2024 (7) TMI 252 - HC - GST

Seeking grant of Regular bail - illegally claimed ITC - fake firms - no busiess conducted - HELD THAT - In the present case, it is alleged that the applicant, by using a single PAN and without conducting any business and supply of any goods from the registered premises, illegally claimed refund of the accumulated ITC on account of trade/supply of goods and contravened provisions of the CGST Act. The office of the non-applicant recorded statements of the applicant and various witnesses. The non-applicant relied upon statements of witnesses including the applicant and submitted that the arrest of the applicant is justified. Section 136 of the CGST Act deals with relevancy of statement under certain circumstances. As per the said Section, a statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under this Act shall be relevant. For the purpose of proving an offence, As per the said Section, a statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under this Act shall be relevant. From the material collected on record, reasons recorded are that during search, some documents were found showing that the applicant is running several firms on one PAN and without supplying any goods and though the said firms are not in existence, claimed ITC on account of trade/supply of goods. In the case of ARNESH KUMAR VERSUS STATE OF BIHAR ANR 2014 (7) TMI 1143 - SUPREME COURT , the Honourable Apex Court while laying down some guidelines clarified that directions issued would not only be applicable to cases under 498-A of the Indian Penal Code or Section 4 of the Dowry Prohibition Act but also would cover cases where offence is punishable with imprisonment for a terms which may be less than seven years or which may extend to seven years whether with or without fine. In the present case, the necessary investigation is already carried out and chargesheet is already filed. The maximum punishment provided is five years. Further detention of the applicant in jail is not required. As such, the application deserves to be allowed - applicant shall be released on bail, subject to fulfilment of conditions imposed - bail application allowed.

Issues Involved:
1. Legality of the applicant's arrest under Section 69 of the CGST Act.
2. Allegations of fraudulent Input Tax Credit (ITC) claims.
3. Compliance with the guidelines of Section 41A of the Code of Criminal Procedure.
4. Applicability of precedents set by the Honourable Apex Court regarding bail.

Issue-wise Detailed Analysis:

1. Legality of the Applicant's Arrest under Section 69 of the CGST Act:
The applicant was arrested under Section 69 of the CGST Act for offences under Section 132 (1) (b), 132 (1) (c), and 132 (1) (1) (i), read with Section 132 (5). The non-applicant argued that Section 69 empowers the Commissioner to arrest a person if there are reasons to believe that the person has committed specified offences. The court noted that the power to arrest under Section 69 is statutory and should not be interfered with by the writ court, as long as the Commissioner has reasons to believe the person committed the offence.

2. Allegations of Fraudulent Input Tax Credit (ITC) Claims:
The applicant was accused of managing multiple firms and carrying out transactions using vexatious documents to illegally claim ITC. The investigation revealed that the applicant operated 89 different firms and passed on fake ITC worth Rs. 37.00 crores. The applicant argued that the laptop containing incriminating evidence did not belong to him and that he only operated two firms. The court noted that the material collected showed the applicant running several firms on one PAN and claiming ITC without actual supply of goods.

3. Compliance with the Guidelines of Section 41A of the Code of Criminal Procedure:
The applicant contended that his arrest was in violation of Section 41A of the Code of Criminal Procedure, which mandates notice before arrest. The court referred to the Honourable Apex Court's decision in Satender Kumar Antil vs. CBI, emphasizing that both "reason to believe" and "satisfaction qua an arrest" must be recorded. The court found that the investigating agency did not comply with these guidelines, making the arrest unwarranted.

4. Applicability of Precedents Set by the Honourable Apex Court Regarding Bail:
The applicant cited the Honourable Apex Court's decisions in Ratnambar Kaushik vs. Union of India and Satender Kumar Antil vs. CBI, arguing that bail should be granted considering the period of custody and the fact that the trial would take time. The court noted that the maximum punishment for the alleged offences is five years and that further detention was not required since the investigation was complete and the chargesheet filed. The principle that "bail is rule and jail is exception" was reiterated.

Conclusion:
The court allowed the bail application, emphasizing that the maximum punishment is five years and further detention was unnecessary. The applicant was ordered to be released on bail with conditions, including executing a P.R. Bond of Rs. 2.00 lacs, surrendering his passport, and not leaving the Nagpur district without court permission.

Order:
1. The criminal application is allowed.
2. The applicant shall be released on bail on executing a P.R. Bond in the sum of Rs. 2.00 lacs with one solvent surety of the like amount.
3. The applicant shall attend the office of the non-applicant as required for investigation.
4. The applicant shall surrender his passport before the trial court within a week of release.
5. The applicant shall not leave the jurisdiction of Nagpur district without prior court permission.

The application stands disposed of.

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