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TMI Blog2021 (6) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... nies namely Galux International, M/s Shriram Overseas, M/s Delta Agrotech Pvt. Ltd. which were controlled by brothers Sanjay Dhingra and Gulshan Dhingra. It is further submitted that it is alleged against M/s KMG Ltd. that the company did not receive goods and only received invoices against which ITC was wrongly availed and the said invoices were not genuine. Rather, it has been argued that it is the case of the petitioners that they are not the creators of the said alleged documents but are bonafide recipients/purchaser of the said goods as all the payments against the said purchases were made through bank transfers which are duly reflected in the books of accounts. It is further submitted that there is sufficient evidence like Dharamkata slips, stocks in hand of over 7 crores on the business premises of the petitioners which primafacie establishes that during the search of GST department on 28.06.2018 no discrepancy in the stock was found by the officers of GST. 3. It is further submitted that the value of the goods at the time of search was around 7 crores as per the petitioner's books of accounts. It is further submitted that the petitioners were issued summonses U/s 70 of GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent manufacturers to whom the said goods have been sold in the normal course of trade and business. It is further submitted by the counsel for the petitioners that the department has wrongly alleged that no goods have been received by the petitioners under the alleged invoices on the strength of which Rs. 22.42 crores have been availed. The entire case is based on documents which are all in the custody of the department. It is further submitted by the counsel for the petitioners that the company M/s KMG is a 40 years old company which is carrying on its trade business of non ferrous metals and there has not been any discrepancy in any of their stocks. 7. It is further submitted that the applicants/petitioners are not habitual offenders and have deep roots in the society and they do not have any other case against them. It is further submitted that it will be unfair to arrest the applicants/petitioners after three years when show cause notice has already been issued to the main person. It is further submitted that the petitioners were summoned by the IO on 15.02.2021, 18.02.2021, 26.02.2021, 05.03.2021 and 25.03.2021 and all the above said summonses were duly attended by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent that Sant Overseas existed only on papers and the transporters involved in the supply from Sant Overseas to M/s KMG have also denied transportation, which clearly shows that the supplies to M/s KMG and other suppliers are fake and actual movement of goods has not taken place. It is further submitted that the fake ITC availed by M/s KMG now stand at approximately Rs. 2.5 crores. Reliance has been placed on Bharat Raj Punj Vs. Commissioner of CGST, Jaipur, Vimal Yashwantgiri Goswami Versus State of Gujrat and P.V. Ramana Reddy Vs. UOI & Ors. (2019) 104 taxmann.com 407 (Telangana), Ashish Jain Vs. UOI, 2019 (29) GSTL 6 (Bom.). 11. The Punjab and Haryana High Court passed a judgment in C.W.P. No. 24195 of 2019 (O & M), Akhil Krishan Maggu & Anr. Versus. Deputy Director, Directorate General of GST Intelligence & Ors. which has considered the relevant judicial pronouncements from paragraph no.7 onwards which are as follows :- 7. Before adverting to present controversy, it would be profitable to look at judicial pronouncements relating to the issue involved. The provisions of CGST Act, 2017 qua arrest and prosecution are para materia with provisions of Finance Act, 1994 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent beyond the period of six months from the date on which such payment is due and further that the amount exceeds Rs. 50 lakhs (now enhanced to Rs. 1 crore). (iv) A possible exception could be where a person is shown to be a habitual evader of service tax. Such person would have to be one who has not filed a service tax return for a continuous length of time, who has a history of repeated defaults for which there have been fines, penalties imposed and prosecutions launched, etc. That history can be gleaned only from past records of the ST Department. In such instances, it might be possible to justify resorting to the coercive provisions straightaway, but then the notes on file must offer a convincing justification for resorting to that extreme measure. (v) The decision to arrest a person must not be taken onwhimsical grounds; it must be based on 'credible material'. The constitutional safeguards laid out in D.K. Basu's case (supra) in the context of the powers of police officers under the Cr PC and of officers of Central Excise, Customs and enforcement directorates, are applicable to the exercise of powers under the FA in equal measure. An officer whether of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g service tax returns or is a habitual offender in that regard. It is only after checking the entire records and seeking clarification where necessary, that the investigating agency can possibly come to a conclusion that Section 89(1)(d) is attracted. None of the above safeguards were observed in the present case. The DGCEI acted with undue haste and in a reckless manner. (xi) Liberty is granted to the officials of MMT and IBIBO to institute appropriate proceedings in accordance with law against the officers of the DGCEI in which the supplementary affidavits filed in these proceedings and the replies thereto can be relied on. This holds good for the officials of the DGCEI as well when called upon to defend those proceedings in accordance with law. (xii) The Court cannot decline to exercise its jurisdiction and clarify the legal position as regards the interpretation of the scope and ambit of the powers under Sections 89, 90 and 91 of the FA. This is clearly within the powers of this Court. That is why this Court has decided to proceed with these petitions notwithstanding that the criminal petitions may be pending in the criminal jurisdiction of this Court. (xiii) The Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making a recovery even before adjudication. 82. In the context of the provisions for arrest under the Central Excise Act, 1944, the DGCEI has published a Manual in 2004 containing guidelines to the CE Officers on when and in what circumstances resort should be had to the coercive step of arrest. In Chapter X Para 7 of the said Manual, it is stated that arrest can be made prior to the issue of an SCN but only "where fraudulent intent is clear (prima facie there is evidence of mens rea) or where the evidence is enough to secure a conviction or where the person is likely to abscond, tamper with evidence or influence the witnesses if left at large. Arrest at the investigation stage should be resorted to only when it is unavoidable." (Emphasis supplied) Concededly, Hon'ble Supreme Court vide order dated 23.01.2019 has upheld aforesaid decision of Delhi High Court. 