Bombay High Court
Sanket S/O Vijay Murkute vs Director General Of Goods And Service ... on 28 June, 2024
2024:BHC-NAG:6638
235 ba585.24
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
CRIMINAL APPLICATION (BA) NO.585/2024
Sanket s/o Vijay Murkute
..vs..
Director General of Goods and Service Tax Intelligence, Nagpur Zonal Unit
represent through Senior Intelligence Officer, Nagpur
...................................................................................................................................................................................................
Office Notes, Office Memoranda of Coram,
appearances, Court orders or directions Court's or Judge's Order
and Registrar's orders
...................................................................................................................................................................................................
Shri S.V.Manohar, Senior Counsel assisted by Shri P.S.Dhenge, Advocate for the
Applicant.
Shri S.N.Bhattad, Counsel for the Non-applicant.
CORAM : URMILA JOSHI-PHALKE, J.
CLOSED ON : 25/06/2024
PRONOUNCED ON : 28/06/2024
1. By this application under Section 439 of the
Code of Criminal Procedure, the applicant arrested on
13.3.2024 seeks regular bail 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 by the non-applicant.
2. Heard learned Senior Counsel Shri S.V.Manohar
for the applicant and learned counsel Shri S.N.Bhattad for
the non-applicant.
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3. The allegations against the applicant are that he
is proprietor of M/s.Om Sai Enterprises and his father is
proprietor of S.P.Enterprises. The applicant is responsible
for management and affairs of both firms registered on
PAN. The investigating agency has seized a laptop from
premises of the applicant and on forensic investigation, it
revealed that 89 different firms are maintained by separate
folders by the applicant. It further revealed that the
applicant has carried out transactions of sale and supply by
showing vexatious documents of existence of other firms
and has never conducted any business activities through
the said firms and illegally claimed Input Tax Credit (ITC)
over the said transactions and thereby committed an
offence.
4. The Directorate General of GST Intelligence
(DGGI) Nagpur Zonal Unit conducted a search on
22.12.2023 and found that another firm namely "Shri
Krishna Traders" in the name of Manoj Khobragade is also
managed and operated by the applicant. The said firm is
also engaged in availing and passing on fake ITC and has
individually passed around Rs.12.00 crores involving
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invoice value of Rs.67.00 crores. The three Shell Firms
owned and operated by the applicant cumulatively availed
and passed on fake ITC around Rs.37.00 crores. On the
basis of these allegations, the crime was registered.
5. Learned Senior Counsel for the applicant
submitted that the laptop seized by the investigating
agency does not belong to the applicant, but the same
belongs to Vijay Akre and Vikesh Joshi. When the search
was conducted by the investigating agency, 22.11.2023, at
resident and office of the applicant, said Vijay Akre was at
the house of the applicant who handed over the said laptop
to the investigating agency. The applicant has not created
any firm as alleged by the investigating agency. The
applicant is operating only two firm i.e. M/s.Om Sai
Enterprises and S.P.Enterprises. He submitted that alleging
false allegations, summons was issued to the applicant and
he was arrested. The applicant was arrested without
complying notice under Section 41 of the Code of Criminal
Procedure. The investigating agency has not ascertained
allegation whether the applicant was operating and
managing affairs of other firms. The allegations of
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contravention of provisions and availing excess ITC are
baseless. The offences alleged are punishable with
imprisonment less than seven years. The investigating
agency has not followed guidelines issued by the
Honourable Apex Court in the case of Satender Kumar
Antil vs. CBI, reported in 2022 SCC OnLine SC 825.
6. In support of his contentions, learned Senior
Counsel for the applicant placed reliance on the decision of
the Honourable Apex Court in the case of Ratnambar
Kaushik vs. Union of India, reported in (2023)2 SCC 621,
wherein it is held that bail by considering period of custody
and submission of chargesheet and trial would take its own
time and bail was granted subject to certain conditions. He
also placed reliance on order passed by this court in
Criminal Application (BA) No.19/2024 (Rahul s/o
Kamalkumar Jain vs. Director General of Goods and
Service Tax Intelligence, Nagpur Zonal Unit, thr. Sr.
