9911796707
TMI Blog2025 (4) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... marily tobacco products manufactured by ITC LTD, under a distributorship arrangement confined to the Jaigaon region. The petitioner operates under an area-specific supply agreement with ITC Ltd., under which all goods are delivered directly to the petitioner's designated warehouse or business premises by the supplier-ITC Ltd. It is further contended that the petitioner was arrested on 31-03-2025 at around 9.30 P.M by officers of the Central Goods and Services Tax (CGST). Department Siliguri pursuant to an Arrest Authorisation Order dated 30.03.2025 issued by the Commissioner, CGST and CX. Siliguri. The said order claimed that the petitioner in his capacity as the authorized signatory of M/S Budhu Sha and Co. had rendered himself liable to punishment under Section 132 (1) (c) read with Section 132 (1)(i) and Section 132 (5) of the central Goods and Services Tax Act 2017, and was therefore liable to be arrested under Section 69 (1) of the said Act. The arrest was effected without any judicial warrant and significantly before any formal complaint had been filed before the Learned Magistrate. The Memo of Arrest Served on the petitioner records that the arrest is based on the alleged wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecution wholly arbitrary and devoid of fairness. It is also contended that the search proceedings concluded on 30-03-2025 with the preparation and issuance of a spot panchanama which accurately recorded the physical verification of stock tallying of batch numbers availability of corresponding transport document and absence of any unaccounted goods, cash or incriminating materials. On the very next day ie. 31/03/2025 three officers of the CGST. Department visited the petitioner's business premises and made an unexpected and wholly irregular request to retrieve and substitute the copy of the original panchanama that had been handed over to the petitioner the previous evening. The officers carried with them a different version of the Panchanama and sought to replace it with the original copy. The petitioner and his staff finding this request suspicious and unlawful refused to comply. It is contended that the allegations forming the basis of the present complaint and arrest pertain exclusively to financial years preceding FY-2024-25, and in particular to FY-2020-21, 2021-22, 2022-23 and 2023-24. No proceedings whatsoever have been initiated against the petitioner for the current f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner submits that in the complaint lodged by the respondent several facts of the allegations which are irrelevant have been stated but the basis or foundation for commission of the alleged offence under Section 132 (1) (c) of the CGST Act mentioned in para-7 of the complaint are as follows: Vehicles mentioned in certain E-way Bills enclosed as Annexure-1) issued by one of the suppliers of M/S Budhu Sha and Company, involving ITC of Rs. 3.7.29 crores have either crossed no toll plaza or have not crossed all the toll-plaza falling on the normal/designated route, from the place of business of the said supplier to the place of business of M/S. Buddhu Sha and Co. He had even failed to produce any reliable evidence to establish that the goods have been transported in actual and vehicles have actually moved/crossed all toll-plazas on the way. 6. Learned Advocate further submits that from the particulars attached to the complaint that E-way Bills issued by ITC Ltd (the supplier) in respect of the financial years 2021-22, 2022-23 and 2023-24 corresponding to 232 invoices are the subject matter of Investigation. Learned Advocate also submits that although it is contended that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should state the Commissioner's satisfaction and refer to the 'material' forming the basis of his findings regarding the commission of a non-bailable offence. iii) Failure to do so would result in an illegal arrest. iv) The difference between the 'reasons to believe' and 'suspicion' is explained. v) Suspicion requires lower degree of satisfaction, and does not amount to belief. Belief is beyond speculation or doubt, and the threshold of belief conveys conviction founded on evidence regarding existence of a fact or doing of an act. vi) The reasons for the formation of the belief which must have a rational connection with or an element bearing on the formation of belief. The reasons should not be extraneous or irrelevant for the purpose of the provision. 8. Learned Advocate submits that the foundation of the allegations that the petitioner's firm availed Input Tax Credit fraudulently on the basis of fake invoices is that the entries of subjected E-way Bills corresponding to 232 invoices as given were not found in the 'toll crossing record' in toll plazas which is not statutorily prescribed and moreover non-entry of the E-way bills in the toll crossing record is not a conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on his outward supplies. The said supplier has to follow certain conditions in order to avail such credit of taxes paid on inward supplies. Such conditions are prescribed under Section 16 of Central Goods and Services Act 2017. Provisions have also been made under CGST Act 2017 and rules made thereunder for refund of unutilized input tax credit at the end of any tax period where the outward supply made by a supplier is zero rated supply (which includes export of goods/services in terms of Section 16 of the Integrated Goods and Service Tax Act 2017) made without payment of tax. 13. Learned Advocate further submits that one of the conditions to take/avail ITC is that a registered person have to receive the goods/services or both, which are used or intended to be used in the course or furtherance of his business as per Section 16 (2) (b) of the CGST Act 2017. In order to get unjust enrichment some persons avail, ITC (Input Tax Credit) without actual receipt of goods and get refund thereof in a planned way. There is payment of value of supply from the account of suppliers however, there is no actual transfer/movement of goods from the place of the supplier, to the place of the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these Forty (40) vehicles Sixteen (16) vehicles, used in 56 consignments. Thus the complete absence of toll data during the claimed movement period is a significant anomaly and is not consistant with the lawful movement of goods as movement between the places of Businesses necessarily involves crossing the tolls falling on the either of the routes. It is further submitted that on further verification of the E-way Bills No. 851179898279 and 841381086388. Specific anomalies have been detected with regard to the two consignments. It