The Hon'ble Bombay High Court in Sanket v. Director General of Goods and Service Tax Intelligence (BA) No. 585 of 2024 dated 28-06-2024 held that bail should be granted to an assessee arrested for GST offences, considering that the investigation was completed, chargesheet filed, maximum punishment was 5 years, and further detention was not required.
Facts of the Case:
The applicant, Sanket, was arrested on March 13, 2024, in connection with Case No.DGGI/INT/INTL/505/2023-GR C-O/o ADG-DGGI-ZU-Nagpur, registered for offences punishable under Section 132(1)(b), 132(1)(c), 132(1)(1)(i) read with 132(5) of the CGST Act, 2017. He sought regular bail under Section 439 of the Code of Criminal Procedure.
The Directorate General of GST Intelligence (DGGI) Nagpur Zonal Unit conducted a search on December 22, 2023. They alleged that the applicant was the proprietor of M/s.Om Sai Enterprises and his father was the proprietor of S.P.Enterprises. The investigating agency seized a laptop from the applicant's premises, which allegedly revealed that 89 different firms were maintained in separate folders by the applicant.
The DGGI alleged that the applicant carried out transactions of sale and supply by showing vexatious documents of existence of other firms, never conducted any business activities through these firms, and illegally claimed Input Tax Credit (ITC) over the said transactions. Furthermore, they claimed that another firm, "Shri Krishna Traders" in the name of Manoj Khobragade, was also managed and operated by the applicant.
According to the DGGI, "Shri Krishna Traders" was engaged in availing and passing on fake ITC, individually passing around Rs.12.00 crores involving an invoice value of Rs.67.00 crores. The three Shell Firms allegedly owned and operated by the applicant cumulatively availed and passed on fake ITC of around Rs.37.00 crores.
The applicant contended that the seized laptop belonged to Vijay Akre and Vikesh Joshi, not to him. He claimed to be operating only two firms: M/s.Om Sai Enterprises and S.P.Enterprises. The applicant argued that he was arrested without complying with Section 41 of the Code of Criminal Procedure and that the investigating agency had not followed guidelines issued by the Supreme Court in Satender Kumar Antil v. CBI.
The applicant sought regular bail under Section 439 of the Code of Criminal Procedure.
Issue:
Whether bail should be granted to the applicant arrested for GST offences, considering the stage of investigation, nature of offences, and prescribed punishment?
Held:
The Hon'ble Bombay High Court in Criminal Application (BA) No. 585 of 2024 held that:
The Court observed that Section 69 of the CGST Act empowers the Commissioner to arrest a person when there are reasons to believe that an offence has been committed. However, this power does not provide an absolute guarantee against arrest. The Court referred to the Supreme Court's decision in State of Gujarat etc. v. Choodamani Parmeshwaran Iyer and anr, which clarified the difference between "reasons to be recorded" under Section 41A(3) of the Code of Criminal Procedure and "reasons to believe" under Section 69(1) of the CGST Act.
The Court examined Section 132 of the CGST Act, which provides for punishment for certain offences. It noted that for offences under Section 132(1)(b) and 132(1)(c), the maximum punishment that can be imposed is imprisonment which may extend to five years and a fine, if the amount of ITC wrongly availed or refund wrongly taken exceeds Rs.500 lacs.
The Court considered the principles laid down by the Supreme Court in Arnesh Kumar v. State of Bihar and Satender Kumar Antil v. CBI, which emphasized the need to comply with arrest guidelines for offences punishable with imprisonment for less than seven years.
The Court noted that in the present case, the necessary investigation was already carried out and the chargesheet was filed. Considering that the maximum punishment provided is five years and further detention of the applicant was not required, the Court decided to grant bail.
The Court allowed the application and ordered the release of the applicant on bail, subject to conditions including execution of a personal recognizance bond of Rs.2.00 lacs with one solvent surety, attendance for investigation as required, surrender of passport, and not leaving the jurisdiction without prior permission.
Relevant Sections: Sections 132 and 69 of Central Goods and Services Tax Act, 2017/Maharashtra Goods and Services Tax Act, 2017: "Punishment for certain offences" and "Power to arrest" respectively.
Relevant Sections:
Sections 132 and 69 of Central Goods and Services Tax Act, 2017/Maharashtra Goods and Services Tax Act, 2017: "Punishment for certain offences" and "Power to arrest" respectively.
Pari Materia:
1. Satender Kumar Antil v. CBI, reported in 2022 SCC OnLine SC 825
2. Ratnambar Kaushik v. Union of India, reported in (2023) 2 SCC 621
3. Arnesh Kumar v. State of Bihar, reported in (2014) 8 SCC 273
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