7.1 Relying upon decision of Delhi High Court, in the case of Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST & C. Ex., Salem 2019 (25) G.S.T.L. 321 (Mad.), Madras High Court has concluded, in the relevant Paras as below: "36. Though the discussions and conclusions therein have been rendered in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putting the cart before the horse. 39. The exceptions to this rule of assessment are only those cases where the assessee is a habitual offender, that/who has been visited consistently and often with penalties and fines for contraventions of statutory provisions. It is only in such cases that the authorities might be justified in proceedings to pre-empt the assessment and initiate action against the assessee in terms of Section 132, for reasons to be recorded in writing. There is no allegation, either oral or in writing in this case that the petitioner is an offender, let alone a habitual one. 40. In the present case, the Department does not dispute that action was intended or envisaged in the light of Section 132 of the CGST Act, the counter fairly stating that the provisions of Section 132 of the CGST Act were 'shown' to the Assessee. There is thus no doubt in my mind that the Department intended to intimidate the petitioner with the possibility of punishment under 132 and this action is contrary to the scheme of the Act. While the activities of an assessee contrary to the scheme of the Act are liable to be addressed swiftly and effectively by the Department, (the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has considered a similar case and has rejected the Anticipatory Bail taking into consideration the conduct of the applicant, gravity of offence and the serious allegations made. This order has travelled to the Supreme Court in Petition for Special Leave to Appeal Crl. Nos. 244/2019, dated 9-1-2019 [2019 (24) G.S.T.L. J82 (S.C.)] by the petitioner therein, wherein the Bench has issued notice and granted interim protection in the following terms : 'Issued notice. In the meantime, the petitioner shall not be arrested, provided he appears before the Directorate General of GST Intelligence and in the event of his arrest, he shall be released on bail on furnishing security to the satisfaction of the competent authority. Learned Counsel for the petitioner has submitted that the petitioner shall regularly appear, as and when he is called.' 45. Moreover, the High Court of Karnataka at Bengaluru in Criminal Petition No. 979 of 2019 c/w Criminal Petition No. 980/2019, dated 19-2-2019 [2019 (23) G.S.T.L. 449 (Kar.)] while considering the grant of Anticipatory Bail, in circumstances very similar to the matter before me, has allowed the petition and granted bail in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not as merely because the investigations are underway that the arrest would be effected. Eventually, all that the Respondents are presently contemplating is to investigate the matter. The Petitioners do not dispute the right to investigate and in accordance with law. That they have already attended the offices of the concerned Respondents and once the statement of the Petitioners was recorded goes without saying that on further summons being issued and on called upon to attend the Officers of the Respondents, they will attend and co-operate in these investigations by producing all the documents and answering the requisite queries, subject, ofcourse, to their rights in law. It is only when these investigations conclude that the authorities would be in a position to take a decision whether to launch any prosecution. In such a prosecution as well, if the provisions of the Criminal Law, which enable arrest in cases of cognizable offences and non bailable, that the Petitioners can have an apprehension and which also can be taken care of by approaching a competent Criminal Court. Secondly, there is no question of any recovery of tax by coercive means, unless the investigation results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue upon production of receipt in the Registry about the deposit made with the Department within one week from today, until the disposal of this Special Leave Petition. 7.5. Telangana High Court in the case of P.V. RAMANA REDDY Vs. UNION OF INDIA 2019 (25) G.S.T.L. 185 (Telangana) relied upon by the Respondent has concluded in relevant Para as below: "48. That takes us to the next question as to whether the petitioners are entitled to protection against arrest, in the facts and circumstances of the case. We have already indicated on the basis of the ratio laid down by the Constitution Bench in Kartar Singh and the ratio laid down in Km. Hema Mishra that the jurisdiction under Article 226 of the Constitution of India to grant protection against arrest, should be sparingly used. Therefore, let us see prima facie, the nature of the allegations against the petitioners and the circumstances prevailing in the case, for deciding whether the petitioners are entitled to protection against the arrest. We have already extracted in brief, the contents of the counter affidavits. We have summarized the contents of the counter affidavits very cautiously with a view to avoid the colouring of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is imperative in the facts and circumstances of that case. 124. The court must carefully examine the entire available record and particularly the allegations which have been directly attributed to the accused and these allegations are corroborated by other material and circumstances on record. 125. These are some of the factors which should be taken into consideration while deciding the anticipatory bail applications. These factors are by no means exhaustive but they are only illustrative in nature because it is difficult to clearly visualise all situations and circumstances in which a person may pray for anticipatory bail. If a wise discretion is exercised by the concerned judge, after consideration of entire material on record then most of the grievances in favour of grant of or refusal of bail will be taken care of. The legislature in its wisdom has entrusted the power to exercise this jurisdiction only to the judges of the superior courts. In consonance with the legislative intention we should accept the fact that the discretion would be properly exercised. In any event, the option of approaching the superior court against the court of Sessions or the High Court is alway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y deposited Rs. 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; 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. Therefore, in these circumstances, 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 Rs. 5,00,000/- each with one surety each of the like amount subject to the satisfaction of the IO/court concerned, subject to the following conditions: (i) The applicants/petitioners shall make themselves available for interrogation by the proper officer as and when required; (ii) The applicants/petitioners shall not directly or indirectly, make any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade from disclosing such facts to the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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