Bombay High Court
Krishna Murari Singh vs Union Of India And Ors on 6 May, 2021
Bench: Sunil P. Deshmukh, Abhay Ahuja
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION (STAMP) NO. 9767 OF 2021
Mr. Krishna Murari Singh ] ... Petitioner
Vs.
Union of India & Ors. ] ... Respondents
Mr.Aabad Ponda, Senior Advocate with Mr. Himanshu Chaudhary,
Ms.Swati Singh, Paul i/b. Naik Naik & Company for Petitioner.
Mr.Jitendra B. Mishra with Mr.D.B.Deshmukh for Respondent No. 2
Ms.Neha Bhide, 'B' Panel Counsel for Respondent - State.
CORAM :- SUNIL P. DESHMUKH &
ABHAY AHUJA, JJ.
DATE :- 06 MAY, 2021
(THROUGH VIDEO CONFERENCING)
P. C. :-
1. Petitioner is before this court challenging validity of section
132(1)(b) and (c) of the Central Goods and Services Tax Act, 2017 (for
short, 'CGST Act') with declaration that the same is unconstitutional and
further declaration that exercise of power under Section 69 of the CST Act
would be only upon determination of liability and that petitioner's arrest
is illegal and in violation of section 69 and its spirit as well as is contrary
to judgments of Supreme Court of India and High Court and seeks his
enlargement on bail.
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2. Petitioner states that the petitioner is Chairman and
Managing Director of M/s. Global Space Technologies Limited ('GSTL').
Petitioner states that search and seizure had been carried out on its
premises in October, 2020. Summons had been issued to petitioner to
attend office of respondent no. 2 - Superintendent ( Anti Evasion ), CGST
on 19.10.2020. Since the petitioner had been out of town, accountant of
petitioner had been to respondent no. 2. He had furnished solicited
information about it's Directors, office location etc.. Two emails had also
been issued providing details viz. tally and ledgers etc.
3. The petitioner had been summoned on various dates
thereafter on 09.03.2021, 12.03.2021, 17.03.2021, 19.03.2021,
22.03.2021 and 23.03.2021. The petitioner had attended all the dates
except one while he had undergone angioplasty. On 23.03.2021, he was
arrested. On the next date, he was produced before the Magistrate,
Belapur seeking remand. On the very day, the petitioner had filed an
application for bail.
4. In the remand application by respondents before the
Magistrate, several allegations had been made against petitioner, inter
alia, that he had not deposited with the government tax collected to the
tune of Rs. 6,30,00,000/- referring to its corroboration from the
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representative of Axis Bank. It has been found that M/s. VRD Retails is a
bogus company which had no dealings with GSTL and the transactions
had been on paper based on bogus invoices, gift boxes, food and
beverages. Input Tax Credit ('ITC') had been availed of to the tune of
Rs.2 Crores without receipt of goods and services. There have been
transactions and supplies by petitioner suppressing the same from the
department. Vehicle registration numbers declared in purchase invoices
and e-way bills pertaining to supplies to certain concerns were found to
be fictitious and non-existent and the petitioner had been dodgy and
evasive and had been giving false information. There is a tax evasion to
the tune of Rs.9.90 Crores and the petitioner being aware of the same,
has pleaded ignorance despite him being sole decision maker.
5. It is the contention of the petitioner the allegations in the
remand application are without any details as to the invoices, alleged
illegal availment of ITC, details of calculations of GST liabilities. With
reference to the application, the petitioner had been remanded to judicial
custody until 07/04/2021. While the petitioner was in judicial custody,
the statement of petitioner had been recorded by respondent no.2.
Respondent no.2 had purportedly filed reply to the bail application on
01/04/2021 and on 06/04/2021 the Magistrate had rejected the bail
application of the petitioner. The petitioner had been produced before the
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Magistrate and his remand had been extended and petitioner continues to
be in judicial custody.
6. Mr. Ponda, learned senior advocate appearing for petitioner
contends that it is well-settled that a bail would normally not refused
unless there is some evidence warranting that a bail would not secure
presence of convicts on judgment or if there is likelihood of interfering
with witnesses for prosecution or would be polluting the process of
justice. Petitioner has all along being cooperative right from the day of
search and seizure and has always responded to and appeared as and
when summoned. The petitioner has bona fide deposited a sum of Rs.45
Lakhs without accepting the liability. It is submitted that the magistrate
had not appreciated the purport of decision of this Court in the case of
Daulat Samirmal Mehta Vs. Union of India, in Civil Writ Petition No.471
of 2020, decided on 15/02/2021, wherein, based on supreme court
judgments, it has been observed that, bail and not jail is the rule in the
cases not involving heinous offences like rape, murder, terrorism etc. and
that the case against him was not even at pre-trial stage where there had
been no formal accusation in any form viz. FIR / complaint. It is
submitted that the ratio in case of Daulat (supra) squarely applies to the
present matter.
