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2024 (2) TMI 129 - HC - GSTSeeking grant of bail - illegal claim of refund of accumulated ITC on account of trade/supply of goods - obtained GST Registration on fictitious documents and has never conducted any business activity from the registered premises - HELD THAT - In view of Section 69 of the CGST Act, 2017, the Commissioner may authorize arrest of a person only if he has reasons to believe that such a person has committed any offence under the clauses mentioned therein. Reasons to believe does not mean a purely subjective satisfaction. It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion; it must be founded upon information. Such reasons to believe can be formed on the basis of direct or circumstantial evidence. A rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the officer and the formation of his belief. From the material collected on record, the reasons recorded are that during search some documents were found showing that the applicant is also running several firms on one PAN and without supplying any goods and though the said firms are not in existence and 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. Thus, when facts of the present case are taken into consideration, it reveals that the applicant was arrested. Necessary investigation is carried out and the statement of the applicant is recorded. The maximum punishment provided is imprisonment upto five years. The facts of the case show that the dispute is regarding the tax evasion and the applicant has already paid Rs. 81.00 lacs towards the said tax amount. The offence is under the CGST Act, 2017 except with the limited exceptions are compoundable. The detention of the applicant in jail is not required. The applicant is not involved in a heinous crime like murder or terrorism. The basic rule is, bail is rule and jail is exception . The allegations of serious financial impropriety are levelled against the applicant. The criminal application is allowed.
Issues Involved:
1. Legality of the Applicant's Arrest 2. Applicability of Section 41A of the Code of Criminal Procedure 3. Allegations of Tax Fraud and Evidence 4. Application of Judicial Precedents and Guidelines 5. Conditions for Granting Bail Summary: 1. Legality of the Applicant's Arrest: The applicant was arrested on 28.11.2023 in connection with Case No. DGGI/INTL/1082/2023 for offences under Sections 132(1)(b), 132(1)(c), 132(1)(i) read with Section 132(5) of the CGST Act, 2017. The Directorate General of GST Intelligence (DGGI) conducted a search and seized three mobile phones, revealing that the applicant's trade firm, Arihant Traders, was non-existent and had no business activity. The applicant allegedly managed multiple firms under one PAN, issued fake invoices, and claimed fraudulent ITC, thus committing the offence. 2. Applicability of Section 41A of the Code of Criminal Procedure: The applicant's counsel argued that the arrest was unwarranted and violated Section 41A of the Code of Criminal Procedure, which mandates recording reasons for arrest. The non-applicant's counsel contended that Section 69 of the CGST Act, 2017, empowers the Commissioner to arrest a person based on "reasons to believe" that an offence has been committed, thus overriding Section 41A. The court noted that "reasons to believe" must be based on information and evidence, not mere suspicion. 3. Allegations of Tax Fraud and Evidence: The applicant allegedly committed a tax fraud of Rs. 144.65 crores by availing and passing on inadmissible ITC. During the search, no documents of business activity were found. The applicant admitted to obtaining GST registrations for multiple firms on the same PAN and issuing invoices without actual supply of goods, thereby availing fraudulent ITC. The court considered these admissions and the material evidence collected during the search. 4. Application of Judicial Precedents and Guidelines: The applicant's counsel cited several judicial precedents, including the cases of Satender Kumar Antil vs. CBI and State of Gujarat vs. Choodamani Parmeshwaran Iyer, arguing that the arrest was unjustified without proper adjudication. The court acknowledged that the power to arrest under Section 69 of the CGST Act, 2017, must be exercised with care and circumspection, and the guidelines issued by the Honourable Apex Court must be followed. 5. Conditions for Granting Bail: The court emphasized that "bail is rule and jail is exception" and noted that the maximum punishment for the alleged offences is imprisonment up to five years. The applicant had already paid Rs. 81.00 lacs towards the tax amount. Considering the non-heinous nature of the crime and the completion of the investigation, the court granted bail with conditions, including executing a P.R. Bond of Rs. 2.00 lacs, surrendering the passport, and not leaving the jurisdiction without prior 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. 3. The applicant shall attend the office of the non-applicant as required for investigation. 4. The applicant shall surrender his passport within a week from release. 5. The applicant shall not leave the jurisdiction of Nagpur district without prior permission of the Court.
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