The petitioner-accused is before this Court seeking grant of anticipatory bail and to release him on bail in the event of his arrest by the Commissioner of Central Excise and GST in Proceeding No. CBIC-DIN- 20201157YZ0000777F65 under Sections 69, Clause (a) or (b) or (c) or (d) of Section 132(1) and as per Section 132(4) and Clause (a), (b), (c) or (d) of Section 132(1) of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).
2. Brief facts of the case as narrated in the petition are that, the petitioner who is the proprietor of M/s Vigneshwara Transport Company, involved in transport business has approached this Court seeking grant of anticipatory bail contending that the respondent held raid simultaneously in three places belonging to the petitioner, on 28.11.2020 at 7.30 a.m. The said raid was politically motivated to wreck vengeance on the petitioner. The respondent had not followed the procedure as contemplated under law for holding such raid, but they acted rudely, harassed the petitioner and his team. They indulged in aggressive and physical abuse. The nephew of the petitioner by name Sachin Amin was illegally detained and was taken away by the respondent-officers to an unknown location. They have ransacked the petitioner’s house and seized the same after affixing summons under Section 70(1) of the CGST Act, calling upon the petitioner to be present before the respondent at 10.00 a.m. on 01.12.2020. The petitioner was also called upon to carry along with him the copies of invoices/bills from July 2017 till date, copies of balance sheet for the years 2017-2018 to 2020-2021 and copies of the agreement/contract.
3. It is stated that the petitioner is paying income tax regularly and the raid held on 28.11.2020 is only with an intention to disrupt the normal life of the petitioner in carrying on his business. It is stated that the petitioner is having in all 13 vehicles to carry on his business. The vehicles were purchased by obtaining loan from various banks. The bank statements, income tax returns and other relevant documents are available in the public domain and the respondent could easily access to all those documents. The petitioner was not required to be summoned to appear before the respondent to produce those documents. Therefore, it is the contention of the petitioner that summoning him by the respondent is only with an ulterior motive to tease and harass him.
4. It is contended that the petitioner has reason to believe that he may be apprehended on accusation of committing the offence under Section 132(5) of the Act which is non-bailable in nature. As per section 69(1) of the CGST Act, the Commissioner is empowered to authorize any officer of Central Tax to arrest a person, if he has reason to believe that such person committed the offence under Section 132 of CGST Act. Therefore, the petitioner is having reasonable apprehension of being arrested and detained in custody by making false allegations, if he appears before the respondent without a pre-arrest protection. Accordingly, he moved the petition under section 438 of Cr.P.C. seeking anticipatory bail.
5. Heard Sri.Mohammed Akhil Nazeer, learned Counsel for the petitioner and Sri.Amit Deshpande, learned Standing Counsel for the respondent-State. Perused the materials placed on record.
6. Learned counsel for the petitioner re-iterated his contention as stated above and contended that the conduct of the respondent in holding raid on the premises belonging to the petitioner, sealing it without any reasons and summoning the petitioner to appear before him is apparently motivated and without any reasonable cause. The petitioner is ready and willing to abide by any of the conditions that would be imposed by this Court and cooperate with the Investigating Officer for investigation. He further submitted that the premises belonging to the petitioner is already raided and all the relevant documents are already taken away by the respondent. Under such circumstances, summoning the petitioner for questioning is only a formality. No further investigation is required to be done as the petitioner has maintained the records and documents in the course of his business and he has no criminal antecedents. He never evaded tax.
7. Learned counsel relied on the decision of this Court in Sri Hanumanthappa Pathrera Lakshmana Vs State Crl.P.2419/2020 DD 11.06.2020 to contend that the petition under Section 438 of Cr.P.C. is maintainable and the same is not barred under any law and further contended that the co-ordinate Bench of this Court considering similar set of facts and circumstances granted pre-arrest relief to the petitioner therein. Therefore, learned counsel seeks similar relief in favour of the petitioner.
