9911796707
TMI Blog2021 (2) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... t material to show that ITC of more than ₹5 crores has been wrongfully/ fraudulently availed, the authorities may continue with the investigation without arrest of the applicant. If, on conclusion of investigation, it is found that the amount so availed was more than ₹5 crores, complaint will be instituted under 132 (a) or (b) or (c) or (d) of sub Section 1 read with Clause (i) of sub Section 1 of Section 132 of the Act. Otherwise, complaint will be filed either under Clause (ii) or clause (iii) or clause (iv) of sub Section 1 of Section 132 of the Act but, by no stretch of imagination, can arrest of a person be justified to enable the department to collect evidence if at the time of arrest, the material fell short of indicating the availment of ITC of more than ₹5 crores. The manner in which the statement of Nitish was pleaded to have been recorded at his residence, but now it is being tried to be projected that it was recorded in the office of CGST at Kamal in response to notice under Section 7 of the CGST Act raises a serious suspicion about manipulation, so is the attempt by the authorities to surreptitiously incorporate in the panchnama that record pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations which other grounds could be there. The court is conscious that in some aspects it has gone into merits which, at the time of deciding application for bail is not advisable, but this was necessary because the contention before the court was that the applicant was authorised to be arrested by the Commissioner without there being material to form a reasonable belief that he had committed offence punishable under Clause (i) of Sub-Section 1 of Section 132 of the Act. In view of the law laid down in Akhil Krishan Maggu (supra), the Court was required to look into the entire facts and circumstances to find out if there was credible material to justify arrest of the applicant. In Dhruv Krishan Maggu versus Union of India decided by the Hon'ble Delhi High Court on January 8, 2021 on which reliance has been placed by the respondent also, it was held that though it was not inclined to interfere with investigation at that stage and that too, in writ proceedings, but at the same time innocent persons cannot be arrested or harassed. The Hon'ble High Court went on to observe that it has no doubt that the trial court, while considering the bail or remand or cancellation of bail a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmission of the Court and shall surrender his passport while furnishing bonds - Application allowed. - Jagdeep Jain, J. ORDER On 8.1.2021, simultaneous searches under Section 67(2) of the Central Goods and Services Tax Act, 2017 (for short, the 'CGST Act') were conducted at 241-B, Sector-3, Karnal, the premises of M/s Dholagiri Enterprises, Partnership firm (GSTIN No.06AARFD2856LIZX); House No.212, Sector 32 Narsi Village, Karnal, the premises of M/s Garg and Company, Proprietor Shashank Garg (GSTIN NO.06APVPG8986RIZE); House No. 1057 Sector-32, Urban Estate, Karnal, the premises of M/s Dholagiri Enterprises, Proprietor Nitish Kumar (GSTIN No.06DMLPK8324RIZ8); House No.55 village Chomura, Tehsil Karnal, Post Office Dabkoli Kalan, District Karnal, the residential premises of Nitish Kumar, Proprietor of M/s Dholagiri Enterprises (GSTIN No.06DMLPK8324RIZ8); House No.207 19, scheme No.19, Vivekanand Nagar, Jind, the address of M/s Garg and company and; House no.1334 Sector-6, Karnal, the residential premises of Shashank Garg, Proprietor of M/s Garg and Company. The firms Dholagiri Enterprises (partnership firm) and Dholagiri Enterprises (proprietorship firm) were not found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 1.7.2017 to 7.1.2021 from many suppliers and had paid the tax as required under law to the sellers. M/s Dholagiri Enterprises (proprietorship concem of Nitish Kumar) and M/s Dholagiri Enterprises (partnership firm) were amongst the suppliers. During the period in question M/S Dholagiri Enterprises (proprietorship firm) had made purchases from approximately 135 suppliers across the country. In his statement, which was procured forcibly, Nitish Kumar was alleged to have stated that his firm had received invoices from M/S P.S. International without actual supply of goods involving ITC to the tune of ₹26.50 lacs while invoices without actual supply of goods received from M/S JEY Oil and Bitumen Products India Pvt. Limited involved ITC of approximately 2.14 crore. However, taking a general comment allegedly made by Nitish Kumar that his firm had passed on ITC amounting to ₹24.25 crores to the firm of the applicant on invoices without actual supply of goods, the authorities presumed that all the purchases of M/s Dholagifi Entemrises (proprietorship firm) amounting to ₹133 crores were without actual supply of goods. Giving a list of some reputed companies, the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Caught on wrong foot, the authorities drew fresh panchnama. The applicant was threatened that he would be arrested and would be implicated in such a manner that he will not even be able to get bail. Accordingly, they impressed upon the Commissioner GST at Panchkula and obtained arrest warrant and the Commissioner, without having reasons to believe that a cognizable and non-bailable offence within the meaning of Section 132(1)(i) of the CGST Act had been committed, issued a warrant in cursory manner. 