Intelligence Officer, Nagpur) on 25.1.2024.
7. Per contra, learned counsel for the non-
applicant submitted that Section 69 of the CGST Act
empowers the Commissioner to arrest a person when he
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has reasons to believe that a person has committed offence
specified in clause (a) or (b) or (c) or (d) of sub-section (1)
of Section 132 which is punishable under clauses (i) or (ii)
of sub-section (1) of sub-section 2 of the said section. He
may by order authorizes any officer of the Central Tax to
arrest such person. He further submitted that the applicant
has systematically planned and flouted in all 92 GST Firms
in his name, in the names of his relatives, and dummy
persons and effected total bogus supply worth of Rs.850.71
crores and availed fraudulent ITC of Rs.153.11 crores and
passed on bogus credit of Rs.141.27 crores. Thus, there is
evasion of tax. The investigation regarding evasion of tax
in respect of other firms is in progress. Considering large
magnitude of amount involved, the application deserves to
be rejected.
8. In the light of the above submissions, if Scheme
contemplated under Section 132 of the CGST Act, 2017 is
considered, it provides punishment for certain offences and
it is urged that it is only when a person supplies any goods
or services or both without issue of any invoice, in violation
of the provisions of the Act and with an intention to evade
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taxes or issues any invoice or bill without supply of goods
or services or both in violation of the provisions of the Act,
leading wrongful availment of the utilization of ITC or
refund of the tax or avails ITC using such invoice or bill or
collects any amount as tax but fails to pay same to the
Government beyond a period of three months, he can be
said to have committed offences under clauses (a) or (b) or
(d) of the Ac which is cognizable and non bailable and the
imprisonment imposed by way of punishment, on being
convicted for the said offences, may extend to five years or
fine, if the amount of ITC is wrongly availed or the amount
of refund wrongly taken exceeds Rs.500 lacs. In all other
cases, punishment prescribed is imprisonment which may
extend to three years and with fine.
9. In the light of the above provisions prescribing
the punishment, learned counsel for the applicant would
invoke the law laid down by the Honourable Apex Court in
the cases of Satender Kumar Antil vs. CBI supra and State
of Gujarat etc. vs. Choodamani Parmeshwaran Iyer and
anr, reported in 2023 SCC OnLine SC 1043 and submitted
that considering penalty to be imposed on conviction for
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the offence alleged to have been committed, the arrest of
the applicant was unwarranted but the investigating
agency has not considered the same. Admittedly,
principles of paramount importance is, 'bail is rule and jail
is exception'. Now, investigation is completed and further
incarceration of the applicant in jail is not required.
10. Insofar as submissions of learned counsel for the
non-applicant are concerned, as regards applicability of
Section 41A of the Code of Criminal Procedure, the same
has been dealt with by the Honourable Apex Court in the
case of State of Gujarat etc. vs. Choodamani Parmeshwaran
Iyer and anr supra wherein it is observed that it is well
settled position of law that power to arrest a person by an
empowered authority under the GST Act and could be
termed as statutory in character and ordinarily the writ
court should not interfere with exercise of such power. We
say so because such power of arrest can be exercised only
in those cases where the Commissioner or his delegatee
has reasons to believe that the person has committed any
offence specified in clause (a) or clause (b) or clause(c) or
clause (d) of sub-Section (1) of Section 132 which is
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punishable under clause (i) or (ii) or sub-section (1) or
sub-section (2) of the said Section.
It is further held by the Honourable Apex Court
that in the light of the fact that Section 69(1) of the CGST
Act, 2017 authorizes the arrest only of persons who are
believed to have committed cognizable and non-bailable
offences, but Section 69(3) of the CGST Act, 2017 deals
with the grant of bail and the procedure for grant of bail
even to persons who are arrested in connection with non-
cognizable and bailable offences and (2) in the light of the
fact that the Commissioner of GST is conferred with the
powers of search and seizure under Section 67(10) of the
CGST Act, 2017, in the same manner as provided in
Section 165 of the Cr.P.C., 1973, the contention of the
Additional Solicitor General that the petitioners cannot
take umbrage under Section 41 and 41A of Cr.P.C. may not
be correct.