8. Per contra, learned Standing Counsel for the respondent opposing the petition submitted that baseless allegations are made against the respondent without substantiating the same. He contended that on the basis of specific intelligence report received by the respondent regarding involvement of the petitioner in transportation of goods illegally, which were clandestinely removed by the traders without raising invoices as required under Section 31 of the CGST Act and without generating e-way bills as required under Rule 138 of CGST Rules. As per Rule 138A of the said Rules, the relevant documents need to be carried by the person in-charge of the conveyance and should be produced as and when required. When search was held on credible information, incriminating documents were found. The petitioner had given his statement admitting involvement in such illegal transportation of goods without following the procedure as contemplated under law and thereby evading tax payable to the State. The search conducted by the respondent on the basis of credible information cannot be termed as harassment or highhanded acts.
9. Learned Standing Counsel submitted that the petitioner is required to co-operate in the investigation, but, the petitioner is avoiding to appear before the respondent or the authorized officer and not co-operating in the investigation. A search was held in the office premises of the petitioner on 28.11.2020. The house premises of the petitioner could not be searched, as the same was kept under lock and key to avoid search and seizure of incriminating materials. Therefore, the premises was seized and the summons under Section 70(1) of the CGST Act was affixed on the door, requiring the petitioner to appear before the authorized officer on 01.12.2020. But the petitioner had not chosen to comply with the summons, but on the other hand, filed Crl.Misc.No.715 of 2020 before the learned Principal District and Sessions Judge, Mangaluru seeking grant of anticipatory bail. Initially, he was successful in getting interim bail, but, however, on considering the merits of the case, the said petition came to be dismissed.
10. Initially, the petitioner was summoned to appear before the authorized officer and accordingly, the petitioner had appeared and had given his statement which were recorded on 21.12.2020, 22.12.2020 and 23.12.2020 and undertook to co-operate and produce necessary documents before the authorized officer. He was again summoned to appear on 28.12.2020. Since there was no response from the petitioner, summons was again issued calling upon the petitioner to appear on 08.01.2021 and again on 11.01.2021. The petitioner appeared before the authorized officer on 19.01.2021. His statement was recorded, wherein, he categorically admitted that he has indulged in unlawful activity in transportation of goods in violation of the provisions of the CGST Act. From the search held at the premises of the petitioner on 28.11.2020 and from the statement of the petitioner, it is clear that the petitioner is not maintaining proper books of accounts and relevant records of business as required under Section 35 of the CGST Act and Rule 56 of the CGST Rules at the principal place of business. In the meantime, one Pramod and Sachin Amin who were concerned with the dealings of the petitioner were summoned and their statements were recorded on various dates. Both these persons have categorically stated regarding the misdeeds that are committed by the petitioner only with an intention to evade tax payable to the State. The respondent has not yet quantified the tax evasion by the petitioner, but, however, sufficient materials are collected to prove evasion of tax and commission of economic offences.
11. It is submitted that some of the e-way bills were found in the lorry belonging to the petitioner. Apparently, those e-way bills were found to be manipulated. In fact, e-way bills are generated which are valid only for one trip. But the petitioner by manipulating the e-way bill has claimed input tax credit without supply of goods. During investigation, various whatsapp communications were retrieved, which prima facie disclose grave economic offences. The respondent suspects that it is a racket having its links inter-state and crores of rupees of tax suspected to have been evaded by the petitioner. Under such circumstances, the petitioner is not entitled for grant of pre-arrest protection. Thus, the petition filed by the petitioner under Section 438 Cr.P.C. is not maintainable. Accordingly, he prays for dismissal of the petition as devoid of merits.
