As already noted, not only there are serious allegations against the accused/ respondent of his having made fictitious sales of value of more than Rs. 200 crores and having consequently caused loss to the government of the GST evasion / wrongful availment of input tax credit of the value of more than Rs. 27 Crores, it is also alleged that the accused/ respondent had indulged in the act of threatening the witnesses who were otherwise coming forward to give their statement to the department / petitioner as to how the bogus firms were created and how their documents were misused. There are, thus, merits in the application of the applicant/petitioner seeking cancellation of bail of the accused/respondent. The application is accordingly allowed and the order granting bail to the accused/respondent is hereby set aside.
FULL TEXT OF THE ORDER / JUDGMENT OF PATIALA HOUSE COURT
1. By this order,I shall decide the application / petition preferred by the applicant / petitioner Commissioner of Central Tax, GST, Delhi (West) seeking cancellation of bail as granted to the accused/ respondent Rajesh Jindal by the Ld. CMM, PHC, New Delhi vide order dated 01.08.2018.
2. Case of the petitioner as per the petition is that accused/ respondent alongwith co-accused Adesh Jain was arrested by the officials of the petitioner on 01.08.2018 and was produced before the Ld. CMM the very same day. Since the Ld. CMM was not available, the respondent/accused and the co-accused were produced before the Ld. Link Magistrate. On the remand application preferred against them, the Ld. Link MM admitted the accused/respondent on bail and remanded the co-accused Adesh Jain to judicial custody till 02.08.2018.
3. It is averred that the accused/ respondent Rajesh Jindal and the co-accused Adesh Jain were arrested with the allegations that they were involved in generation of fake invoices by floating dummy companies / firms in the name of poor persons / third persons and of passing on the input tax credit (in short, ‘ITC’) to unscrupulous persons / firms/ companies without actual supply of goods. This was done with the malafide intent to pass on the undue advantage of ITC to various companies / firms for utilizing the bogus GST ITC so generated. In return, accused / respondent and the co-accused were taking commissions at various rates. This activity of the accused/ respondent and of the co-accused was found involving fictitious sales of the value of Rs. 201 crores and of the amount of tax evasion of more than Rs. 27 crores.
4. It is averred that when the accused / respondent alongwith the co-accused was produced before the Ld. Link MM, it was noted by the Ld. MM vide his order dated 01.08.2018 that the offence stated to be made out against the accused persons falls under the provisions of Sec. 132 (1)(b) of the CGST Act, 2017 and that as per the mandate of the law as provided’ under clause (4), all the offences under this Act except the offences referred to in sub-sec (5) are non-cognizable and bailable. The offence u/s 132(1)(b) of the Act is the one which falls within the domain of sub-section (5) of Sec. 132 of the CGST Act if the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 5 crore, thus, making the offence as cognizable and non-bailable. Ld. MM then noted that perusal of the proceedings of GST (West) at that stage revealed that the allegations of tax evasion against accused Rajesh Jindal was for a sum of Rs. 4,58,19,883/- which is less than Rs. 5 Crores and as such, the offence u/s 132(1)(b) being punishable under clause (ii) of sub-section (1) (b) of Sec. 132, falls under the category of non-cognizable and bailable and as such accused/ respondent was admitted to bail. As to co-accused Adesh Jain, since the duty evasion was found to be of more than Rs. 27 crores which was punishable u/s 132(1)(b) r/w clause (i), as such he was remanded to JC till 02.08.2018.
5. It is averred that the Ld.MM while opining the duty of tax evasion to be of less than Rs. 5 crores in respect of accused/ respondent Rajesh Jindal, referred to his statement voluntarily tendered on 01.08.2018 and recorded u/s 70 of the CGST Act, 2017. It is averred that the Ld. MM failed to take into consideration that there was a statement dated 31.07.2018 tendered by the respondent himself wherein he had admitted of his partnership with the co-accused Adesh Jain. This fact of equal partnership of the accused/ respondent and the co-accused was further established by the statement dated 31.07.2018 of co-accused Adesh Jain as tendered voluntarily u/s 70 of the CGST Act wherein he stated that they were sharing the profits equally. It is averred that the accused/respondent in his statement again recorded on 03.08.2018 u/s 70 of the CGST Act had further admitted that he and co-accused Adesh Jain were sharing profits and expenses and were selling the invoices to various persons. It is averred that as such, even on the date when the accused/respondent was produced before the Ld. Link MM, the amount of tax evasion was of more than Rs. 27 crores and as such the offence was covered u/s 132(5) of the CGST Act, 2017 making it cognizable and non-bailable. In addition, it has been averred that during further investigation, the amount of GST so fraudulently passed has increased to the tune of Rs.50 crores and is increasing with each passing step of the investigation.
