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TMI Blog2022 (10) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged to a mismatch liability of an amount approximated to Rs.23 crores. The demand notice was served by the respondent on the Company on 22/2/2022 for "Input Tax Credit (ITC)" disallowance. The said notice alleged that during the investigation of the proceedings initiated u/s. 67 of the Act, it is revealed that registration certificate of some of these suppliers of the Company are cancelled and still the Company of the applicants have availed the ITC from the suppliers. The notice therefore, informed the Company that it is liable to discharge the liability on account of the disallowable ITC and this notice placed at Exhibit-C of the application, has bifurcated the amount into two categories; the first category being the list of suppliers whose registration was cancelled being the sum of Rs.2,71,80,295/- and a further sum of Rs.3,87,29,103/- from the three other suppliers. The Company was directed to pay the above amount immediately, else it was threatened of the proceedings to be initiated as per the provisions of law. The notice was replied by the Company with respect to the three suppliers/companies mentioned in Table 2 of the notice by informing that the registration of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T/CGST, which deal with eligibility of claims in relation to ITC, the constitutionality of the said provision is sub judice before 9 distinct High Courts, and on an application filed for clubbing, it was turned down in Union of India vs. Cummins Technologies India Pvt. Ltd. In this background, his submission is, before adjudicating the claim, the respondents are seeking custodial interrogation of the applicant, which is not at all necessary, particularly, when the company of the applicants have deposited a sum of Rs.2.21 crore in instalments apparently indicating that there is no intention to avoid the payment, provided the final adjudication specifically fix the responsibility. 5 The learned counsel Mr. Devani has also invited my attention to the scheme contemplated u/s. 132 of CGST Act, which provides punishment for certain offences, and it is urged that it is only when a person supplies any goods or services in violation of the provisions of the Act, and with an intention to evade taxes, or issue any invoices or bills without supply of goods or services or both in violation of the provisions of the Act, leading to wrongful availment of the utilization of ITC or refund of the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patory Bail must be rejected. 8 In the wake of the rival contentions, I have examined the scheme of the enactment under which the applicants are accused and also perused the material that is available as on date, to determine whether their custodial interrogation is necessary. It is necessary to refer to the provisions of the Central Goods and Services and tax Act, 2017/the Maharashtra GST Act, 2017, which contain provisions of levy and collection of tax on intra state supply of goods or services or, both in the State of Maharashtra and which extends to the whole State of Maharashtra. 9 Chapter V of the said Act consists a provision of Input Tax Credit (ITC). Since I am not concerned with the substantive provisions of the enactment, I would refer only to the provisions which relate to the power of search seizure and goods and the provision for offence and penalties. Section 67(1) is a power of inspection, search and seizure which authorize the proper Officer to inspect any place of business of the taxable person or persons engaged in the business of transporting goods, or the owner or the operator of the warehouse or godown, if he has reason to believe that (a) a taxable pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain offences under the Act is contemplated in Section 132, and sub-clause (1) and sub-section (4) of the very said section contemplate that notwithstanding anything in the Code of Criminal Procedure, all offences under the Act, except for the offence referred to, in sub-section (5) shall be non-cognizable and bailable, meaning thereby that the offences specified in clause (a) to (d) of sub-section (1) are nonbailable. 12 Section 134 of the Act prescribe the procedure for taking cognizance of any offence punishable under the Act, and it contemplate previous sanction of the Commissioner before the Magistrate try such offence. 13 The Show Cause Notice issued to the Company of the applicants, indicate that the books of accounts of the Company were examined to verify the Input Tax Credit (ITC) and two facts are noticed, and find mention (i) On verification, there are suppliers who have not been paid by the taxpayer for the supplies they have made within one hundred and eighty days from the date of issue of invoice. (ii) Difference between ITC claimed in GSTR-3B and ITC available as per GSTR-2A is calculated on yearly basis. The total amount payable is estimated as Rs.6,75,28,313/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble offence to appear before him. Upon the notice being issued, it shall be the duty of the person to appear before the police officer in compliance and upon such compliance unless for reasons to be recorded, the police officer shall not arrest such a person. No doubt, the duty and power to be exercised u/s. 41 and 41A relate to a police officer. In case of Arnesh Kumar vs State of Bihar, (2014) 8 SCC 273, the Supreme Court while interpreting the scope and object of Section 41 and 41A, being considered as facet of Article 21 of the Constitution of India has ruled as under :- "7.1 From a plain reading of the aforesaid provision, it is evident that a person accused of an offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without find, cannot be arrested by the police officer only on his satisfaction that such person had committed the offence punishable as aforesaid. A police officer before arrest, in such cases has to be further satisfied that such arrest is necessary to prevent such person from committing any further offence; or for proper investigation of the case; or to prevent the accused from causing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe' and 'satisfaction qua an arrest' are mandated and accordingly are to be recorded by the police officer" 17 The argument which would come from the respondent no.1, that the observations are restricted only to the police officer and may not apply to the Officers of the GST Department, exercising the power of arrest under the CGST Act, may not hold any water, as whatever may be the statute under which a particular act amounts to an offence, arrest undisputedly, would result in the same consequences. It may bring humiliation, stigma, suffering, when not justified. Apart from this, in the backdrop of the prevailing situation that the jails in India are flooded with under trial prisoners, which was one of the anxiety expressed by their Lordships in case of Antil, by keeping in mind the object of granting bail. The principle is again reinforced that no inflexible rule can be led to the effect that in particular category of cases, the bail must be denied. The category of economic offences which has always been considered as a class of it's own, also cannot be categorized as the one where bail must be denied as a rule as the position of law has been clarified in case of P. Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout issuance of invoice, in violation of the provisions of the Act or rules made thereunder, with an intention to evade the tax. The safeguard contained in the said provision is the expression "reasons to believe", when the Commissioner may authorize any officer to effect arrest of a person. It necessarily contemplate existence of reasons on which the belief is founded and not merely the belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion, but must be founded upon some concrete foundation, on the basis of direct or circumstantial evidence and it will be open for the Court to examine whether the reasons for the formation of the belief have a rational connection with, or the relevant bearing on the formation of belief. Reasons to believe thus, must be based on some credible material. 19 The question whether the principle contained in Section 41 and Section 41A of the Cr.P.C would be invoked in respect of the offences under CGST came up for consideration before the Division Bench of this Court in case of Daulat Samirmal Mehta vs. Union of India, 2021 (3) BCR, 692, and the question to that effect came to be formulated by the Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 69 on the one hand and between sections 69 and 132 of the CGST Act on the other hand, relief against arrest was denied to the petitioners in view of the special circumstances of that case which the Telengana High Court highlighted 43. SLPs filed against the decision of the Telangana High Court were dismissed by the Supreme Court" Recording that the economic offences constitute a class apart and need to be visited with a different approach in the matter of bail, because they pose serious threat to financial health of the country, the Division Bench relying upon the decision of the Apex Court in case of Arnab Goswami vs. State AIR 2021, SC page 1, relied upon the principles culled out for grant of bail under Article 226 of the Constitution of India by the High Courts and by relying upon the said principle directed release of the applicants before it. 21 The Delhi High Court, while dealing with an Anticipatory Bail Application pertaining to Section 132 of CGST in case of Tarun Jain Vs. Directorate General of GST Intelligence DGGI (Judgment dated 26/11/2021) also referred to another facet of the offence under the CGST Act, it being compoundable in nature, by virtue of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the court. The court after analysing the provisions of the Act held as under :- "On close reading of the above said Sections, the maximum punishment provided under the Act is five years and fine and if that is taken into consideration, the magnitude of the alleged offence and it is not punishable with death or imprisonment for life. Even as per the said provision, the alleged offence is also compoundable with the Authority, who has initiated the said proceedings. The only consideration which the Court has to consider while releasing the petitioners on anticipatory bail is that whether the petitioners can be secured for the purpose of investigation or for the purpose of trial. Under such circumstances, I feel that by imposing stringent conditions if the petitioners are ordered to be released on anticipatory bail, it would meet the ends of justice" In the end, considering that the offences involved did not contemplate punishment for more than five years, the learned Single Judge has recorded his finding, with which I fully concur : "44. In the present case, there cannot be any conflict with the fact that petitioner has been charged with economic offence. However, it is to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there are incongruities within Section 69 and 132 of the CGST Act, 2017, we do not wish to grant reliefs to the petitioners against arrest, in view of the special circumstances which we have indicated above" 25 In the wake of the above observation, when I turned my attention to the facts involved before me and whether the gravity and seriousness of the accusations would require custodial interrogation, I must record my finding in the negative. The Show Cause notice issued to the Company in which the applicants are the Directors, allege that there are suppliers who have not been paid by the tax payer for the supplies that have made within 180 days of the issuance of invoice and there is a difference between ITC claimed in GSTR 3B and ITC available as per GSTR-2A. The aforesaid accusations are based on documentary evidence and the show cause notice has clearly highlighted the details of the IGST/CGST amount and held that the disallowable ITC to the tune of Rs.3,74,30,604/- must be paid with interest as per provisions of Section 50(1) of GST Act, 2018. Admittedly, there is no final adjudication at the instance of the Department and all the documents required for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is punishable with an imprisonment of less than 7 years and without having regard to the authoritative pronouncement of the Apex Court in case of Arnesh Kumar Vs. State of Bihar (2014) 8 SCC 273 as well as Satender Antil Vs. C.B.I, 2022 SCC Online SC 825. 29 Hence, I deem it appropriate to protect the applicant from arrest by following order :- ORDER (a) In the event of their arrest, the Applicant no.1 Narendra Amrutlal Patel and applicant no.2 Ashok Girdharilal Mewani in connection of Case ID No. INV. No.327/2021-22 dated 13/12/2021 and subsequent Summons/Notice u/s. 73(1) issued by Assistant Commissioner of State Tax under MGST/CGST Act, shall be released on bail on furnishing P.R. bond to the extent of Rs.50,000/- each with one or more sureties of the like amount. (b) The applicant shall not directly or indirectly make any inducement, threat or promise to any person acquainted with facts of case so as to dissuade him from disclosing the facts to Court or any Police Officer and should not tamper with evidence. (c) The Applicant shall mark his attendance to the Officer and render his co-operation by reporting on every Thursday between 11.00 am to 2.00 p.m for a period o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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