12. In view of the rival contentions urged by the learned counsel for both the parties, the point that would arise for my consideration is:
“Whether the petitioner is entitled for grant of anticipatory bail under Section 438 of Cr.P.C.?” My answer to the above point is in ‘Negative’ for the following:
13. In Sri Hanumanthappa Pathrera Lakshmana (supra), the co-ordinate Bench of this Court considered the position of law as to whether there is any bar to entertain the petition for anticipatory bail under Section 438 of Cr.P.C., when the offences involve fraudulent involvement of input tax credit on the basis of invoices without actual supply of goods in contravention of Section 16 of CGST Act, which has resulted in loss to exchequer and held that there is no statutory bar in CGST Act for granting anticipatory bail. It is held that merely issuing several notices/summons by the respondent during lockdown for COVID-19 itself cannot be a ground to reject the petition seeking anticipatory bail. It was held that no prejudice would be caused to the respondent if anticipatory bail is granted and accordingly, petition was allowed and conditional order of anticipatory bail was granted.
14. Learned Standing Counsel relied on the decision in Sandeep Goyal Vs Union of India 2020 (36) GSTL 497 to contend that in similar set of facts, where there is allegation of committing fraud of about 70 crores and the investigation was pending, the Hon’ble Supreme Court rejected the claim for bail having regard to the totality of the facts, even after considering that the maximum punishment prescribed is 5 years and the petitioner was already in judicial custody since 1 year 8 months and the co-accused were enlarged on bail.
15. He also relied on the decision in Rajesh Arora Vs Union of India MANU/RH/0441/2020, wherein, the High Court of Rajasthan (Jaipur Bench) refused grant of bail to the accused who is said to have been committed the offences punishable under Sections 132(1)(B), (C), (D), (F), (I), (L) of CGST Act, since there was allegation that by creating 555 fake firms, the accused therein had committed fraud to the tune of ₹ 74 crores and the investigation was still pending. This order of the High Court of Rajasthan was challenged by the accused before the Hon’ble Apex Court in SLP (Cri.) Nos.2547-2548 of 2020. The Hon’ble Apex Court vide order dated 23.06.2020 refused to interfere with the order passed by the High Court of Rajasthan (Jaipur Bench) rejecting the bail for the offences under Section 132(1), (B), (C), (D), (F), (I), (L) of CGSC Act, wherein the maximum punishment is 5 years and the petitioner was in judicial custody since 2 years. However, it has upheld the direction issued by the High Court to complete the investigation in a time bound manner while refusing to enlarge the petitioner on bail.
16. In Amit Beriwal Vs State of Odisha 2020 SCC Online Orissa 546, the High Court of Orissa, Cuttack, considered the allegations made against the accused that the bills were being procured from the firms at Delhi who had no purchasers, the tax which was not deposited for transaction was utilized by the firms for not only availing input tax credit, but for getting refunds by showing the sales to export units. The refunds were received for the tax which was actually never received by the revenue and under such circumstances, it relied on the opinion formed by the Hon’ble Apex Court in Y S Jagan Mohan Reddy Vs CBI (2013) 7 SCC 439, wherein, it is held:
“Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serous threat to the financial health of the country.”
Relying on the specific observation made by the Hon’ble Apex Court, it was held that there are no reasons to grant bail to the accused and rejected the petition filed under Section 439 of Cr.P.C., wherein paras 22 to 24 and 27 reads as under:
“22. Moreover, the courts cannot lose sight of the adverse impact such activities would have in the economy. It appears that a large number of cases have now emerged in different parts of the country, where such persons, with vested interests, have created a host of unscrupulous and bogus entities. These fake entities are then used for the purpose of indulging in issuances of false and fabricated invoices, without actual movement or supply of goods and services and without payment of any GST to the public exchequer, but for the purpose of claiming ITC, by defrauding the Revenue. Enormity of such devious activities touch the raw nerve of the economic system and strike at the root of the proper and effective functioning of the GST regime, which has been set up with the laudable object of “One Nation, One Tax, One Market”, by subsuming various earlier indirect levies such as Central Excise Duty, Service Tax, VAT etc.; expecting that goods and services would be cheaper and beneficial to the common man. One cannot lose sight of the fact that GST regime is relatively new and is still evolving. Unfortunately, the attempts to dampen the spirit of its proper implementation are already assuming huge proportions and need to be curbed with an iron fist so that the contours of fiscal compass will be extended to the advantage of the people.
