Case Law Details

Case Name : Naval Kumar & 3 Others Vs CGST, Delhi East (Patiala House Court)
Appeal Number : Bail Application No. 1795/2020
Date of Judgement/Order : 24/11/2020
Related Assessment Year :
Courts : District Court (13)

Naval Kumar Vs CGST (Patiala House Court)

In this case , admittedly the total amount as liability of the of the applicants is yet to be adjudicated and assessed. Liability which has been raised by the department is the tentative where show cause notice is yet to be issued and adjudication is still due. Such proceeding will take considerable period of time. The firm involved in this case is stated to be a 50 years old firm and applicants are responsible for the running the firm being it’s employees at senior positions. Lability is yet to be ascertained, only a tentative availment of ITC of GST has been averred, even as on today it is not sure that the entire amount of ICT has been availed by the accused firm alone as involvement of other firms also been averred. Apart from this, there is nothing on record to show that applicant has been a habitual offender. It has also not been contended that there is any likelihood of their absconding from the country, investigation in this case still at the initial stage and the evidence which is required to be collected during the course of investigation is primarily documentary in nature. The presence of accused can be secured by imposing stringent condition upon the applicant, so that, they may not flee from the investigation and cooperate in the same as and when directed by the department. A sum of Rs Rs.4.5 crores already deposited out of total sum of Rs Rs.85.4 crores. Moreover, the purpose of investigation and fixing the liability of the petitioner is to secure the payment of GST, and also to deprecate the false claim of ITC and the object of statute can be secured by directing the applicant to deposit the amount in terms of the liability as held by Hon’ble Supreme Court in judgement of C.Pradeep (Supra).

Fake Input Tax Credit

In these circumstances, it is directed that in the event of arrest of the applicants namely Naval Kumar, Sanjeev Kothiala, Harmesh Mohan Sood and Sudhir Awasthi, they be released on bail on furnishing personal bond in the sum of Rs.2 lacs each (Rs. Two Lacs each) with surety of like amount to the satisfaction of IO/Commissioner, GST subject to the following conditions: –

1). The applicants shall deposit a total sum of Rs.10 crores, out of the total liability, within 10 days from today to the commissioner CGST/ competent Authority in terms of the directions in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise.

2) The applicants/accused shall join the investigation as and when directed by the IO/Department.

3). They shall not leave the country without permission of the court.

4). They shall deposit their passport with the department.

5). They shall not hamper the investigation and tamper with the evidence in any manner.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Arguments heard.

This is an application in which the accused persons have sought anticipatory bail U/s 438 CrPC.

In this case, it has been alleged that on investigation it was revealed that fictitious firm were engaged in generating and passing on fake input tax credit (ITC) by issuing bogus invoice without actually supply of goods. M/s Milk Food Pvt. Ltd in this manner has availed huge ITC from different firms that have already been proved to be fictitious and non­existent during the investigation. It is alleged that M/s Milk Food Ltd has availed fake ITC of Rs.54.86 crores from M/s Maya Implex, M/s Aditya Sales, M/s Shivv Muskaan Traders and M/s Shri Nidhivan Foods which were being operated by Sh. Ashish Agarwal.

It is further alleged that M/s. Milk Food Ltd. Have also availed ITC of Rs.30.54 crores from M/s. Devyaani Agro Industries (Prop. Sanjay Kumar Garg). Therefore, in total there is an allegation that the firm has availed total amount of Rs.85.4 crores of inadmissible ITC from the government. Sh. Ashish Agarwal has been shown as mastermind and main beneficiary of several fake firms involved in generating and passing on fake ITC. It is further alleged that accused Ashish Agarwal and Sanjay Kumar Garg were arrested in connection of availing admissible ITC. In this manner, the firms which were being run by Sh. Ashish Agarwal and Sanjay Kumar Garg were operating fictitiously through non existing firms to pass on fake ITC by issuing fake invoices without actual supply of goods to various parties including M/s Milk Food Ltd.

Applicant No.1 Sh. Naval Kumar is the Dy. General Manager, Applicant No.2 Sanjeev Kothiala is CFO, who was looking after day to day working of the company and payment of tax liability, whereas applicant No.4 Sh. Sudhir Awasthi is the CEO of the company and he was also responsible for the day today operation of the company including decision in tax matter. Applicant No.3 sh. Harmesh Mohan Sood was authorized to look after day today business activities of the company.

It is contended by Ld. Counsel for CGST that applicant No.1 and 2 have already joined the investigation whereas, accused No.3 and 4 are yet to join the same. Investigation is stated to be at initial stage where the availment of inadmissible input tax credit of Rs.85.4 crores has been ascertained.

Bail is opposed by the department on the ground that offence alleged against the accused persons are serious in nature in which huge liability of tax evaded in the form of ITC from the government and it is further contended that investigation is at initial stage. In support of his arguments, Ld. counsel for Respondent has placed reliance upon the judgment of Hon’ble Telangana High Court in the matter of P.V. Ramana Reddy Vs. Union of India, reported as 2019-TIOL-873- HC-TELANGANA-GST and Hon’ble Supreme Court, in the case of UOI Vs. Sapna Jain, SLP (Crl.) 4322-4324/ 2019 .