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7. It is submitted that search and seizure has been carried out
and alleged fake invoices, balance-sheets, ledgers etc. have already been
taken in possession for conducting further investigation and as such,
custody of petitioner would not be required.
8. Mr.Ponda submits that the statements made by the petitioner
or appearing against the petitioner, would not be per se admissible in
evidence and in the case of Daulat (supra), it has been observed that
section 136 of the CGST Act would roll in to play when trial would
commence further highlighting that an admission of a person before
revenue officials under CGST Act would not be ipso facto admissible in
evidence unless it receives acceptance from the court.
9. He submits that there is no rationale and intelligible nexus
between 'reasons to believe' that petitioner has committed alleged offence
and the arrest and as to his custody. There is no material placed on
record in support of reasons to believe against the petitioner. It is
contended that reasons to believe must be recorded in writing with
application of mind by the commissioner.
10. The decision of Delhi High Court in Makemytrip (India)
Private Limited Vs. Union of India, 2016 (44) STR 481 is pressed into
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service to emphasize that a decision to arrest must not be taken on
whimsical grounds and reasons must be based on credible material. It is
further referred to even reasons to believe and its depiction is not a
formality, it should be coupled with need to arrest.
11. Section 138 has been referred to contending that offences
under CGST Act are compoundable and thus arrest of petitioner has been
absolutely unnecessary. The object of purpose of CGST Act basically is to
levy, secure and recover tax and its purpose is economic and is not to
penalize a person. Collection of revenue being the central objective, the
arrest is incidental to achieve the said purpose. Referring to section
138(3), it has been contended that the same prohibits further proceedings
against the accused in respect of same offence and any criminal
proceedings initiated would stand abated.
12. Mr.Ponda, learned senior advocate contends, despite co-
operation and payment, the petitioner has been put under arrest for
alleged non-payment of GST and alleged illegal availment of ITC. It has
been contended that the government has no authority to take extra-legal
steps to collect tax and cannot resort to coercion for payment of amount
not legally payable and such resort is deprecated and exactly the
government is doing the same thing by putting petitioner under arrest
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using the power as a tool to coerce the petitioner to pay the amount not
legally due. It is submitted that the allegations and statements in the
remand application and reply to the bail application about conduct of the
petitioner are with a view to create prejudice against the petitioner. It is
contended that mere allegation that the accused is not cooperating or he
may tamper with evidence or he may influence witnesses, is not sufficient
to arrest a person.
13. It is contended that the petitioner has been illegally arrested
and remanded without taking into consideration observations of this court
in the cases involving similar factual aspects.
14. On the other hand, Mr. Mishra, learned Counsel for revenue
refers to and relies on the application for remand contending that the
petitioner is engaged in evasion of goods and services tax by collecting
taxes and not paying the same to the government, is suppressing taxable
value of supply for payment of tax and is availing Input Tax Credit ('ITC')
on purchase of goods and services not received by him and in using
ineligible credit for payment of taxes on their outward taxable supply.
Premises of GSTL were searched on 15/10/2020 and incriminating
documents were seized under panchanama and it has been unearthed
that the company has collected tax to the tune of Rs.6.3 Crore but has not
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deposited with the government. During the investigation, it has been
gathered that GSTL is engaged in clandestine supply of goods and services
without payment of taxes and without accounting the same in the returns
filed with the department. From the documents retrieved, it has surfaced
that GSTL has supplied goods and services to the tune of Rs.35 Crores and
the same fact has been confirmed from one of the recipients. On the same
Rs.6.3 Crore goods and service tax is payable. It is also being seen that
M/s.VRD Retail is a bogus company having a bogus director and his
statement shows he is ignorant about GSTL and as such transactions of
GSTL with said concern are fictitious. The investigation also revealed that
GSTL is engaged in availing ineligible ITC on the invoices without receipt
of goods or services and has evaded payment of tax.