23. This Court is well aware of the complications thrown in by the new GST regime and the problems posed in its implementation. It seems a countrywide cartel specializing in defrauding the GST system is operating to bring the economy to its knees. These complications created by the unscrupulous fraudsters, one would fear, could lead to arrest of innocent businessmen and traders. However, a reading of the GST code would make it abundantly clear that it is rooted with several checks and balances to ensure that the initiation of prosecution or an arrest is to be made only after following due and elaborate process.
24. One cannot lose sight of the fact that the Governments are making their best efforts to enhance the ease of doing business, to reduce the burden on the tax payers, to make the procedures simpler with the use of new technologies. The Government officials have also been making all efforts to ensure efficient collection of tax, so that the burden on the genuine tax payers can be reduced. All these efforts cannot be permitted to be sabotaged by such criminals who prey on the public exchequer. The text book notion of tax collection needs to be overhauled by conjuring with the emerging technologies so as to get rid of practical hiccups.
With these observations, the Court rejected the prayer for grant of bail.
17. In Vikas Goel Vs Dy. Dir., Directorate General of GST Intelligence, Gurugram 2019 (28) GSTL 590, the High Court of Punjab and Haryana (Chandigarh), considering the seriousness, nature and gravity of the offence punishable under Section 132 of CGST Act, rejected the bail sought by the accused, by observing as under:
“4. Perusal of the record shows that there are serious allegations against the present petitioner, who is the main accused, that he along with co-accused, by falsely showing bogus billing etc., adjusted the amount without any actual transportation of the goods or sale of goods etc., Only paper transactions were done and the accused have wrongly claimed the relief of more than 80 crore. The case is at preliminary stage.”
18. In Tejas Pravin Dugad and Others Vs Union of India and Others MANU/RH/0441/2021, the High Court of Bombay (Aurangabad Bench) considered similar situation, where the petitioner had sought for anticipatory bail, where the allegations of evasion of tax was made after granting interim relief to the petitioner during pendency of the petition, the Court held in para 22 as under.
“Thus, the respondent Department was virtually prevented from exercising its power even like issuing summons. By such order, the petitioner indirectly got relief of anticipatory bail, which is also not ordinarily permissible in proceedings of present nature. White collar offence is most serious than offence like murder, dacoity etc., such offences are committed after hatching conspiracy. This circumstance needs to be kept in mind by court as the granting of relief of anticipatory bail hampers investigation and such approach causes damage to the image of judiciary.”
19. In Siddharam Satlingappa Mhetre Vs State of Maharashtra and Others (2011) 1 SCC 694, the Hon’ble Supreme Court clarified the word “extraordinary” found in Section 438 of Cr.P.C. to hold that it is not in the sense that it should be invoked only in an exceptional or rare cases. In cases where Court is of the considered opinion that accused has joined investigation and is fully co-operating with the investigating agency and is not likely to abscond, anticipatory bail should be granted. It is also held that under Articles 21 and 22 of Constitution of India, sanctity of individual liberty is paramount, whereas while considering the applications under Sections 437, 438 and 439 of Cr.P.C. it is the interest of society which is paramount. Since both these interests are precious, a perfect balance between these two conflicting interests is to be maintained.
20. In M/s Supreme Bhiwandi Wada Manor Infrastructure Pvt Ltd Vs The State of Maharastra and another SLP (Cri) No.3155/2018 DD 26.07.2021, the Hon’ble Apex Court considering various judgments on the subject, set aside the order of the High Court granting anticipatory bail under Section 438 of Cr.P.C to the accused, where serious allegations are made against the accused of fraudulent misappropriation of amounts and when the FIR sets out details of alleged act of fraud and misappropriation of funds.