Ld. Defence counsel has argued that in view of the investigation carried out by the respondent/department, there is an apprehension to the applicants that they may be arrested in this case and they have already joined the investigation. It is further contended that the prime accused who were supplier/distributor of Milk Food Ltd. Ashish Aggarwal and Sanjay Kumar Garg has already been arrested by the department on 29.10.2020 and 12.11.2020, respectively, and accused Sanjay Garg already been enlarged on bail on 14.11.2020 by the order of Ld. CMM wherein it was observed that arrest of the accused was made prior to adjudication of alleged evasion which is in violation of the settled preposition of law. In support of his contention Ld. Defence counsel relied upon judgment of Make My Trip v. Union of India (2016) 233 DLT 484 (DB) and Akhil Krishan Maggu v. Dy. Dir. D.G. of GST Intelligence 2020 (32) GSTL 516 (P&H).

It is further contended by Ld. Defence counsel that despite the fact that adjudication in this case is yet to be carried out despite that accused persons are ready to deposit 10% of the total tentative liability which has been allegedby the department by way of its reply. In support of his averment Ld. Counsel has also relied on the judgment of Hon’ble Supreme Court in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise, Selam andAnr. SLP (Crl.) Nos. 6834/2019.

It is further averred that by way of the said judgment Hon’ble Supreme Court in an anticipatory bail application itself directed petitioner to deposit 10% of the alleged demand and similarly in the present case also the assessment and adjudication qua the ITC has not been carried out by the department and on the basis of tentative liability which has been set up by the department, applicants are ready to deposit GST in accordance with the same itself.

On the point of deposit of Rs.10% of the liability towards inadmissible ITC, Ld. Counsel for the respondent/department has submitted that the same is not permissible and applicant should deposit the entire amount of the liability and it is also contended that in the judgement of UOI v. Sapna Jain (Supra) pre-arrest bail has been discouraged by Hon’ble Supreme Court as well as Hon’ble High Court.

In response to these arguments of the department, it is contended by Ld. Counsel for the applicants that the judgment of Hon’ble supreme court in UOI v. Sapna Jain case is dated 29.05.2019, whereas in another judgement of Hon’ble Supreme court dated 06.08.2019 in C. Pradeep Hon’ble Supreme Court has granted pre-arrest bail to the accused on the deposit of 10% of the disputed liability and the said judgment till date has not been overruled.

In this case, the total liability averred by the department is Rs.85.4 crores and it is contended by Ld. Counsel for the applicant that out of the total liability, Rs.4.5 crores already been deposited by the applicants under protest and the factum of deposit of the said amount is acknowledged by the officer of the department Sh. Sachin Johri. Applicants NO.1 ,2 and 4 are stated to be employee of the company who were looking after the day today work as well as the taxation matters of the company whereas, accused No.3 is the Director who is 72 years of aged person. The co accused namely, Ashish Agarwal who allegedly created fake bills and supplied the same to the firm of the applicants and who was managing seven firms which were allegedly involved in availment of ITC to the tune of Rs.30.5 crores already been enlarged on bail by the court of Ld. CMM itself, it has been contended that while granting bail nothing has been deposited by him towards the alleged liability and the case of the applicants seeking anticipatory bail while depositing 10% of the total liability is on better footing than the case of the co-accused who is released on regular bail.

I am also in agreement with the submission of Ld. Defence counsel with respect to the observations of Hon’ble Supreme court in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise, Selam andAnr. SLP (Crl.) Nos. 6834/2019 vide order dated 06.08.2019 wherein it was held that

“ Ld. Counsel for the petitioner submits that indisputably assessment for the relevant period has not been completedby the Department so far. In which case, invoking Section 132 of the central Goods and Services Tax Act, 2017 does not arise. He further submits that, even if, the alleged liability of Rs.19 crores as is assumed by the Department is accepted, it is open for the petitioner to file appeal after the assessment order is passed; and as per the statutory stipulation, such appeal could be filed upon deposit of only 10% of the disputed liability. In that event, the deposit amount may not exceed Rs.2,00,00,000/- (Rs. Two Crores) which the petitioner is willing to deposit within one week from today without prejudice to his rights and contentions in the assessment proceedings and the appeal to be filed thereafter, if required.

Issue notice on condition that the petitioner shall deposit Rs. two crores to the credit of C No. IV/16/27/201HPU on the file of the Commissioner of GST and Central Excise, Salem, Tamil Nadu and produce receipt in that behalf in the Registry of this Court within ten days from today, failing which the special leave petition shall stand dismissed for non-prosecution without further reference to the court.

Subject to the above, notice returnable within three weeks, Dasti, in addition, is permitted.

