2021 (6) TMI 515 - HC - GST

Seeking grant of anticipatory Bail - receipt of only invoices against which ITC was wrongly availed - bonafide case for grant of bail or not - HELD THAT - In the instant case, the investigation relates to the period of 2018 and prior to it, the petitioners have joined the investigation and their statements have already been recorded. The employees of the petitioners have also joined the investigation; the main accused was arrested and granted bail. The petitioners have further joined the investigation at least 4 times after the filing of this bail application - the petitioners have already deposited ₹ 2.5 crores with the department; there are no allegations of any threat to any of the witnesses or tampering with the evidence and the documents are in the custody of the department. Thus, it is not the case of the department that the petitioners are flight risk or there are any chances of their absconding. It is not the case of the department that the petitioners have not co-operated during the period they have joined the investigation on the receipt of the summonses. The present anticipatory bail application is allowed and it is ordered that in the event of arrest, the petitioners be released on bail on their furnishing a personal bond in the sum of ₹ 5,00,000/- each with one surety each of the like amount subject to the satisfaction of the IO/court concerned and subject to conditions imposed - bail granted.

Issues Involved:
1. Rejection of anticipatory bail application.
2. Allegations of wrongful Input Tax Credit (ITC) availed by the petitioners.
3. Investigation and evidence submitted by the petitioners.
4. Coercive measures by the GST Department.
5. Status of co-accused and investigation completion.
6. Allegations against subsequent manufacturers and transporters.
7. Petitioners' cooperation and societal roots.
8. Department's counter-affidavit and evidence.
9. Legal precedents and judicial pronouncements on anticipatory bail and arrest.

Detailed Analysis:

1. Rejection of Anticipatory Bail Application:
The petitioners challenged the order dated 04.02.2021, whereby their anticipatory bail application was rejected by the Additional Sessions Judge, Patiala House Court, New Delhi.

2. Allegations of Wrongful ITC:
The investigation pertains to the alleged wrongful availment of ITC amounting to ?22.42 Crores based on invoices from companies controlled by Sanjay Dhingra and Gulshan Dhingra. The GST department alleges that M/s KMG Industrial Traders Pvt. Ltd. did not receive goods but only invoices, which were not genuine.

3. Investigation and Evidence Submitted by Petitioners:
The petitioners argued that they are bona fide recipients/purchasers of goods, with all payments made through bank transfers duly reflected in their books of accounts. They submitted evidence including Dharamkata slips and stocks worth over ?7 crores, asserting no discrepancy was found during the GST department's search on 28.06.2018.

4. Coercive Measures by GST Department:
The GST department blocked the petitioners' bank account on 07.08.2020 under Section 83 of the CGST Act and also blocked pending ITC credit of ?1.25 Crores, causing financial losses. The petitioners deposited ?2.5 crores to get the bank account partially defreezed but were allowed only limited debit for salary payments.

5. Status of Co-Accused and Investigation Completion:
The co-accused Sanjay Dhingra and Gulshan Dhingra are on regular bail, and show cause notices have been issued to them. The petitioners argued no final assessment or show cause notice has been issued to them, which could conclusively determine their liability.

6. Allegations Against Subsequent Manufacturers and Transporters:
The petitioners contended that the department failed to investigate subsequent manufacturers to whom the goods were sold. They also argued against the department's claim that no goods were received, stating that all documents are in the department's custody.

7. Petitioners' Cooperation and Societal Roots:
The petitioners emphasized their cooperation in the investigation, attendance to summonses, and societal roots, arguing that arresting them after three years would be unfair. They highlighted their non-habitual offender status and deep societal roots.

8. Department's Counter-Affidavit and Evidence:
The department's counter-affidavit dated 17.03.2021 relied on statements of transporters and witnesses to show a missing chain of transportation. They alleged that no goods were received by M/s KMG from the firms in question and uncovered another firm, M/s Sant Overseas, from which ITC credit of ?2.9 crores was availed.

9. Legal Precedents and Judicial Pronouncements:
The judgment extensively cited legal precedents, including:
- Make My Trip Vs. Union of India: Emphasized the need for a proper procedure before arrest and the importance of credible material for arrest.
- Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST & C. Ex., Salem: Stressed that punishment under Section 132 of the CGST Act should follow the determination of excess credit through assessment.
- Vimal Yashwantgiri Goswami Vs. State of Gujarat: Highlighted the need for care and circumspection in exercising arrest powers under Section 69 of the Act.
- C. Pradeep Vs. Commissioner of GST and Central Excise Salem: Interim protection against arrest was granted by the Supreme Court.
- P.V. Ramana Reddy Vs. Union of India: Discussed the sparing use of protection against arrest under Article 226 of the Constitution.

Conclusion:
The court allowed the anticipatory bail application, ordering that in the event of arrest, the petitioners be released on bail upon furnishing a personal bond of ?5,00,000 each with one surety each of the like amount, subject to specific conditions including availability for interrogation, non-inducement of witnesses, non-leaving of India without court permission, and compliance with summonses. The court emphasized that arrest should be the last option and restricted to exceptional cases.

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