2024 (10) TMI 788 - HC - GST

Grant of bail - passing on fraudulent input tax credit - creation of fake invoices - non-compliance with Section 41A of Cr.P.C and Section 70 of GST Act - HELD THAT - It reveals that during the course of the search proceedings '' the reason to believe'' was formed based on the material evidence. Therefore, the commissioner authorized the CGST authorities to arrest the accused/respondent which reduced into wittings by the commissioner in the case investigation file. Accordingly, arrest was made by the authorities/petitioner by following due process of law. During the arrest copy of the memorandum of arrest was given to the accused. Further, while remanding the accused/respondent copy of the arrest memo was submitted before the Court, the grounds for arrest also explained to the accused/respondent and also mentioned about the tax evaded by the accused/respondent in the remand report. In the report, it is clearly mentioned as the accused is the master mind in creating non existing fictious firms and caused tax loss to the Government to the tune of Rs. 175.88 crores and also submitted the voluntary statement made by the respondent along with remand report. Based on the aforesaid material and evidence the Additional Director authorized the officers to arrest the respondent. As per Section 70 of CGST Act, the summon was issued to the respondent/accused calling upon him to appear for enquiry and also to return the statement on 24.06.2023 and the same was received by his wife/Meerakumari on 23.06.2023 but he was not appeared. Again another summon was issued to the respondent/accused for appearance but he was not appeared. Therefore, the search was made in his premise in the presence of his wife on 21.03.2023 along with other individual witnesses. As per Section 70 of CGST Act, the summons issued to the respondent to appear before the appropriate officer but he was not appeared. So also Section 41A of Cr.P.C indicated that issue a notice directing the person against whom reasonable complaint has been made. Therefore summons issued to the accused /respondent in relation to cognizable offence is equivalent to the duty cast upon the police officer under Section 41A of Cr.P.C. In the present case, authorization of arrest was issued under Section 69 of CGST Act with reasons and they complied with the other procedures before arrest under Section 69(ii) of the CGST Act and in fact grounds of arrest informed to the accused/respondent which is also a equivalent procedural safeguards mentioned in Cr.P.C. Moreover, the amount of tax evaded also recorded in the memo of arrest which enclosed with arrest memo and that copy also provided to the accused at the time of the arrest all these procedural formalities not been denied by the respondent, so there is no procedural default on the side of the investigating agency. Therefore, the reason assigned by the Court for granting bail that the investigating agency had committed default in following the procedures as contemplated under Section 41 A is erroneous. Further, the respondent attempted to flee from the country after he came to know about his accomplice's arrest. Therefore, if the bail is granted to him, he may flee to foreign countries or may tamper the evidence. The prime facie investigation shows that accused/respondent caused loss to the Government exchequer to the tune of Rs. 173.88 crores. Hence this court is inclined to cancel the bail. Petition allowed.

Summary

Issues Involved:

1. Compliance with procedural requirements under Section 41A of Cr.P.C and Section 70 of CGST Act.
2. Alleged non-cooperation and attempt to flee by the respondent.
3. Validity of the bail granted by the Principal Sessions Judge.

Issue-wise Detailed Analysis:

1. Compliance with Procedural Requirements:

The primary contention revolves around whether the procedural requirements under Section 41A of the Code of Criminal Procedure (Cr.P.C) and Section 70 of the Central Goods and Services Tax (CGST) Act were adhered to during the arrest of the respondent. The petitioner argued that the respondent was issued summons under Section 70 of the CGST Act, which is equivalent to the notice under Section 41A of Cr.P.C. The petitioner contended that the procedures outlined in the Cr.P.C were covered under Section 69 of the CGST Act, ensuring compliance with procedural safeguards akin to those in Section 41A of Cr.P.C. The court found that the investigating agency had followed the due process of law, including issuing a memorandum of arrest and informing the respondent of the grounds for arrest, thus negating any procedural default.

2. Alleged Non-Cooperation and Attempt to Flee:

The petitioner highlighted that the respondent failed to cooperate with the investigation, did not appear despite multiple summons, and attempted to flee the country, leading to his apprehension at the Bangalore International Airport. The court noted that a Look Out Circular was issued due to the respondent's non-compliance and attempt to evade authorities. The respondent's voluntary statement during the investigation, where he admitted being misled by lawyers, was also considered. The court found substantial evidence indicating the respondent's deliberate avoidance of the investigation process, thereby justifying the issuance of the Look Out Circular.

3. Validity of the Bail Granted:

The bail granted by the Principal Sessions Judge was challenged on the grounds that the court below failed to appreciate the respondent's alleged involvement in creating fake invoices and causing significant revenue loss to the government. The petitioner argued that the respondent's actions resulted in a fraudulent input tax credit of Rs. 175.88 crore. The court found that the reasons assigned by the lower court for granting bail, particularly the alleged non-compliance with Section 41A of Cr.P.C, were unsustainable. The court emphasized that the procedural safeguards under the CGST Act were equivalent to those under the Cr.P.C, and the investigating agency had adhered to these procedures. Given the substantial evidence of the respondent's involvement in tax evasion and the risk of him fleeing or tampering with evidence, the court concluded that the bail granted was erroneous and liable to be set aside.

Conclusion:

The court, after a thorough examination of the materials and evidence, determined that the procedural requirements were met, and the respondent's actions posed a significant risk to the investigation. Consequently, the petition to cancel the bail was allowed, directing the authorities to secure the respondent as per the law.