6. In the end, it was contended that the applicant is entitled to bail not only on the aforesaid grounds but also because he has already paid more than 10 per cent of the disputed tax liability; he is not required for custodial interrogation; complaint under Section 132 is yet to be filed; there is nothing on record to show that he is a habitual offender; all the requisite documents have already been seized and are also available in electric form, there is no such evidence which could be tampered with; there are no chances of influencing the witnesses as primarily the case is based on documentary evidence and; that the applicant is engaged in construction of Government projects which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, however, vague and indefinite or distant which would warrant the formation of the belief relating to the escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 11. In Smt. S.R. Venkatraman Versus Union of India, 1979 ILLJ 25 (SC), the Hon ble Supreme Court observed that in the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of arrest then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt availment of ITC to the tune of ₹6,83,20,272/- as per the following table :- Sr. No TRADE NAME GSTIN Effective Date of Cancellation detection ITC / Amount involved 1 JEY OIL BITUMEN PRODUCTS INDIA PRIVAIE LIMITE 06AAECJ7827RIZT 12/25/2020 21,440,685 2 OM CEMENT STEEL TRADERS 06AMWPR8419A2ZN 6/13/2019 17,072,475 3 SHASHI ENTERPRISES 06GIAPS1523LIZ5 9/18/2019 10,489,100 4 POOJA TRADING CO. 06EVUPK3221AIZT 10/4/2019 5,417,944 5 JAI MAI-A TRADERS 06FGQPK2696DIZ0 6/1/2019 5,102,046 6 P S INTERNATIONAL 06CRZPR9812H2ZV 12/5/2019 3,991,635 7 OMIDO TRADING PRIVAIE LIMITED 07AACC05248BIZQ 10/4/2017 1,893,573 8 KENKAM INTERNATIONAL 07EGAPK1310MIZN 12/31/2018 903,453 9 GREENDUST VENTURES PRIVATE LIMITED 07AAGCG5589DIZE 10/29/2019 806,940 10 SAWARIA TRADING COMPANY 06CAEPS2772MIZ7 7/6/2019 657,112 11 CHIRAG TRADERS 06ANXPR5620F7ZG 4/30/2018 545,310 Total 68,320,272 15. It is contended that the figure of ₹24 crores approximately towards fraudulent ITC having been passed by M/s Dholagiri Entemrises to M/s Garg and Company, came up in the statement of Nitish, Proprietor of M/s Dholagiri Enterprises, which coupled with the upfront list of 12 firms as per the above table, was sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contention, learned counsel would point out that on the top of the statement, it is mentioned that it was being recorded before Superintendent of Goods and Services Tax, Panchkula, but actually it appears to have been made before Ajay Kumar, Superintendent, CGST Division, Karnal. He further contended that it has been made to appear as if the statement was recorded in response to summons of the even date, but in the application seeking judicial remand of the applicant as well as in the reply to the bail application, it was the consistent stand of the department that the statement of Nitish Kumar was recorded at his residential premises. Learned counsel argued that this is a clear case of manipulation which is further exposed by factual errors in the statement of Nitish Kumar in as much as in reply to question No.5 M/s P.S.International was mentioned as one of the major buyers of M/s Dholagiri Enterprises, Proprietorship firm, whereas the latter had not made even a single penny sale to that firm. Moreover, in response to question No.3, it was mentioned that both the firms have no additional place of business though in actual M/s Dholagiri Enterprises, Partnership firm has an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberty of the applicant is involved, therefore, the court at this stage is obligated to look into all the circumstances leading to his arrest and if there is a slightest doubt over the authenticity of the proceedings, the applicant deserves bail so as to be able to defend himself if ultimately a complaint comes to be filed against him. He pointed out that after filing reply in the court, the authorities conducted further searches at the premises of various suppliers of M/S Dholagiri Enterprises and terrorized them into tendering false statement that they had issued invoices to M/s Dholagiri Enterprises without supply of goods. To buttress this contention, leamed counsel placed on record certain affidavits of the suppliers and reiterated that the authorities would continue manipulating the facts to justify their wrongful act. 22. Reiterating that there was no manipulation and that the arrest of the applicant was based upon the relevant and credible information, learned counsel for respondent argued that the very fact that the affidavits of the suppliers of M/S Dholagiri Enterprises, Karnal have fallen in the hands of the applicant establishes link between him and M/S Dholagiri Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material/information collected or gathered during inspection, search and seizure and then a decision has to be taken as to whether there exists reasonable ground to believe that a person has committed an offence involving wrongful/fraudulent availment of ITC exceeding ₹5 crores and, whether that person requires to be arrested. It has to be understood that power to arrest and justification for arrest are two different concepts. In ordinary criminal matters, the Hon'ble Supreme Court has time and again held that a person should not be arrested merely because the police has the power to arrest. This principle has been enshrined in CGST Act by stipulating that formation of reasonable belief shall be a pre-condition for the Commissioner to authorize arrest of a person. It is in this context, that the Hon'ble High Court of Punjab and Haryana while deciding civil writ petition No.24195 of 2019 (O M) titled Akhil Krishan Maggu and another Versus Deputy Director, Directorate General of GST Intelligence and others laid in no uncertain terms that power of arrest should be resorted to in exceptional circumstances and with full circumspection. 