For a period of one week, no coercive action be taken against the petitioner in connection with the alleged offence and the interim protection will continue upon production of receipt in the Registry about the deposit made with the Department within one week from today, until the disposal of this Special Leave Petition.”

I also do not find any fault in submission of Ld. Defence counsel that protection qua deposit of 10% amount is not in violation of direction of Hon’ble High Court in Orion Security Solutions & Anr. wP(Crl) 695/2020 where the amount directed to be deposited by the Hon’ble High Court was qua the admitted liability, whereas Hon’ble Supreme Court in C.Pradeep (Srupra) has directed the deposit of 10% in case of unadjudicated liability.

Reliance is also placed on behalf of the petitioner on the verdict of the Supreme Court in Siddharam Sattlingappa Mhetre v. State of Maharashtra; (2011) 1 SCC 694 that in a case where the Court is of a considered view that the accused has joined the investigation and he is fully cooperating with the investigating agency and is not likely to abscond, in that event, custodial interrogation should be avoided, and anticipatory bail should be granted and the Hon’ble Supreme Court laid down the following factors and parameters to be taken into consideration while dealing with the anticipatory bail:

112. The following factors and parameters can be taken into consideration while dealing with the anticipatory bail:

i. The nature and gravity of the accusation and the exact role of the accused must be properly comprehended before arrest is made;

ii. The antecedents of the applicant including the fact as to whether the accused has previously undergone imprisonment on conviction by a Court in respect of any cognizable offence;

iii. The possibility of the applicant to flee from justice;

iv. The possibility of the accused’s likelihood to repeat similar or the other offences.

v. Where the accusations have been made only with the object of injuring or humiliating the applicant by arresting him or her.

vi. Impact of grant of anticipatory bail particularly in cases of large magnitude affecting a very large number of people.

vii. The courts must evaluate the entire available material against the accused very carefully. The court must also clearly comprehend the exact role of the accused in the case. The cases in which accused is implicated with the help o sections 34 149 of the Penal Code, 1860, the court should consider with even greater care and caution because over implication in the cases is a matter of common knowledge and concern;

viii. While considering the prayer for grant of anticipatory bail , a balance has to be struck between two factors namely, no prejudice should be caused to the free, fair and full investigation and there should be prevention of harassment, humiliation and unjustified detention of the accused;

ix. The court to consider reasonable apprehension of tampering of the witness or apprehension of threat to the complainant;

x. Frivolity in prosecution should always be considered and it is only the element of genuineness that shall have to be considered in the matter of grant of bail and in the event of there being some doubt as to the genuineness of the prosecution, in the normal course of events, the accused is entitled to an order of bail.”

Similarly, in this case also, admittedly the total amount as liability of the of the applicants is yet to be adjudicated and assessed. Liability which has been raised by the department is the tentative where show cause notice is yet to be issued and adjudication is still due. Such proceeding will take considerable period of time. The firm involved in this case is stated to be a 50 years old firm and applicants are responsible for the running the firm being it’s employees at senior positions. Lability is yet to be ascertained, only a tentative availment of ITC of GST has been averred, even as on today it is not sure that the entire amount of ICT has been availed by the accused firm alone as involvement of other firms also been averred. Apart from this, there is nothing on record to show that applicant has been a habitual offender. It has also not been contended that there is any likelihood of their absconding from the country, investigation in this case still at the initial stage and the evidence which is required to be collected during the course of investigation is primarily documentary in nature. The presence of accused can be secured by imposing stringent condition upon the applicant, so that, they may not flee from the investigation and cooperate in the same as and when directed by the department. A sum of Rs Rs.4.5 crores already deposited out of total sum of Rs Rs.85.4 crores. Moreover, the purpose of investigation and fixing the liability of the petitioner is to secure the payment of GST, and also to deprecate the false claim of ITC and the object of statute can be secured by directing the applicant to deposit the amount in terms of the liability as held by Hon’ble Supreme Court in judgement of C.Pradeep (Supra).

In these circumstances, it is directed that in the event of arrest of the applicants namely Naval Kumar, Sanjeev Kothiala, Harmesh Mohan Sood and Sudhir Awasthi, they be released on bail on furnishing personal bond in the sum of Rs.2 lacs each (Rs. Two Lacs each) with surety of like amount to the satisfaction of IO/Commissioner, GST subject to the following conditions: –

1). The applicants shall deposit a total sum of Rs.10 crores, out of the total liability, within 10 days from today to the commissioner CGST/ competent Authority in terms of the directions in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise.

2) The applicants/accused shall join the investigation as and when directed by the IO/Department.

3). They shall not leave the country without permission of the court.

4). They shall deposit their passport with the department.

5). They shall not hamper the investigation and tamper with the evidence in any manner.

This order shall come into operation from the date when payments are made. Let the matter be put up for confirmation of the payments on 04.12.2020.

It is certified that proceedings conducted through VC on CISCO WEBEX Meetings, the quality of audio and video was clear and uninterrupted to the satisfaction of the participants.

Download Judgment/Order

More Under Goods and Services Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

January 2021
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031