - Section 69 of the GGST Act empowers the Commissioner to arrest a person, who has committed any offence stipulated in the said section if the Commissioner has reason to believe that the said person has committed any offence as stated in the said provision - it is revealed that the Commissioner can delegate his powers to his subordinate officer. It is contended by learned advocate for the applicants that even assuming that the Commissioner is empowered to delegate his powers to his subordinate, as per Section 69 of the GGST Act, reasonable belief should be that of the Commissioner. The Commissioner can delegate his powers to his subordinate. A very same reasonable belief will be that of the authority upon whom the power is delegated. Thus, the power under Section 69 of the GGST Act can be exercised by the authority upon whom the power is delegated provided the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the GGST Act. Thus, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power under Section 69 of the Act remains the same. Thus, this Court is of the view that the submissions canvassed by learned advocate for the applicants on this aspect is misconceived. It is alleged by the prosecution that the present applicants in connivance with other persons, entered into transaction with 36 dummy firms and false invoices and sales were raised and in pursuance thereto, the Company has issued cheques to 36 dummy firms including four person, who are now arrested by the respondent department. There were receipts of more than ₹ 737.00 Crores and amount has been withdrawn by bearer cheque or transferred to other Company or by RTGS to dummy firms and during the course of investigation from one Mr. Afzal, certain material is collected - It is the specific case of the department that the transaction worth of ₹ 737.00 Crores were entered into with 36 dummy firms and there would be liability of more than ₹ 137.00 Crores. Thus this Court is of the view that in the facts of the present case, the custodial interrogation of the applicants would be required. There are provisions in the GGST Act that the registration of the firm can be cancelled with retrospective effect. In the present case, during the course of investigation, it has been revealed that at the time of registration of the firm, the concerned persons have provided necessary documents for the purpose of registration, however as per the case of the prosecution, subsequently it was found that without there being any actual movement of the goods, false invoices were raised and after the arrest of four persons and during the course of investigation, it is revealed that those 36 firms were dummy firms. Thus in the facts of the present case, the custodial interrogation of the applicants is necessary. The present applications are dismissed.

Summary

Issues Involved:
1. Grant of anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973.
2. Allegations of wrongful Input Tax Credit claims and evasion of State Tax.
3. Validity of Section 69 of the GGST Act.
4. Delegation of powers by the Commissioner under the GGST Act.
5. Compliance with procedural requirements under the GGST Act and the Code of Criminal Procedure.
6. Necessity of custodial interrogation.
7. Applicability of precedents and guidelines on anticipatory bail.

Issue-wise Detailed Analysis:

1. Grant of Anticipatory Bail:
The applications were filed under Section 438 of the Code of Criminal Procedure, 1973, seeking pre-arrest bail in connection with alleged fraudulent transactions. The applicants argued that they had complied with the GGST Act requirements and cooperated with the investigation. However, the court found that the allegations were serious, involving transactions worth ?737 crores with dummy firms, and custodial interrogation was necessary. The court noted the applicants' non-cooperation during the investigation and dismissed the applications for anticipatory bail.

2. Allegations of Wrongful Input Tax Credit Claims:
The respondents alleged that the applicants had claimed to purchase material worth ?762 crores without actual purchases, using fake bills to wrongfully claim Input Tax Credit, leading to an evasion of State Tax worth ?137 crores. The court found these allegations serious and noted that the applicants' transactions with 36 dummy firms were suspicious. The court emphasized the need for custodial interrogation to investigate these allegations thoroughly.

3. Validity of Section 69 of the GGST Act:
The applicants challenged the validity of Section 69 of the GGST Act before the Supreme Court, which granted interim protection but directed them to seek remedies under the Code. The court noted that the Supreme Court's interim order only addressed the validity of Section 69 and did not affect other reliefs sought by the applicants. The court found that the Commissioner had the authority to arrest under Section 69 if there was a reason to believe an offense was committed.

4. Delegation of Powers by the Commissioner:
The court referred to Section 5(3) of the GGST Act, which allows the Commissioner to delegate his powers to subordinates. The court cited precedents affirming that the delegated authority could exercise the power of arrest under Section 69, provided the delegatee had reasons to believe an offense was committed. The court rejected the applicants' argument that the reasonable belief should be that of the Commissioner alone.

5. Compliance with Procedural Requirements:
The applicants argued that the GGST Act and the Code of Criminal Procedure's procedural requirements were not followed. However, the court referred to previous judgments, including Vimal Yashwantgiri Goswami, which clarified that the authorized officer could arrest without complying with Sections 154 to 157 of the Code. The court held that the authorized officer must inform the arrested person of the grounds and take them to a Magistrate without unnecessary delay.

6. Necessity of Custodial Interrogation:
The court emphasized the need for custodial interrogation due to the complexity and magnitude of the alleged fraud involving ?737 crores. The court noted that the applicants had not cooperated with the investigation and provided evasive replies to important questions. The court found that custodial interrogation was essential to uncover the truth and gather necessary evidence.

7. Applicability of Precedents and Guidelines on Anticipatory Bail:
The applicants cited various judgments where anticipatory bail was granted in similar cases. However, the court distinguished these cases based on the specific facts and seriousness of the present case. The court also referred to the Supreme Court's guidelines in Sushila Aggarwal and other cases, emphasizing that anticipatory bail should not be granted in routine economic offenses involving significant public money. The court concluded that the applicants were not entitled to anticipatory bail given the gravity of the allegations and their non-cooperation during the investigation.

Conclusion:
The court dismissed the applications for anticipatory bail, citing the need for custodial interrogation due to the serious allegations of tax evasion and fraudulent transactions. The court upheld the validity of Section 69 of the GGST Act and affirmed the delegation of powers by the Commissioner. The court emphasized compliance with procedural requirements and distinguished the present case from precedents cited by the applicants.