6. It is averred that the modus operandi of the accused / respondent is that he floated various bogus firms by using the name of poor persons, less educated and unemployed individuals by luring them with consideration ranging from Rs. 12,000/- to Rs. 15,000/-. In return, these individuals used to hand over their Aadhar Card, PAN card, bank account details and registered mobile number to the accused/ respondent for using the same for OTP verification in the process of making them become the proprietors of the bogus firms. The accused/ respondent was actively assisted by the co-accused Adesh Jain and that these two used to take documents from the dummy proprietors for its use in government authorities for the purpose of taking statutory registrations such as GST etc. The accused were aware that the government having eased the norms of operating business, is not requiring any human interface of the duMmy proprietor with any of the GST official and the identity of the said individual becomes the identity as is made available through the PAN Card, Aadhar Card etc. It is with this knowledge that the accused ventured into creating bogus firms and issuing fake invoices. The searches carried out at the premises of the accused/ respondent and of the co-accused resulted in seizure of many fake and bogus tax invoices and also of the computers wherein such information was used to be stored.
7. It is averred that as such the order dated 01.08.2018 vide which the Ld. Link MM had made a distinction of the case against the accused/ respondent is patently illegal. It is averred that as such, the applicant / petitioner preferred an application seeking cancellation of bail of the accused/ respondent before the Ld. CMM, PHC which came to be dismissed vide order dated 14.08.2018 which was passed on extraneous considerations. It is averred that thereafter the petitioner/ applicant preferred a petition Crl. M.C. No. 4767 of 2018 which was disposed of by the Hon’ble High Court of Delhi vide its order dated 18.09.2018 giving liberty to the petitioner to approach the Court of Sessions u/s 439(2) Cr.PC. Hence, the present application before this Court has been filed.
8. It is further averred that not only the bail order and order dismissing the cancellation of bail application are illegal, even the accused / respondent after being granted bail had indulged himself in constantly threatening the witnesses and their statements in this regard were recorded, which again is a ground for cancellation of bail of the accused/ respondent.
9. Notice of the application was issued to the accused/respondent and reply to the application came to be filed. In the reply, it has been averred that the application/petition of the applicant/petitioner is based on falsehood and deserves to be rejected with exemplary costs. It is averred that the allegations are false and baseless and there is a deliberate suppression of material facts by the applicant/petitioner. It is averred that the order dated 14.08.2018 passed by the Ld. CMM is a reasoned order passed on merits and needs no interference by this Court. It is averred that the arrest of the accused/respondent in itself was illegal as the offence alleged is non-cognizable and bailable. It is averred that even as per the allegations made in the application, the offence as disclosed is of the nature of offence u/s 132(1)(f) of the CGST Act, 2017 which is a non-cognizable and bailable offence irrespective of the amount of the tax allegedly evaded. It is averred that the law is well settled by the Hon’ble Supreme Court of India in Dolat Ram & Ors vs State of Haryana, (1995) 1 SCC 349 wherein it was held that very cogent and overwhelming circumstances are necessary for an order directing the cancellation of bail, already granted. It is averred that in the application / petition, no cogent or overwhelming circumstance has been shown meriting cancellation of bail. Instead, false and vague averments have been made in the application which are not substantiated by any document or material.
10. It is further averred that the application proceeds on a wrong notion that every offence under the CGST Act, 2017 is cognizable and non-bailable. In fact, except of few offences u/s 132 of the Act, all other offences are non-cognizable and bailable. Also, the maximum punishment provided u/s 132 of the Act is of five years and that the accused/ respondent had appeared before the authority as and when he was called upon by issuance and service of summons. As such, the present application is against the spirit and mandate of the law laid down by Hon’ble Supreme Court in Arnesh Kumar vs State of Bihar (2014) 8 SCC 273.