It is further held by the Honourable Apex Court
that it may be remembered that Section 41(3) of Code of
Criminal Procedure, does not provide an absolute
irrevocable guarantee against arrest. Despite the
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compliance with the notices of appearance, a Police Officer
himself is entitled under Section 41A(3) Code of Criminal
Procedure, for reasons to be recorded, arrest a person. At
this stage, we may notice the difference in language
between Section 41A(3) of the Code of Criminal Procedure
and 69(1) of the CGST Act, 2017. Under Section 41A(3) of
the Code of Criminal Procedure, "reasons are to be
recorded", once the Police Officer is of the opinion that the
persons concerned ought to be arrested. In contrast,
Section 69(1) uses the phrase "reasons to believe". There is
a vast difference between "reasons to be recorded" and
"reasons to believe."
11. This Court at Principal Seat in the case of
Daulat Samirmal Mehta vs. Union of India, thr.the
Secretary and ors, reported in 2021 SCC OnLine Bom 200
dealt with the issue and held that power to arrest is
provided in Section 69. As per sub-section (1), where the
Commissioner has reasons to believe that the person has
committed any offence specified in clause (a) or clause (b)
or clause (c) or clause (d) of sub-section (1) of Section
132, which is punishable under clause (i) or (ii) of sub-
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section (1) or sub-section (2) of the said section, he may by
order authorize any officer of central tax to arrest such
person. Chapter XIX deals with offences and penalties.
Section 132 is part of Chapter XIX. It provides for
punishment for committing certain offences. As per sub-
section (1), whoever commits any of the twelve offences
mentioned therein shall be punished in the manner
provided in clauses (i) to (iv) of sub-section (1).
12. In this case, we are concerned about Section
132(1)(b) and 132(1)(c) of the CGST Act, 2017.
As per clause (c) of sub-section (1) of Section
132, the offences are availing ITC using invoice or bill
without the supply of goods or services or both in violation
of the CGST Act.
As per clause (b), a person who issues any
invoice or bill without supply of goods or services or both
in violation of the provisions of the CGST Act or the rules
made thereunder leading to wrongful availment or
utilization of ITC or refund of tax.
If a person commits the above two offences as
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per clauses (b) and (c), he shall be punishable under
clause (i) if the amount of tax is evaded or the amount or
ITC wrongly availed of or utilized or the amount of refund
wrongly taken exceeds Rs.500 lacs with imprisonment for a
term which may extend to five years. All other penalties
are below five years. Therefore, maximum penalty that
can be imposed for committing offence under clauses (b)
and (c) of sub-section (1) of Section 132 is imprisonment
which may extend to five years and with fine.
As per sub-section 5, the offences specified in
clause (a) or (b) or (c) or (d) of sub-section (1) and
punishable under clause (i) of that sub-section are
cognizable and non-bailable.
13. Reverting back to the of the present case, it is
alleged that the applicant, by using a single PAN and
without conducting any business and supply of any goods
from the registered premises, illegally claimed refund of
the accumulated ITC on account of trade/supply of goods
and contravened provisions of the CGST Act. The office of
the non-applicant recorded statements of the applicant and
various witnesses. The non-applicant relied upon
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statements of witnesses including the applicant and
submitted that the arrest of the applicant is justified.
Section 136 of the CGST Act deals with relevancy of
statement under certain circumstances. As per the said
Section, a statement made and signed by a person on
appearance in response to any summons issued under
section 70 during the course of any inquiry or proceedings
under this Act shall be relevant. For the purpose of
proving an offence, As per the said Section, a statement
made and signed by a person on appearance in response to
any summons issued under section 70 during the course of
any inquiry or proceedings under this Act shall be relevant.
For for the purpose of proving an offence under this Act,
the truth of the facts which it contains, (a) when the
person who made the statement is dead or cannot be
found, or is incapable of giving evidence, or is kept out of
the way by the adverse party, or whose presence cannot be
obtained without an amount of delay or expense which,
under the circumstances of the case, the court considers
unreasonable; or (b) when the person who made the
statement is examined as a witness in the case before the
court and the court is of the opinion that, having regard to
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the circumstances of the case, the statement should be
admitted in evidence in the interest of justice.
