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TMI Blog2024 (3) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... posited, all proceedings in respect of the said notice shall be deemed to be concluded - it may be inferred that even if all the tax liability including penalty, etc. has been deposited, it would be only the 'notice' which would be discharged and the proceedings with regard to Section 132 of the CGST Act shall remain alive. Thus, there seems force in the submissions made by learned counsel for the Department that the process of prosecution and assessment may go on simultaneously. The arrest of the applicant has not been done for his non cooperation in the investigation or for further investigation. Nowhere it is stated that the applicant while at liberty may hinder the smooth progress of investigation and in this order it has also not been mentioned as to why the applicant is being arrested, which was required to be stated. The requirement under sub-section (1) of section 69 of CGST Act is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. From a perusal of the reasons recorded by the Principal Additional Director General, it is reflected that no incident has been mentioned therein recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Mohd. Faiz Alam Khan, J. For the Applicant : Shivanshu Goswami, Mukesh Kumar Tewari, Purnendu Chakravarty For the Opposite Party : Digvijay Nath Dubey, Dipak Seth ORDER HON'BLE MOHD. FAIZ ALAM KHAN, J. 1. Heard Shri Satish Chandra Mishra, learned Senior Counsel assisted by Shri Purnendu Chakravarty and Shri Mukesh Kumar Tewari, learned counsels for the applicant and Shri Dipak Seth, learned counsel appearing on behalf of Union of India and perused the record. 2. This bail application has been moved by the accused-applicant- Deepanshu Srivastava for grant of bail in Case Crime No. 316 of 2024, under Section 132 of Central Goods and Services Tax Act, 2017, Police Station DGGI, Lucknow Zonal Unit, District Lucknow, during trial. 3. Learned Senior Counsel appearing for the accused-applicant while pressing the bail application submits that the applicant has been falsely implicated in this case and without any sufficient reasons and basis and without assessing any tax liability the applicant has been arrested and detained in prison since 02.02.2024. 4. While drawing the attention of this Court on Sections 69, 73, 74 and 79 as well as Section 62 of the Central Goods and Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case since 02.02.2024 and while producing the applicant before the Magistrate after his illegal arrest, the department has requested for judicial remand and no custody remand was requested, which prima-facie reflect that further detention of the applicant is not required by the investigating agency and despite the investigation is complete, the complaint is not being filed deliberately to deny the facility of bail to the applicant. The alleged offences against the applicant are punishable with maximum imprisonment of five years and as the investigation has almost completed, the detention of the applicant is not required anymore. 11. It is further submitted that the applicant has cooperated in the investigation and has appeared before the investigating officer as and when his presence was required. However, at the very first occasion available to him, he has retracted his statement shown to have been recorded before the investigating officer. Applicant undertakes that he will cooperate with the investigation as well as with the trial. 12. Learned Senior Counsel has relied on the law laid down by the Division Bench of this Court of date 13.07.2023 passed in Writ Tax No. 834 of 2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n placed at Page No.71 of the paper book, in order to show that the applicant has opened many bogus firms and companies in order to claim input tax illegally. The statement of Gaurav Tripathi placed at Page No. 119 of the objections is also highlighted in order to show that the Flat No. B-2 situated at Shalimar Mannat, Barabanki was taken on rent by Shri Gaurav Tripathi on the instigation of the applicant. 20. While drawing the attention of this Court towards the law laid down by the Hon'ble Supreme Court in Y.S. Jagan Mohan Reddy vs. Central Bureau of Investigation (2013) 7 SCC 439 , Nimmagadda Prasad vs. C.B.I. (2013) 7 SCC 466 and Devchand Kalyan Tandel vs. State of Gujarat and another (1996) 6 SCC 255, it is submitted that economic offences are of a class of their own and they have to be taken up at a different pedestal as they are causing irreparable injury to the economic health of the country and are required to be dealt with iron hands. In this regard, the law laid down by the Hon'ble Supreme Court vide order dated 07.11.2023 passed in Criminal Appeal No. Nil of 2023, arising out of S.L.P. (Crl.) No. 10810 of 2023, 'The State of Jharkhand vs. Dhananjay Gupta @ D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 90 crores and the number of fake firms were about 53 as on 17.02.2024 and on further investigation till 29.02.2024 the number of fake firms created, managed and run by the applicant has reached 271 and the investigation is still going on. The allegations are that without paying a single penny to the government as tax huge amount of input tax credit has been availed. It is also alleged that 09 places belonging to the applicant were searched on 30.01.2024 and consequent to these searches huge number of incriminating documents and electronic devices showing creation of fake firms were found from the premises including the residence of the applicant and his offices. 