ORDER

1. This application has been filed under section 439 of the Code of Criminal Procedure for regular bail in connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/ Varun Bansal/2022-23/B.61, dated 28.07.2022 issued under section 69(1) read with section 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017 (for short ‘GST Act’) and Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).

2. The present applicant is the erstwhile director of the company namely Active Metals Pvt. Ltd. till October, 2019, who subsequently by resolution dated 15.11.2021, was appointed as an authorized representative to look into the matters of CGST/SGST of the company.

2.1 It is stated that, under section 67(2) of the CGST and GST Act, a search was conducted on 20.06.2022 at the company and residential premises of the Directors, and on 22.07.2022, a letter along with order was issued under section 83 of the Act for provisional attachment of the plant, machinery, vehicles and stock of the company on the ground that input tax credit was availed by the company by showing fake purchases from bogus/suspicious entities. 2.2 The search was conducted during the period from 20.07.2022 to 28.07.2022, and on 28.07.2022, the applicant came to be arrested by issuing arrest memorandum by the State Tax Officer, Enforcement Division, Rajkot, for the offence punishable under section 132(1)(c) of the CGST and GST Act, alleging that input tax credit of Rs.10.71 crores in respect of fictitious transactions amounting to Rs.59.55 crores was availed by him.

3. Ms. Megha Jani along with Mr. Dilip T.Mamtora and Mr. Meet D.Pansuria, learned advocates for the applicant submitted that, the allegations against the present applicant are of entering fake invoices into the data provided to the department; however, the alleged invoices provides transportation detail whereby the goods were supplied and delivered to the accused purchaser. Ms. Jani states that the entire case of the department is based on documentary evidence, which have been either uploaded by the applicant or seized by the department.

3.1 Ms. Jani submits that while arresting the applicant, the mandatory procedure of section 69 of the CGST Act, 2017 has not been followed, which envisages that if the commissioner has reasons to believe that a person committed offence under clause (a) to (d) of section 132(1), he shall by order authorized any officer of central tax to arrest such person; however, in the case of the applicant, such authorization of the Commissioner has not been made available to the applicant and thus, the entire exercise carried out is in blatant violation of the procedure contemplated in section 69 of the CGST Act, 2017.

3.2 Ms. Jani further submits that the allegation of availing wrongful input tax credit is without any basis and contrary to the evidence; thus, states that the documentary evidence for the purchase of goods including transportation details had been provided by the applicant, which itself suggests that there was a movement of goods and therefore section 132(1)(c) is not applicable in the present case. It is stated by Ms. Jani that the goods were purchased from the entities mentioned in the arrest memorandum against payments made through RTGS, which was admitted by the department in part-3 of the remand application dated 06.08.2022, which was not taken into consideration.

3.3 Ms. Jani stated that transactions with 10 firms, whose registrations were cancelled by the department, was based on some intelligence and system analysis and as shown in the arrest memo, the purchase shown by the company from 10 firms, were before the order of cancellation of registration and thus, she submits that section 132(1)(c) would not be applicable.

3.4 Ms. Jani submitted that 138 transactions, which is alleged by the department, are against regular bills, purchase number with party name, date of E-way bill number, bill amount, CGST taxable amount, truck number, lorry number and the transport company. The total documents were produced before the department, which shows the movement of goods

3.5 Ms. Jani further submitted that the provisional attachment of property under section 83, includes plant & machinery, vehicle and stock, which are assessed by the department as Rs.6,17,21,463/-; and further the applicant has made payment of Rs.50 Lakhs on July, 2022. Ms. Jani stated that complaint has been filed on 22.09.2022 alleging that the applicant is availing Input Tax Credit using invoice and bills without any supply of goods or services or fraudulently has availed the Input Tax Credit without any invoice or bills.

3.6 Ms. Jani submitted that the witness list does not suggests any of the transporters nor any transporter has been made accused in the matter and as per the witness list, the only four witnesses are from the department. According to Ms. Jani, had there been any suspicion transaction and communication with Angadiya Pedi, then they ought to have been made witness in the complaint.

3.7 Reliance has been placed by Ms. Jani on the judgment of Arnesh Kumar Vs. State of Bihar & Anr., reported in 2014 (8) SCC 273, and P. Chidambaram v. Directorate of Enforcement, reported in (2020) 13 SCC 791.