24. It has to be appreciated that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been availed by M/s Dholagiri Enterprises or by the applicant. Nitish Kumar was also confronted with transactions pertaining to M/s JEY Oil and Bitumen Products India Pvt. Ltd and M/s P.S.International involving a total sum of ₹2,40,90,685/-. His statement that ITC to the tune of ₹2,14,40,685/- regarding transactions with M/s JEY Oil and Bitumen Products had been availed was believed without even checking the record that M/s JEY Oil and Bitumen Products had not even filed return GSTR-I/GSTR-3B, therefore, question of passing of ITC to M/S Dholagiri Enterprises and then to applicant did not arise. Similarly, 0m Cement and Steel 'l'raders had discontinued business with effect from 13.6.2019. Before that it had filed GST returns and had made tax payments as evident from data downloaded from GST Portal. Therefore, there was no question of revenue loss to the exchequer since supplier had deposited the tax on goods sold to M/s Dholagiri Enterprises and the same was claimed as ITC by M/s Dholagiri Enterprises. But on the basis of field visit report dated 21.1.2021, it was concluded by the authorities that the business of 0m Cement and Steel Traders was not in existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the statement of Nitish was pleaded to have been recorded at his residence, but now it is being tried to be projected that it was recorded in the office of CGST at Kamal in response to notice under Section 7 of the CGST Act raises a serious suspicion about manipulation, so is the attempt by the authorities to surreptitiously incorporate in the panchnama that record pertaining to M/S Dholagiri Enterprises was recovered from the premises of the applicant. It will not be out of the place to mention that the statement of the applicant was recorded on 9.1.2021. He was allegedly shown the panchnama dated 8.1.2021 drawn at the registered premises of M/s Dholagiri Enterprises and was asked about invoices worth ₹133.47 crores involving ITC amounting to ₹24.28 crores approximately. It is not clear as to how and on what basis this figure of ₹133.47 crores was arrived at particularly when in his statement Nitish Kumar has simply referred to ITC amounting to ₹24.25 crores. Needless to say that the applicant acknowledged having received the invoices but never admitted availment of ITC amounting to ₹24.28 crores. He is alleged to have admitted that he wrongly avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant on the ground that the case was covered by illustration 6. In this case, the guidelines/illustrations at serial No.l, 2, 3 and 5 are not applicable. In so far as the guideline at serial No.4 is concerned, there is least possibility of the applicant fleeing from country given the fact that he has a large number of government contracts in his hands. Even otherwise, this aspect can be taken care of by making a condition for surrender of passport. Coming to guideline No.6, as observed, herein above, there was no direct documentary or otherwise concrete evidence available on record indicating tax evasion of more than ₹5 crores. Moreover, the applicant has established business. It is not denied that he is paying good amount of direct and indirect taxes. He is not a fly by night operator. Therefore, in view of the guidelines laid down in Akhil Krishan Maggu (supra), he should not have been arrested in such a cursory manner simply on the alleged statement of Nitish about the availment of ITC to the tune of ₹24.25 crores. As rightly pointed out by counsel for the respondent, the guidelines are illustrative and not exhaustive, but he has not been able to persuade the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial leave to appeal (Crl.) No.6834/2019. The apprehension of the respondents that he will interfere in investigation by tampering with evidence or by winning over the witnesses seems to be unfounded for the reason that entire record is in the custody of department. Whatever information is to be collected from other entities will be available with them or on the portal/ in the records of the department. At this stage, no entity will be in position to manufacture or destroy record. If the department has become more active after filing reply in the Court on 29th January 2020 and has searched the premises of various suppliers of M/s Dholagiri Enterprises and the applicant has placed on record affidavits of some of those suppliers that they were forced to make statements, it cannot be said that he is so powerful as to influence the witnesses. There are always two sides of coin. The Court does not want to go into the question as to whose version is correct, but definitely this is not a case to justify further incarceration of the applicant. 33. In view of the discussion foregoing, the application is allowed. The application is admitted to bail on his furnishing personal bonds in the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
