2023 (6) TMI 1048 - DSC - GST

Seeking grant of pre-arrest bail - fraudulently encashing the undue input tax credit by showing exports of goods exported - territorial jurisdiction to entertain the present applicant seeking pre-arrest bail. Maintainability of present application - admittedly proceedings of CGST have been initiated at Bhopal Commissionerate there and not in Delhi - HELD THAT - Applicant has moved the present application on the ground that he being permanent resident of Delhi having no concern with the firm in question apprehends his possible arrest, therefore approached the court at Delhi. Having gone through the judgment in Capt. Satish Kumar Sharma s case 1990 (9) TMI 363 - DELHI HIGH COURT , without commenting much into the details of facts of that case, it would be rather important to note that in para 14 to 18 Hon ble High Court referred to different judgments of High Courts laying down legal proposition that an application u/s 438 Cr.PC can be filed before the court of Session/High Court of that territorial jurisdiction where applicant resides and apprehends his arrest on accusation of having been committed beyond jurisdiction. In the absence of any specific bar either u/s 438 Cr.PC or in any manner, a court can entertain any application for pre-arrest bail at the instance of an applicant who resides within territorial jurisdiction of that court and apprehends his arrest at another jurisdiction, where he intends to approach in accordance with law - this court has jurisdiction to entertain the present application. Merits of the case - fraudulently encashing the undue input tax credit by showing exports of goods exported - HELD THAT - Sr. Standing counsel on the other hand submits that even if the refund had not been withheld by custom authorities, there is no provision which prohibits the CGST from inquiring and claiming the refund when there is sufficient material in the investigation of the Department show that the input tax credit has been availed without actual supply of material. Ld. Sr. Standing counsel specifically referred to section 74 and 132(1)(e) of the Act. Considering the totality of the circumstance, this court need not to go into much details of material which is otherwise under investigation of CGST Bhopal, merits of the matter can obviously be examined by courts of local jurisdiction. However two aspects which certainly weigh this court to give protection to the accused - there was no tangible reason furnished in the application of his apprehension of being arrested. As such he submits that very application is without basis. However receiving of summons by the applicant from the Department, more particularly when his father has already arrested and the fact that applicant has no concern with the firm is admitted. - When the very initiation of action by the Department may not be in accordance with Rule 96 of the Act, though there is no denial to the fact that Department can still initiate the action in terms of section 74 of the Act as rightly pointed out by ld. Sr. Standing counsel but the fact that the applicant being not at all concerned with the said firm. - Therefore for the above said two reasons accused/ applicant is protected from possible arrest, subject to he joins the investigation with CGST Bhopal Commissionerate as well as of any succeeding dates for which he would be called upon. Application disposed off.

Summary

Issues involved:
The issues involved in the judgment include the maintainability of the application for pre-arrest bail in a court where the applicant resides, the jurisdiction of the court to entertain the application, the merits of the case regarding fraudulent claims of input tax credit by a partnership firm, and the protection granted to the accused/applicant from possible arrest.

Maintainability of the application:
The accused/applicant sought pre-arrest bail in a court where he resides, despite the proceedings being initiated by the CGST Bhopal Commissionerate. The court examined the precedent value of a judgment and concluded that an application for anticipatory bail can be filed in the local court of the territorial jurisdiction where the applicant resides and apprehends arrest for an accusation committed elsewhere. The court found that it had jurisdiction to entertain the present application based on this legal proposition.

Merits of the case:
The CGST Bhopal Commissionerate alleged that a partnership firm engaged in fraudulent credit of input tax without actual receipt of goods, leading to a fraudulent claim of refund amounting to approximately Rs. 11.25 crores. The accused/applicant was mentioned as a key person of the firm and was summoned for investigation. The applicant denied any connection with the firm and raised objections regarding the initiation of action by the Department. The Department, however, maintained that it had the authority to inquire and claim refunds if there was evidence of availing input tax credit without actual supply of material, citing relevant sections of the Act.

Protection granted to the accused/applicant:
The court noted that the Department was not currently contemplating arresting the applicant but required his cooperation in the investigation. Considering that the applicant's father had already been arrested and the applicant had no actual connection with the firm in question, the court granted protection from possible arrest. The court also highlighted that the initiation of action by the Department may not have been entirely in accordance with the relevant rules, providing further grounds for protection. The accused/applicant was directed to join the investigation and attend future dates as required.

Conclusion:
The court disposed of the application, emphasizing that if any further proceedings were initiated by the Department, the applicant could seek legal remedies in the appropriate jurisdiction.