15. He submits, on verification of vehicle number in purchase
invoices and the vehicle registration number in e-way bill pertaining to
certain suppliers, it has transpired that the vehicles were non-existent or
fictitious resulting in commission of offence under section 132(1)(c). The
petitioner had given evasive replies in the statements during investigation
and was giving false information about the transactions. It is alleged that
the petitioner has evaded tax in excess of Rs.9.90 Crores as per the
investigation carried out so far and there are indications of finding more
evasion of tax. It is alleged that the modus operandi has been conspired
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at the instance of the petitioner. Investigation is at crucial stage. If
petitioner is released, he will tamper with evidence, influence witnesses
and derail / tamper the investigation proceedings. Government revenue
is at stake. As such, the petition is opposed.
16. Learned Counsel for petitioner, Mr. Ponda submits that in the
case of Sunil Kumar Jha Vs Union of India & Ors. (Civil Writ Petition
No.5484 of 2021) and Akshay Chhabra Vs Union of India & Ors. (Civil
Writ Petition No.5486 of 2021) in the order dated 11th March, 2021, the
court has taken stock of the situation and relevant facts therein are also
similar to the ones in present matter. In said case as well, the petitioners
therein had responded to the summons and duly attended the office of
the respondent. As such, while the petitioner has been cooperating with
the respondents and has been responding, there is no justification for
keeping petitioner in custody. It is contended that the maximum penalty
for the alleged offences is five years and fine and as such, the judgment of
Hon'ble Supreme Court in the case of Arnesh Kumar Vs. State of Bihar,
(2014) 8 SCC 273 and that of this court in the case of Daulat Mehta
(supra) would squarely apply to present matter. It is submitted that the
respondents would have to justify and give reasons as to why the
petitioner is required in custody, when the petitioner had attended the
office of the respondent as and when he had been summoned. It is being
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submitted that it is not the case that there had been any custodial
interrogation worth reference. It has been referred to that the custody
sanctioned under remand, no significant progress has taken place and
having regard to decision in Arnab Manoranjan Goswami Vs. State of
Maharashtra & Ors., SCCOnline SC 964 and of this court in Daulat Mehta
(supra), continued detention of petitioner is illegal. Moreover, arrest
itself is illegal. There is no justification for keeping petitioner in custody
any longer.
17. Aforesaid submissions are being countered on behalf of
respondents submitting that detention of the petitioner is necessary
looking at the magnitude of evaded tax as well as likelihood of unearthing
much more evasion. Custody of petitioner is required not only for the
purpose of interrogation, but with a view to ensure that petitioner does
not tamper with documents and influence the witnesses. The submission
on behalf of the petitioner that the petitioner is cooperating with the
investigation is disputed contending that the statements recorded would
show that the petitioner is dodging the answers and the investigating
authority could not proceed further. This would not be a case where it
can be said that there is a cooperation in the investigation. He also places
reliance on decision of Telangana High Court in P. V. Ramana Reddy Vs.
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Union of India 2019 (25) G.S.T.L. 185 (Telangana) and the order of this
court dated 31/07/2019 (in Criminal Writ Petition No.3804 of 2019).
18. It appears on 15/10/2020, office of M/s. Global Space
Technologies Limited ( 'GSTL' ), a concern of which petitioner is Chairman
and Managing Director, was visited for conducting search and seizure. On
same day summons had been issued to petitioner by Superintendent (Anti
Evasion), CGST - respondent no. 2 - to appear before him on
19/10/2020. While the same had not been possible the petitioner being
out of town, Accountant of GSTL, had attended the office of respondent
no. 2. He had been interrogated and information had been solicited from
him about the company, its directors, office locations etc. which had been
duly provided. Even two emails had been issued providing various details
viz. tally and ledgers etc. GSTL had, in the meantime, deposited a sum of
Rs.45 lakhs.
19. Thereafter, petitioner had been summoned on various dates
viz. 09/03/2021, 12/03/2021, 17/03/2021, 19/03/2021, 22/03/2021
and 23/03/2021 and barring a day while petitioner had undergone
angioplasty, he had attended rest of the dates between 09/03/2021 to
23/03/2021. When petitioner attended the office of respondent no. 2 on
23/03/2021, he was arrested purportedly in exercise of powers under
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section 69 of the CGST Act imputing commission of offences under
sections 132(1)(a),(c),(d) and (f) punishable under clause (i) of section
132(1). On the next day, he was produced before the Magistrate at
Belapur seeking remand of petitioner in judicial custody. In Daulat
Mehta's case (supra), the Division Bench has taken stock of bail
jurisprudence evolved over the years. The court has also considered that
case of P.V.Ramana Reddy is distinguishable, in which pre-arrest bail was
involved and in the peculiar circumstances therein, it was refused. The
court had considered observations of Supreme Court in its ruling in Arnab
Goswami's case (supra).
