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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 ..... ecember 2021, but still there is no crystallization of the accusations barring the show cause notice being issued. In any case, even on conviction, the maximum punishment that would be imposed would be imprisonment upto five years. The present case arises out of a tax dispute and the interest of the respondent no.1 can always be protected on the claim being adjudicated and the tax payer being directed to pay the tax. Moresoever, the offence under the GST Act, except with the limited exception of previous conviction are compoundable. Primarily, the GST is a revenue statute to collect the tax on every transaction of supply of goods or services or both and imposition of penalty is prima facie ancillary purpose of the statute. The order passed by the Addl. Sessions Judge, Mumbai, rejecting the Anticipatory Bail Application, perfunctory in nature as except recording that the nature of offence being economic one, the same is rejected. A balance has to be struck between the principle of liberty and the right of the Department to investigate. The learned Judge has recorded a prima facie finding that the applicants are actively involved in the act of availing ITC without actual moveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,29,103/- 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 of the Company was cancelled much after the date of transaction, and in case of other two companies, ITC was availed only after verifying that they have filed their GSTR-1 as well as GSTR-3B and therefore, the liability of the company for these three companies was sought to be reversed. 3 It is the submission of applicants that without responding to the same, summons were received by the two Directors of the Company u/s. 70 of the MCGST Act dated 11/3/2022 with reference to the three companies not mentioned in the earlier notice dated 22/2/2022 and asking the Directors to remain present for recording the statement for investigation pending u/s. 67 of the Act. A specific statement is made in the application that the Directors of the Company had already started paying in part, the ITC amount which was disallowed, but they could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 taxes or avail ITC, using such invoices or bills or collect any amounts as taxes, but fail to pay sum to Government beyond the period of three months, he can be said to have committed offences under clauses (a), (b), (c) or (d) of the Act which is cognizable and non-bailable, and the imprisonment imposed by way of punishment, on being convicted for the said offences may extend to five years or with fine, if the amount of ITC, is wrongly availed, or the amount of refund wrongly taken, exceeds Rs.500 lakhs. In all other cases, the punishment prescribed is imprisonment which may extend to three years and with fine. In the wake of the aforesaid punishment being prescribed, the learned counsel would invoke the law laid by the Hon ble Apex Court in case of Arnesh Kumar vs. State of Bihar Ors, (2014) 8 SCC 273, and in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or as kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act. 10 Section 69 reads thus 69 Power to effect an arrest 69 (1) Where the Commissioner has reasons to believe that person has committed any offence specified in clause (a) or clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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/- and on the disallowable ITC, interest is also calculated. The summary of the tax and interest payable has been indicated in the notice for the year 2017-18 as under :- ACT IGST CGST SGST TOTAL Tax 1,12,47,258 1,30,91,681 1,30,91,665 3,74,30,604 Interest u/s. 50(1) 90,38,331 1,05,29,696 1,05,29,683 3,00,97,709 Total payable 2,02,85,598 2,36,21,376 2,36,21,347 6,75,28,313 14 The applicants have specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt 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 the evidence of the offence to disappear; or tampering with such evidence in any manner; or to prevent such person from making any inducement, threat or promise to a witness so as to dissuade him from disclosing such facts to the court or to the police officer; or unless such accused person is arrested, his presence in the court whenever required cannot be ensured. These are the conclusions, which one may reach based on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Chidambaram Vs. Directorate of Enforcement, (Criminal Appeal No.1340/2019 arising out of SLP(Cri) No.7523/19), where it has been held that the parameters which are to be invoked while considering Bail Application in any other offence than economic offence, must equally apply in such cases in economic offences, too. The Hon ble Apex Court thus, issued guidelines to be followed in the backdrop of the severe congest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Division bench as under :- 26 One more aspect which needs mention is that under sub-section (3) of section 69, arrest under subsection(1) has been made subject to the provisions of Cr.P.C, which would include Section 41 and 41-A thereof. 20 Upon considering the scheme contained in Section 132 of Chapter XIX, and after taking into account the punishment prescribed for the offence so enumerated, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 138 of the Act and in para 36 made the following observations :- 36 There is no embargo under the CGST Act restraining the petitioner from seeking pre-arrest bail. Economic offences such as tax evasion, money laundering, etc. affect the economy of the country and thus are considered grave in nature. To deter persons from indulging in such economic offences, criminal sanctions are requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 reiterated that the offence does not contemplate punishment for more than five years or commission of any serious offence along with the economic offence as it is usually the case in offences under other special statutes dealing with economic offences like Prevention of Money Laundering Act, 2003. Thus, as per the scheme of the CGST Act, though the offence is of economic nature yet t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 investigation, are already in possession of the respondent and not only this, a sum of Rs.2.22 crores has been paid to the Department though under protest, to establish the bonafides. The investigation being based on documents, the Department has failed to make out any case for custodial interrogation, particularly when the GST Portal has all the supporting documents incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 of four weeks from the date of uploading of the order and thereby as and when directed. (d)On their release within 7 days, the applicants shall surrender their passport to the Investigating Officer. The applicants shall not travel without permission of the concerned Magistrate. The Application is allowed in the aforestated terms. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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