4. Mr. Pranav Trivedi, learned Additional Public Prosecutor submitted that, the applicant in his statement stated that he is managing all the purchase transactions, and he is the main person indulged in the activity of showing fake purchase transactions in the books of accounts of the company, which resulted into availing ineligible input tax credit, which caused huge revenue loss to the government exchequer. Mr. Trivedi submits that the company has shown fake purchases to the tune of Rs.59.55 crores from 10 fictitious entities and thereby wrongfully availed illegal input tax credit to the tune of Rs.10.71 crores. Mr. Trivedi stated that such purchase invoices were just paper invoices wherein no real movement of goods were involved between seller and purchaser.

4.1 Mr. Pranav Trivedi, learned Additional Public Prosecutor further submitted that, money were routed through Angandiyas and ten companies with whom the applicant had made fictitious transactions were cancelled with effect from the date of registration and the reason stated for the cancellation were either the address of the firms were not found / not existed or the registration has been obtained by wilful misstatement or suppression of facts; and when detail checking of purchase transactions of the Company were made, 138 purchase transactions were found with 10 bogus firms.

4.2 In 30 invoices, the dispatch place from where the goods had been loaded and dispatched was different in E-way bill and lorry receipt; thus, the place from where the goods were loaded could not be determined. Mr. Pranav Trivedi, learned APP further stated that, in 34 invoices, when the movement of vehicles were checked based on radio frequency identification, no such movement of vehicles and no such reliable documents of movement were found, which creates doubts about the goods actually received. Mr. Trivedi further submitted that in 68 invoices, dispatch place of E-way bill and lorry receipt were different and in all fake purchase to the tune of Rs.59.55 crores from 10 fictitious entities could be easily found out; and thereby it was seen that the applicant had availed illegal Input Tax Credit to the tune of Rs.10.71 Crores wrongfully and such availment of Input Tax Credit were never deposited in the government exchequer. Mr. Trivedi states that such wrongful availment has been purposefully shown with a huge amount of fake purchase in the books of account so as to avail ineligible Input Tax Credit, and thereby, to reduce payment to be made in cash for output tax liability and also to claim it as expenditure. Mr. Trivedi submitted that such purchases were only paper basis. Mr. Pranav Trivedi, submitted that in the year 2020-21 the firm was shown to be the manufacturer of brass while in 2021, the trading is of scrap.

5. Heard learned advocates on both the sides and perused the material on record. In the impugned arrest memo, the allegation against the applicant is of committing offence under section 132(1)(c) of the GGST Act & CGST Act. Section 132 of the GGST Act is pari materia to the provisions under the CGST Act. It relates to “Punishment for certain offences”. For ready reference, section 132(1) is reproduced hereunder;

“Section 132.(1) – Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offence, namely :-

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;

(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

(e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);

(f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;

(g) obstructs or prevents any officer in the discharge of his duties under this Act;

(h) acquires possession of, or in any way  concernshimself   in   transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;

(i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;

(j) tampers with or destroys any material evidence or documents;

(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or (l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, shall be punishable-

(i) in cases where the amount 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;

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;

(iv) in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.”

5.1 In P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791, the Apex Court held as under:

“22. The learned senior counsel for the appellant has also placed reliance on the decision in Sanjay Chandra vs. CBI, (2012) 1 SCC 40 with specific reference to paragraph 39, which reads as hereunder:

“39. Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds: the primary ground is that the offence alleged against the accused persons is very serious involving deep-rooted planning in which, huge financial loss is caused to the State exchequer; the secondary ground is that of the possibility of the accused persons tampering with the witnesses. In the present case, the charge is that of cheating and dishonestly inducing delivery of property and forgery for the purpose of cheating using as genuine a forged document. 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.”

The said case was a case of financial irregularities and in the said circumstance this Court in addition to taking note of the deep-rooted planning in causing huge financial loss, the scope of consideration relating to bail has been taken into consideration in the background of the term of sentence being seven years if convicted and in that regard it has been held that in determining the grant or otherwise of bail, the seriousness of the charge and severity of the punishment should be taken into consideration.