20. Perusal of decision by Division Bench of this court in the case
of Sunil Kumar jha (supra) would show that in paragraphs 11 and 12, the
provisions of section 69 and 132 have been taken into account and it has
been observed that in Daulat's case (supra), this court has analyzed the
powers conferred on the Commissioner under section 69. Recording of
'reasons to believe' by the Commissioner that a person has committed
offence and is required to be arrested is sine qua non for exercising the
powers. It has also been observed that not only recording of reasons
would be that a person has committed offence as specified, but also that
as to why the person needs to be arrested, the court has highlighted that
CGST Act is primarily for collection of revenue and arrest is incidental to
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achieve said objective and the arrest is subject to provisions of the Code of
Criminal Procedure, 1973, containing sections 41 and 41A. The court has
found that if the amount of tax evaded or ITC wrongly availed or utilized
or amount of refund wrongly taken exceeds Rs.5 Crores, then the
sentence is imprisonment for a term which may extend to 5 years and all
other sentences are below 5 years. While maximum sentence that can be
imposed for commission of offence under section 132(1)(b) and (c) is 5
years with fine, then having regard to the case of Arnesh Kumar (supra),
wherein it has been considered that in case where punishment is 7 years
or less and if the person complies with the notice under section 41A of
Cr.P.C. and continues to comply with the same, he shall not be arrested
unless for reasons to be recorded, the police officer is of the opinion that
he ought to be arrested. The court in Daulat Mehta's case (supra) had
also taken into account under section 138(1) of CGST Act, any offence is
compoundable on payment by accused, and said feature highlights
primary concern of the CGST Act is collection of revenue. Further on
payment of compounding amount, the proceedings abate.
21. The court, thus, having regard to factual position that the
petitioners therein had responded to the summons and attended the
dates, in the circumstances found that there could not have been
justification to arrest the petitioner. Apart from that the court also found
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that there had not been any evidence about petitioner's tampering with
the documents or trying to influence the witnesses, observing that mere
allegation is not sufficient. The court also went on to consider section
167 and had considered that under said provision a person cannot be kept
in detention beyond a total period of 60 days where investigation relates
to offence punishable with imprisonment for a term not less than 10 years
and that the Magistrate is authorized to detain beyond 15 days period if
satisfied that the grounds are made out. However, he would not be able
to authorize detention for a total period exceeding 60 days.
22. In the present matter, petitioner has filed an affidavit dated
28.04.2021 that he has already paid an amount of Rs.45,00,000/- and
that he would deposit Rs.5,00,00,000/- under protest towards the alleged
amount of tax evasion to demonstrate bona fides and that it would be
subject to, adjudication of the amounts alleged and rights and remedies of
the petitioner. Another additional affidavit is filed on 06/05/2021 stating
that in addition to aforesaid amount aggregating to Rs.5.45 Crore, further
amount of Rs.55 Lakh will be deposited. Entire aggregate amount of
Rs.6 Crore would be deposited within a period of fortnight which would
be under protest and subject to adjudication.
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23. In the circumstances, following order.
ORDER
(i) Let formal notice be issued to the respondents;
(ii) Petitioner - Mr. Krishna Murari Singh - shall execute a personal bond for an amount of Rs.50,000/- (Rupees Fifty Thousand Only) before the Jail Superintendent, Taloja Jail;
(iii) The concerned Jail Superintendent is directed to ensure that this order is complied forthwith;
(iv) Upon release, petitioner shall furnish surety of 5,00,000/- (Rupees Five Lakhs Only) in Remand Application No.V/A/BEL/Gr.C(New)/12-198/Global/ 2020-21 before the Judicial Magistrate First Class, Vashi at C.B.D. Belapur.
(v) Within six weeks of his release, petitioner to furnish one solvent surety of the like amount before the said authority;
(vi) Petitioner shall cooperate in the investigation and shall not make any attempt to interfere with the ongoing investigation;
(vii) Petitioner shall not tamper with any evidence or try to influence or intimidate any witness;
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(viii) Petitioner shall deposit his passport before the Judicial
Magistrate First Class, Vashi at C.B.D. Belapur.
(ix) Parties to act on an authenticated copy of this order.
(ABHAY AHUJA, J.) (SUNIL P. DESHMUKH, J.)
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