24. It is further alleged that 18 Laptops, 14 Pen drives, 24 SIM Cards, 44 mobile phones, 74 credit/debit cards, six hard disk drives, 251 stamps of various fake firms, 26 cheque books of various fake firms and more than 500 files, record books of fake firms, bilty books and other fake documents have also been found. The statement of the applicant was recorded under Section 70 of the CGST Act on 30.01.2024, 01.02.2024 and 02.02.2024, wherein he alleged to have confessed his guilt and by creating false/shell companies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation and when he was interrogated in jail, he did not cooperate in the investigation and has not given replies. 27. Learned Senior counsel appearing for applicant on the other hand while relying on the law laid down by the Division Bench of this Court of date 13.07.2023 passed in Writ Tax No. 834 of 2023 (Ashish Kakkar vs. Union of India and another) , 'Paras Jain @ Rohan Jain vs. Union of India' and in Ravindra Nath Sharma @ Ravubder Sharma (supra), submits that the law leans in favour of bail and when the offence is punishable with upto five years' of imprisonment, the further detention of the applicant would be a futile exercise. 28. Learned counsel appearing for Union of India, however, relied on Y.S. Jagan Mohan Reddy (supra) and Nimmagadda Prasad (supra) in order to show that the economic offences are of a class of their own and, therefore, are to be dealt with differently and applicant is not entitled for bail. 29. Perusal of the provisions contained under Section 73 and 74 of the CGST Act would reveal that a mechanism has been provided therein with regard to the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment in special cases, under Section 64 and (vii) audit under Sections 65 and 66. 52. But, to say that a prosecution can be launched only after the completion of the assessment, goes contrary to Section 132 of the CGST Act, 2017. The list of offences included in sub-Section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of sub- Section (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment. Therefore, the argument that there cannot be an arrest even before adjudication or assessment, does not appeal to us. Thus, there appears no substance in the submissions raised by learned senior counsel appearing for the applicant that before proceeding under 74 of the Act the applicant should not have been arrested or prosecuted. 31. Chapter XIV of the CGST Act deals with inspection, search, seizure and arrest. It comprises of sections 67 to 72. Section 70 deals with power to summon persons to give evidence and produce documents. As per sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned with offences under clauses (b) and (c) of subsection (1). As per clause (c), the offence is availing input tax credit using invoice or bill without the supply of goods or services or both in violation of the CGST Act; and as per clause (b), a person who issues any invoice or bill without supply of goods or services or both in violation of the provisions of the CGST Act or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax. If a person commits the above two offences as per clauses (c) and (b), he shall be punishable under clause (i) if the amount of tax evaded or the amount of input tax credit wrongly availed of or utilized or the amount of refund wrongly taken exceeds five hundred lakh rupees with imprisonment for a term which may extend to five years and with fine. All other penalties are below five years. Therefore, the maximum penalty that can be imposed for committing offences under clauses (c) and (b) of sub-section (1) of section 132 is imprisonment for a term which may extend to five years and with fine.As per sub-section (5), the offences specified in clause (a) or (b) or (c) or (d) of sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid protection was subject to the appellant s cooperation with the investigating agency. It is not in dispute that the appellant has joined the investigation but the main reason for opposing the prayer of the appellant for pre-arrest bail has been disclosed in paragraph 13 of the counter affidavit, which we quote below:- 13. That the petitioner/accused had though joined investigation on dated 10.02.2024, as per order passed by this Hon ble Court but the petitioner did not cooperate with the police nor got recovered the amount of bribe received by him nor disclosed the other facts of this case properly. Therefore, the custodial interrogation of petitioner/accused is required in the present case for thorough investigation. 34. We cannot treat the behavior attributed to the appellant to be instances of non-cooperation justifying dismissal of his appeal for prearrest bail. An accused, while joining investigation as a condition for remaining enlarged on bail, is not expected to make self-incriminating statements under the threat that the State shall seek withdrawal of such interim protection. 35. Thus the cooperation in the investigation may not be taken that accused applicant while und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sound reasons. Such reasons to believe can be formed on the basis of material/evidence but not on mere suspicion or rumour. It is open for a court to examine whether the reasons for the formation of such belief have a rational connection with the arrest. There must be a direct connection or nexus or live link between the material coming to the notice of the officer and the formation of his belief. 