is submitted that the enquiry reveals that the vehicles mentioned in 232 Nos. of E-way Bills carrying inward goods pertaining to the period from April 2021 to March-2024 issued by one of the suppliers of M/S. Budhu Sha and Company ie ITC Ltd, involving ITC of Rs. 37.29 Crores have either crossed no Toll Plaza or have not crossed all the toll Plaza falling on the normal/designated route from the place of business of the said supplier to the place of business of M/S Budhu Sha and Company. He had even failed to produce any reliable documents to establish to establish that the goods have been transported in actual and vehicles have actually moved/crossed all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce no and Batch number of available stock of Cigarettes purchased from ITC limited. The Batch no were obtained from the ITC software by feeding the invoice no. through which the available stock of cigarettes were procured. The officers then identified an e-way bill no. 841513001162 dated 26-03-2025 for which the toll crossing record was not available on e-way bill portal. The Batch no of goods provided through the corresponding invoices to the above-mentioned e-way bill were identified and verified whether the goods with some batch no. are available in the stock or not. The officers found the goods physically available in the stock Batch no. wise photo of the goods (cigarettes-cartons) were also taken by the officers. Moreover the officer also cheked the CCTV footage and found that the vehicle no. WB73G5358 corresponding to the above said E-way bill entering the PPOB at around 9.00 AM on 27.03.2026 and being unloaded onwards also. 19. Thus from the panchanama dated 30-03-2025 it appears that although an e-waybill 841513001162 dated 26-03-2025 for which the toll crossing record was not available on e-way bill portal but upon verification with Batch no of goods procured through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and examined by the Court. Consequently, it would be incongruous, if not wrong, to hold that the accused can be denied and not furnished a copy of the "reasons to believe". In reality, this would effectively prevent the accused from challenging their arrest, questioning the "reasons to believe". We are concerned with violation of personal liberty, and the exercise of the power to arrest in accordance with law. Scrutiny of the action to arrest, whether in accordance with law, is amenable to judicial review. It follows that the "reasons to believe" should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest.' 22. In the INSTRUCTION. No-02/2022-23. [GST-Investigation] dated 17th August 2022 it was provided as follows: Hon'ble Supreme Court of India in its judgment dated 16th August, 2021 in Criminal Appeal No. 838 of 2021, arising out of SLP (Crl.) No. 5442/2021, has observed as follows: "we may note that personal liberty is an important aspect of our constitutional mandate. The occasion to arrest on accused during investigation arises when custodial investigation becomes necessary or it is a heinous crime or where there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the non-bailable offence or credible information has been received, or a reasonable suspicion exists, of his having been so concerned? 3.2.2 Whether arrest is necessary to ensure proper investigation of the offence? 3.2.3 Whether the person, if not restricted, is likely to tamper the course of further investigation or is likely to tamper with evidence or intimidate or influence witnesses? 3.2.4 Whether person is mastermind or key operator effecting proxy/benami transaction in the name of dummy GSTIM or non-existent persons, etc. for passing fraudulent input tax credit etc.? 3.2.5 As unless such person is arrested, his presence before investigating officer cannot be ensured. 23. In the case of Prem Sundor Choudhary (supra) the Hon'ble Court observed as follows: '5. After reading of Section 69 of CGST Act, 2017 there must be reason to believe that a person has committed an offence and from perusal of Section 132 of the Act, it is clear that there must be reason to believe of tax evasion or condition as specified in section 132 for arresting of such person under the Act. Learned senior counsel for the petitioner further submits that the monetary limit which is specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax evaded or the amount of input tax credit wrongly availed or utilised 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;" 24. Having heard learned senior counsel for the petitioner and learned counsel for the respondent and considering the facts and circumstances of the case, this Court is inclined to enlarge the petitioner on bail. The above named petitioner is directed to be released on bail in connection with Case No. 35(O) of 2024 on executing bail bond of Rs. 10,000/- (ten thousand) with two sureties of the like amount each to the satisfaction of learned Special Judge Economic Offences at Patna. 25. In the case of Niranjan Paul (supra) a Learned Judge of this Hon'ble Court observed as follows: The documents prescribed in the statute and the rules framed thereunder for movement of the goods namely tax invoices, E-waybills etc. have been disclosed in the writ petition. The documents with regard to payment of transportation cost by the supplier and also that the supplier has paid the relevant tax and duties and filed the returns as prescribed under the statute have been anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have conducted further enquiry or give an opportunity to the petitioner of being heard before lodging the complaint on 31/03/2025 and arresting the petitioner. However as the CGST Authority has on enquiry collected some information and documents before lodging the complaint it would not be proper to make any further observation with regard to the merits of the case but it is necessary to decide as to whether petitioner should be granted bail. 28. In order to decide as to whether the accused should be granted bail it is necessary to consider the nature of offence severity of punishment, if convicted, chance of abscondeence and tampering with evidence. 29. In the instant case the petitioner is charged with committing an offence the maximum punishment of which, is five years. Now considering the materials on record, it appears that the relevant documents and information is with the respondent authority thus there is no scope for tampering evidence. As the petitioner has his business there is no chance to abscond. Moreover it appears from record that the petitioner has-co-operated with the respondent authority. 30. Thus considering the nature of allegation, materials on record, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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