21. In Pankaj Grover Vs Directorate of Enforcement, Govt. of India, Lucknow Crl.Misc.No.7661/2021 DD 26.08.2021, the High Court of Allahabad considered similar set of facts and held that in socio economic offences proceeds of crime are larger and further, offenders are economically sound, therefore, in releasing them on bail/anticipatory bail probability of abscondance not within country but beyond country is more probable. The Court held that keeping in view the principle settled by the Hon’ble Apex Court there are no merit in the application filed under Section 438 of Cr.P.C.
22. In the light of various decisions rendered by the Hon’ble Apex Court and other High Courts, the facts and circumstances of the present case are considered. It is the specific contention of the prosecution that the authorities received credible information regarding involvement of the petitioner in transportation of goods illegally without raising invoices as required under Section 31 of CGST Act and without generating e-way bills as required under Rule 138 of CGST Rules. It is not in dispute that as per Rule 138A of CGST Rules, the person in charge of conveyance should carry all relevant documents and he is required to produce the same as and when required. It is also the contention of prosecution that when the premises belonging to the petitioner was searched, incriminating documents were found and when the petitioner was summoned to appear before the authorized officer, he virtually admitted of being involved in such illegal transportation of goods without following the procedure as contemplated under law and thereby evading tax payable to the State. It is also stated that the petitioner had not permitted the respondent to inspect the residential house of the petitioner wherein it is suspected that credible information is available regarding commission of offence and therefore, the same is seized.
23. When serious allegations are made against the petitioner that he has committed the offence punishable under Section 132 of CGSC Act, a detailed investigation is required to be undertaken. Commission of economic offences which cause loss to the revenue cannot be considered lightly.
24. Even though it is contended by the learned counsel for the petitioner that the petitioner is being harassed etc., the same cannot be accepted at this stage, as it is the duty of the respondent to function in accordance with the powers and responsibilities as contemplated under the CGST Act and Rules. No arbitrary powers are vested with such officers either under the Act or under the Rules. If in fact, the petitioner is carrying on the business legally and maintaining the accounts and other documents as required under law, the petitioner cannot have any grievance even if such raid is held and even if he is summoned for questioning. The contention taken by the learned counsel for the petitioner that the petitioner is being harassed to wreck vengeance by interrogating the petitioner, conducting investigation and questioning the petitioner cannot be accepted as the respondent is discharging the official duty on the basis of credible information received by him. The same cannot be questioned at this stage. If there is serious lapses on the part of Investigating Officer in carrying on such investigation, the petitioner is not remedy less to seek redressal of the same. Therefore, I am of the opinion that the grievance highlighted by the learned counsel for the petitioner in the petition as well as during addressing the arguments, has no basis at this stage.
25. The contention of the learned counsel for the petitioner that the petitioner is the income tax assessee having bank statement and other documents available with him or that all the documents are available in public domain cannot be a reason to seek anticipatory bail when it is the contention of prosecution that questioning the petitioners is very much necessary to get proper answers which matches with the documents that are available. The contention of the learned counsel that since the petitioner is already questioned and some of the premises are already searched, the petitioner is not required for further questioning also cannot be accepted. It is the prerogative of the Investigating Officer to question the petitioner on the basis of information he is having for the purpose of satisfying himself that there is compliance of requirements of law by the petitioner while carrying on the business. As it is contended that the offence suspected to have been committed by the petitioner is an economic offence, which results in loss to the revenue, same cannot be ignored or lost sight of by this Court. It is premature to form an opinion that the petitioner is not required for interrogation. It will amount to interference in investigation of suspected white collar crime.
26. Even though the learned counsel relied on the decision of the co-ordinate Bench of this Court in Hanumanthappa Pathrera Lakshmana (supra) the same is not helpful to the petitioner as the position of law that there is no bar to entertain the petition seeking anticipatory bail under Section 438 of Cr.P.C. is not denied by the respondent. There is no bar even in the special enactment. But however the allegations made against the petitioner and the suspicion expressed by the respondent after holding search on few premises and seizing the residential house and also questioning the petitioner on few dates, appears to be well founded. The Investigating Officer has to find answers to such suspicion only by questioning/interrogating the petitioner on the documents which are available with him or that may be available in the residential house which is seized.