Thus, Section 136 will only come into play at
the time where the trial commences and the said provision
is important to highlight the fact that an admission made
by person before the officials under the CGST Act, 2012
would be per se admissible in evidence unless it receives
imprimatur of the Court.
14. From the material collected on record, reasons
recorded are that during search, some documents were
found showing that the applicant is running several firms
on one PAN and without supplying any goods and though
the said firms are not in existence, claimed ITC on account
of trade/supply of goods.
15. In the case of Arnesh Kumar vs. State of Bihar,
reported in (2014)8 SCC 273, the Honourable Apex Court
while laying down some guidelines clarified that directions
issued would not only be applicable to cases under 498-A
of the Indian Penal Code or Section 4 of the Dowry
Prohibition Act but also would cover cases where offence is
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punishable with imprisonment for a terms which may be
less than seven years or which may extend to seven years
whether with or without fine.
16. The Honourable Apex Court in the case of
Satender Kumar Antil vs. CBI supra has reiterated the
above principle in paragraph Nos.26 & 27 which is
reproduced as under:
"26. We only reiterate that the directions
aforesaid ought to be complied with in letter
and spirit by the investigating and prosecuting
agencies, while the view expressed by us on the
non-compliance of Section 41 and the
consequences that flow from it has to be kept in
mind by the Court, which is expected to be
reflected in the orders.
27. Despite the dictum of this Court in Arnesh
Kumar (supra), no concrete step has been taken
to comply with the mandate of Section 41A of
the Code. This Court has clearly interpreted
Section 41(1)(b)(i) and (ii) inter alia holding
that notwithstanding the existence of a reason
to believe qua a police officer, the satisfaction
for the need to arrest shall also be present. Thus,
sub-clause (1)(b)(i) of Section 41 has to be read
along with sub-clause (ii) and therefore both the
elements of 'reason to believe' and 'satisfaction
qua an arrest' are mandated and accordingly are
to be recorded by the police officer."
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17. Upon considering the Scheme contained in
Section 132 of Chap (XIX) of the CGST Act, 2017 and after
taking into account the punishment provided, the decision
in the case of Arnesh Kumar vs. State of Bihar supra was
extensively reproduced in the case of Daulat Samirmal
Mehta vs. Union of India, thr.the Secretary and ors supra
which is reproduced as under:
"The requirement under sub-section (1) of
Section 69 is reasons to believe that not only a
person has committed any offence as specified
but also as to why such person needs to be
arrested. From a perusal of the reasons recorded
by the Principal Additional Director General, we
find that other than paraphrasing the
requirement of Section 41 Cr.P.C., no concrete
incident has been mentioned therein recording
any act of tampering of evidence by the
petitioner or threatening / inducing any witness
besides not co-operating with the investigation,
not to speak of fleeing from investigation. In
such circumstances, we are of the view that the
Principal Additional Director General could not
have formed a reason to believe that the
petitioner should be arrested."
18. In the light of the above observations and in the
light of the decision of the Honourable Apex Court in the
case of Ratnambar Kaushik vs. Union of India supra, in
the present case, the necessary investigation is already
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carried out and chargesheet is already filed. The maximum
punishment provided is five years. Further detention of
the applicant in jail is not required. As such, the
application deserves to be allowed, as per order below:
ORDER
(1) The criminal application is allowed. (2) The applicant shall be released on bail, 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 by the non-applicant, on his executing a P.R.Bond in the sum of Rs.2.00 lacs with one solvent surety of the like amount. (3) The applicant shall attend the office of the non- applicant as and when required for the investigation purpose.
(4) The applicant shall surrender his passport, if any, before the trial court within a week from the date of his release from the jail.
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235 ba585.24 17 (5) The applicant shall not leave the jurisdiction of the Nagpur district without prior permission of the Court.
The application stands disposed of.
(URMILA JOSHI-PHALKE, J.) !! BrWankhede !! Signed by: Mr. B. R. Wankhede Designation: PS To Honourable Judge ...../-
Date: 28/06/2024 11:13:32