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 the exception so as to ensure that the accused has the opportunity of securing fair trial. However, while considering the same the gravity of the offence is an aspect which is required to be kept in view by the Court. The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case. Keeping in view the consequences that would befall on the society in cases of financial irregularities, it has been held that even economic offences would fall under the category of “grave offence” and in such circumstance while considering the application for bail in such matters, the Court will have to deal with the same, being sensitive to the nature of allegation made against the accused. One of the circumstances to consider the gravity of the offence is also the term of sentence that is prescribed for the offence the accused is alleged to have committed. Such consideration with regard to the gravity of offence is a factor which is in addition to the triple test or the tripod test that would be normally applied. In that regard what is also to be kept in perspective is that even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so. Therefore, the underlining conclusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for either grant or refusal of bail though it may have a bearing on principle. But ultimately the consideration will have to be on case to case basis on the facts involved therein and securing the presence of the accused to stand trial.”

5.2 The Hon’ble Supreme Court in case of Sanjay Chandra Vs. CBI, [2012 1 SCC 40], has referred the case of State of Kerala Vs. Raneef, [(2011) 1 SCC 784], to observe that in deciding the bail applications an important factor which should certainly be taken into consideration by the court is the delay in concluding the trial. Here, taking into consideration the course of investigation adopted by the Department, the evidence, so collected, the trial will take considerable time and it may happen, if denied bail, the judicial custody be prolonged beyond the statutory period of punishment which is for five years.

5.3 After the arrest on 28.07.2022, on 22.09.2022, the complaint came to be lodged by the department. During this process of almost two months necessary investigation had been made and documents along with the list of witnesses have been filed in the Court of Chief Judicial Magistrate, Jamnagar.

5.4 Section 132(1)(i) provides for punishment as that ‘in cases where the amount 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; and section 132(2) provides that, where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.

5.5 Section 138 of the Act makes provision for compounding of offences under the Act, even after the institution of prosecution, on payment, by the person accused of the offence, such compounding amount in such manner as may be prescribed. The compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences, on payment of compounding amount as may be determined by the commissioner, the criminal proceeding already initiated in respect of the said offence shall stand abated.

5.6 Pre-charge evidence is required to be recorded. It is true that fraudulent ITC claim has created huge liability for the government, but equally it is necessary that the accused gets an opportunity to defend his case. The department during the course of judicial custody of the present applicant has made necessary investigation and collected documentary evidence through the applicant himself and those supported documents has been produced with the complaint before the Chief Judicial Magistrate. The argument of the learned APP that investigation is still in progress and release of applicant would create hindrance in further investigation, does not make good the level on merits, since the department already had sufficient time to investigate their claim and to gather evidence, which they have alleged are in connection with fraudulent claim of Input Tax Credit and alleged evasion.

5.7 The department has already attached the property under section 83 which is valued as Rs.6,17,21,463/-. Further the amount of Rs.50 Lakhs has been paid by the applicant and if necessary under sub- section (1) of section 138 of the Act, the Commissioner would have all the authority to compound the offence on payment being made by the alleged accused. The details of all the fake companies have been recorded. 138 transactions have been found to be suspicious and against that the applicant claims the said to be actual transfer against the payment by RTGS. Both the sides would get an opportunity to prove their case. Further custody of the applicant does not appear to be necessary, since the department, if provided by law, can go on with the further investigation and produce necessary documents in support of their case, as sufficient time for the investigation was taken prior to filing of the complaint by the department.

6. Hence, considering the facts and circumstances of the case and in view of the observations made above, the present application is allowed. The applicant is ordered to be released on regular bail in connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/Varun Bansal/2022-23/B.61, dated 28.07.2022 on executing a personal bond of Rs.1,00,000/- (Rupees One Lakh only) with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions that he shall;

[a] not take undue advantage of liberty or misuse liberty;

[b] not act in a manner injurious to the interest of the prosecution;

[c] surrender passport, if any, to the lower court within a week;

[d] not leave India without prior permission of the concerned trial court;

[e] furnish the present address of residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of the concerned trial court;

7. The authorities shall adhere to its own Circular relating to COVID-19 and, thereafter, will release the applicant only if he is not required in connection with any other offence for the time being. If breach of any of the above conditions is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter. Bail bond to be executed before the lower Court having jurisdiction to try the case.

8. Rule is made absolute to the aforesaid extent. Direct service is permitted. Registry to communicate this order to the concerned Court/authority by Fax or Email forthwith.