27. When it is stated that the e-way bills found in the lorries belonging to the petitioner were apparently manipulated and it is suspected that there is manipulation of e-way bills only for the purpose of claiming input tax credit without there being supply of goods, it is of serious consequences which requires thorough investigation. It is the specific contention of the prosecution that several whatsapp communications were retrieved which provide sufficient link to the petitioner having involved in evasion of tax, cannot be ignored at this stage. Moreover, it is pertinent to note that the respondent is having strong suspicion about the commission of offence and evasion of revenue to the State, which is of serious consequences. Even the quantum of such tax evasion is not yet quantified. Under such circumstances, the statutory right and duties cast on the respondent cannot be interfered with to thwart the intended investigation.
28. It is not the stage to form an opinion and to belittle the reliability/authenticity or otherwise of the information said to have been received by the respondent, which would amount to scuttling the proceedings at the initial stage. Even though this Court is armed with the power to grant pre-arrest bail, the same cannot be used to usurp the powers vested with the respondent, which is not in the interest of the society as a whole. Investigating the offence suspected of in the present case after the petitioner is armed with anticipatory bail may only be a formality without any result. The authority vested with the respondent under CGST Act and the Rules is to be respected, unless there is a reason to believe that such authority is being misused by the respondent or when apparently there are no reason to deny the claim of the petitioner.
29. The allegation made against the petitioner is that he is supplying the goods without issuance of invoice or bill, without supply of goods, availing input tax credit either using the invoices or bills or fraudulently availing such input tax credit without any invoice or bill and that he is collecting the amount as tax, but fails to pay the same to the Government in violation of the provisions of CGST Act and the Rules made thereunder, with an intention to evade tax. GST Act 2017 is enacted to make provision for levy and collection of taxes on intra-state supply of goods or services or both by the Central Government. The main aim of the Act is to simplify the taxation mechanism, to reduce the burden of taxes and clarify conformity of the tax payment. It also aims at consolidation of all indirect tax levies into a single tax and to remove cascading effect of the taxes. It is to achieve the motive of one nation one tax and to reduce tax evasion, to have corruption free tax administration, to reduce complications, encourage technically driven procedures and to provide ease of operation for e-commerce. If the citizens understand the importance of payment of tax, achieving the aims and objects of enacting the law would be easy, but on the other hand, if new ways and means are found to evade taxes, that will be a hurdle for the economic growth of the country. It amounts to loss of revenue and increase in inflation. It also have the impact on morale, increase in corruption and resulting in accumulation of black money and money laundering. So the impact on the nation as a whole is enormous. It is always considered that fiscal discipline is the base for strong economy that too for a fast developing country like India. Economic offences are always considered as serious threat to the economy of the country. It is nothing but economic terrorism. Therefore, such offences are considered as a class apart.
30. The Hon’ble Apex Court in Y S Jagan Mohan Reddy (supra) categorically held that economic offences constitute a class apart and needs to be visited with a different approach in the matter of bail. Under such circumstances, the strong suspicion of evasion of tax by the petitioner cannot be taken lightly. Only after a detailed investigation, the truth or otherwise in the allegations made could be found out.
31. The conduct of the petitioner in not cooperating with the Investigating Officer is to be taken into consideration while deciding this petition. Initially the raid was held on few premises belonging to the petitioner on 28.11.2020 and the petitioner appeared before the Investigating Officer on few days, but thereafter, it is stated that he is avoiding to appear before the Investigating Officer. The delay in conducting investigation in these types of cases will have its own effects. The facts and circumstances of the case highlighted above does not call for such exercise of power under Section 438 of Cr.P.C. Therefore, I am of the opinion that the petitioner is not entitled for grant of anticipatory bail.
Accordingly, the petition is dismissed.