2021 (5) TMI 334 - HC - GST

Grant of Bail - Constitutional Validity of section 132 (1)(b) of the Central Goods and Services Act, 2017 - power of arrest under Section 69 of the Central Goods and Services Act, 2017 to be exercised only after the proper assessment/ determination of liability - de-attachment of Bank Accounts of petitioner - Fraudulent availment of ITC - HELD THAT - The concerned officer has on the basis of the information given so far by the Petitioner is in the process of identifying other key conspirators/ master mind in the fraudulent availment of ITC, the concerned officer has recorded her reasons to believe that Petitioner has floated the two firms with the core objective to defraud the Government Ex-chequer; that Petitioner is only doing paper transactions involving 66 Crores of revenue which is huge by any standards and, has authorized his arrest under Section 69 of the CGST Act. It is observed from the file notings that in furtherance of the on going investigation, the Revenue authorities are in the process of issuing summons to them and other key persons and coaccused to interrogate and record statements. Having noted the all records and the scale of the alleged scam as well as the involvement of Petitioner, we are not inclined to interfere with the investigation at this stage,as that may tantamount to foreclosing the out-come to the investigation and would rather hamper the same - considering the magnitude and the scale of the alleged fraud involving public money and the critical stage, when investigation to get hold of the mastermind/ king pin and other key conspirators as well as the modus operandi is underway in which Petitioner through his sole proprietary concern, as well as through the Pvt. Limited Company, is alleged to be an active participant, at this stage, we are not inclined to indulge into the request for grant of bail under Article 226 of the Constitution of India. Bail application dismissed - List the matter on 21st June, 2021 for further consideration.

Issues Involved:
1. Constitutionality of Section 132(1)(b) of the CGST Act, 2017.
2. Power of arrest under Section 69 of the CGST Act, 2017.
3. Interim bail for the petitioner.
4. Attachment of the petitioner’s bank account.
5. Restraining further coercive actions or criminal prosecution against the petitioner.

Detailed Analysis:

1. Constitutionality of Section 132(1)(b) of the CGST Act, 2017:
The petitioner sought a writ under Article 226 of the Constitution of India to declare and strike down Section 132(1)(b) of the CGST Act, 2017, as unconstitutional under Article 14 of the Constitution. However, the court did not address this issue in detail in the current judgment, focusing instead on the immediate relief sought by the petitioner.

2. Power of Arrest under Section 69 of the CGST Act, 2017:
The petitioner contended that the power of arrest under Section 69 of the CGST Act should only be exercised after proper assessment/determination of liability. The court noted that Section 69 grants the Commissioner the authority to arrest a person if there is reason to believe that an offense specified under Section 132(1)(a), (b), (c), or (d) has been committed. The court found that the concerned officer had recorded reasons to believe that the petitioner had committed offenses involving fraudulent availment of ITC amounting to ?66 Crores, justifying the arrest under Section 69.

3. Interim Bail for the Petitioner:
The petitioner argued for interim bail, citing the case of Daulat S. Mehta v/s. Union of India & Others, where the petitioner was granted bail under similar circumstances. The court, however, distinguished the present case based on the magnitude of the alleged fraud and the ongoing investigation. The court emphasized the principles laid down by the Supreme Court in Arnab M. Goswami v/s. State of Maharashtra, considering factors such as the nature of the offense, the severity of the punishment, the possibility of tampering with evidence, and the public interest. Given the scale of the alleged fraud and the critical stage of the investigation, the court rejected the petitioner’s request for bail.

4. Attachment of the Petitioner’s Bank Account:
The petitioner’s bank account with Saraswat Co-operative Bank Ltd. was attached following his arrest. The court did not provide specific relief regarding the de-attachment of the bank account in this judgment, focusing instead on the broader issues of bail and the ongoing investigation.

5. Restraining Further Coercive Actions or Criminal Prosecution Against the Petitioner:
The petitioner sought to restrain the respondents from taking any further coercive actions or criminal prosecution. The court, however, did not grant this relief, emphasizing the ongoing investigation and the need to uncover the full extent of the alleged fraud involving public money.

Conclusion:
The court rejected the petitioner’s request for interim bail, citing the ongoing investigation into a significant fraud involving public money. The court emphasized the need to consider the nature of the alleged offense, the potential for tampering with evidence, and the public interest. The court left open the possibility for the petitioner to pursue other legal remedies and scheduled the matter for further consideration on 21st June, 2021.

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