35. In this regard the law laid down by the Supreme Court in Arnesh Kumar Vs. State of Bihar, MANU/SC/0559/2014 : (2014) 8 SCC 273 , is also important where the Supreme Court having referred to section 41 Cr.P.C. held 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 fine, cannot be arrested by a police officer only on his satisfaction that such person has 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 disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referring to a decision in the case of P.V. Ramana Reddy v. Union of India Writ Petition Nos. 4764 of 2019 and allied petitions decided on 18th April, 2019 . There are few important observations made by the High Court and we are in complete agreement with the said observations. The observations of the High Court fell in the context of certain incongruities noticed in Section 69(1) and Section 132 reply of the CGST Act, 2017. We quote the relevant observations hereunder: 39. It is important to note that Under Sub-section (4) of Section 132 of the CGST Act, 2017, all offences under the Act except those under Clauses (a) to (d) of Section 132(1), are made non-cognizable and bailable, not-withstanding anything contained in Code of Criminal Procedure In addition, Section 67(10) of the CGST Act, 2017 makes the provisions of Code of Criminal Procedure relating to search and seizure, apply to searches and seizures under this Act, subject to the modification that the word Commissioner shall substitute the word Magistrate appearing in Section 165(5) of Code of Criminal Procedure, in its application to CGST Act, 2017. 40. Therefore, (1) in the light of the fact that Section 69(1) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Officer Under Section 41A(1) Code of Criminal Procedure, to summon a person for enquiry in relation to a cognizable offence, is what is substantially ingrained in Section 70(1) of the CGST Act. Though Section 69(1) which confers powers upon the Commissioner to order the arrest of a person does not contain the safeguards that are incorporated in Section 41 and 41A of Code of Criminal Procedure, we think Section 70(1) of the CGST Act takes care of the contingency. 42. In any case, the moment the Commissioner has reasons to believe that a person has committed a cognizable and non-bailable offence warranting his arrest, then we think that the safeguards before arresting a person, as provided in Sections 41 and 41A of Code of Criminal Procedure, may have to be kept in mind. 43. But, it may be remembered that Section 41A(3) of Code of Criminal Procedure, does not provide an absolute irrevocable guarantee against arrest. Despite the compliance with the notices of appearance, a Police Officer himself is entitled Under Section 41A(3) Code of Criminal Procedure, for reasons to be recorded, arrest a person. At this stage, we may notice the difference in language between Section 41A(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st is made without a reasonable satisfaction reached after some investigation as to the genuineness of the allegation. Despite this legal position, the Legislature did not find any improvement. Numbers of arrest have not decreased. Ultimately, the Parliament had to intervene and on the recommendation of the 177th Report of the Law Commission submitted in the year 2001, Section 41 of the Code of Criminal Procedure (for short 'Cr.P.C.), in the present form came to be enacted. It is interesting to note that such a recommendation was made by the Law Commission in its 152nd and 154th Report submitted as back in the year 1994. The value of the proportionality permeates the amendment relating to arrest. * * * * * 7.1. From a plain reading of the aforesaid provision, it is evident that a person accused of offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without fine, cannot be arrested by the police officer only on his satisfaction that such person had committed the offence punishable as aforesaid. Police officer before arrest, in such cases has to be further satisfied that such arrest is necessary to prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether it should be treated as a class of its own or otherwise. This issue has already been dealt with by this Court in the case of P. Chidambaram v. Directorate of Enforcement, MANU/SC/1670/2019 : (2020) 13 SCC 791 , after taking note of the earlier decisions governing the field. The gravity of the offence, the object of the Special Act, and the attending circumstances are a few of the factors to be taken note of, along with the period of sentence. After all, an economic offence cannot be classified as such, as it may involve various activities and may differ from one case to another. Therefore, it is not advisable on the part of the court to categorise all the offences into one group and deny bail on that basis. Suffice it to state that law, as laid down in the following judgments, will govern the field:- Precedents P. Chidambaram v. Directorate of Enforcement, MANU/SC/1670/2019 : (2020) 13 SCC 791: 23. Thus, from cumulative perusal of the judgments cited on either side including the one rendered by the Constitution Bench of this Court, it could be deduced that the basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The punishment for the offence is imprisonment for a term which may extend to seven years. It is, no doubt, true that the nature of the charge may be relevant, but at the same time, the punishment to which the party may be liable, if convicted, also bears upon the issue. Therefore, in determining whether to grant bail, both the seriousness of the charge and the severity of the punishment should be taken into consideration. 40. The grant or refusal to grant bail lies within the discretion of the court. The grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court, whether before or after conviction, to assure that he will submit to the jurisdiction of the court and be in attendance thereon whenever his presence is required. xxxxxxxxx 46. We are conscious of the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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