11. It is further averred that petitioner had cleverly concealed in the application that after being granted bail, accused/ respondent was issued summons dated 20.08,2018 seeking appearance on 30.08.2018. However, the said summons were served only after the expiry of the time to.’ appear before the authority. Again, to the summons dated 24.09.2018, accused/ respondent had appeared before the Authority/ department but, except of making him wait, the authority did not record any statement. Same was the situation in respect of summons dated 26.10.2018. Not only that, accused/ respondent was coerced by the applicant’s officers to deposit Rs. 40 Lacs towards the tax allegedly avoided. The accused/ respondent was also not informed of the grounds of his arrest which is in violation of the provisions of sec. 41(B) of the Cr.PC and of sec. 69(2) of CGST Act, 2017.
12. It is further averred that the remand application dated 01.08.2018 did not give the description and the nature of offence except of stating that the alleged offence is u/s 132(1)(b) of the CGST Act, 2017 which is non-bailable and cognizable and that the tax evasion is more than Rs. 5 crores. It is averred that in the remand application, the facts ought to have been stated so as to make out therefrom that offence u/s 132(1)(b) of the Act is made out. Mere allegation of tax evasion in itself is not sufficient to assume or presume that offence u/s 132 (1)(b) is made out. It is further averred that the application for cancellation of bail which was preferred by the applicant before the Ld. CMM only makes a mention that the amount of duty evasion by accused/ respondent is around 85 crores and therefore the offence is cognizable and non-bailable. Again, there was no allegation of any offence covered in clause (a) to (d) are only cognizable and non-bailable. dated 14.08.2018 noted that even the inserted subsequently with a pen. Also, the bail order dated 01.08.2018 clearly mentions that the entire proceedings file prepared by GST (West) has been perused, It is averred that as to the allegation of the accused / respondent extending threats to witnesses, their statements are doctored statements and that when the Ld. CMM had passed the order on 14.08.2018, it was never asserted that the accused/ respondent is threatening witnesses. Even otherwise, the alleged statements of the witnesses placed with the record of present application are of 17.08.2018 and 21.08.2018, which in any case, is after the order dated 14.08.2018. It is averred that even the perusal of the alleged statements of the witnesses that they have been threatened would reveal that it has been typed in a standard format and that it is a pointer that these are false statements. Thus, prayer was made to not only dismiss the application of the applicant / petitioner but also to prosecute the applicant / petitioner u/s 340 Cr.PC.
13. Harpreet Singh, Ld. Senior Standing Counsel for the applicant / petitioner and Sh. J. K. Mittel, Id. Counsel for the accused/ respondent were heard and the record was carefully perused.
14. In his submissions, Id counsel for the applicant / petitioner while making a reiteration of the facts as asserted in the application, placed reliance upon the judgment of Hon’ble Supreme Court of India in Prahlad Singh Bhatti vs. NCT of Delhi, AIR 2001 SC 1444.
15. Ld. Counsel for the accused/ respondent in his submissions also made a reiteration of the averments of the reply and placed reliance upon the following citations:-
(i) Arnesh Kumar vs State of Bihar & Arm (2014) 8 SCC 273
(ii) Ebiz.comPvt. Ltd. Vs Union of India 2016(44) S.T.R 526.
(iii) Amrit Foods vs. Commissioner, 2005 (190) ELT 433 (SC)
(iv) Strategic Credit Capital Pvt Ltd. Vs. Ratnakar Bank Ltd, 2018(9) GSTL 209(Del.)
(v) Haiko Logistic India Pvt. Ltd. Vs U01 ,WP(C) No.7063/16 dated 21.08.2017 (Hon’ble High Court of Delhi).
(vi) Dolatram vs. State of Haryana, 1995(1)SCC 349.
(vii) Prahlad Singh Bhati vs. NCT ofDelhi, 2001(4) SCC 280.
16. Before taking up the rival submissions, it is necessary to take note of the relevant provisions of the law.
Sec. 132 of the CGST Act, 2017 provides for the punishment for certain offences. It lays down:-
(1) Whoever commits any of the following offences, namely:-
(a) supplies any goods or services or both without issue of any invoice
(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 such invoice or bill referred to in clause (b).
(d) collects any amount as tax….
(e) evades tax, fraudulently avails input tax credit or…….
(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…
(h) acquires possession of, or in any way concerns himself in transporting, removing
(i) receives or is in any way concerned with the supply, or in any other manner deals with any supply of services
(j) tampers with or destroys any material evidence or documents.
(k) fails to supply any information which he is required
(l) attempts to commit, or abets the commission of any of the offences .
mentioned in clause (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 utilized 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 wrong availed or utilized 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………..
(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.
(2) Where any person convicted of an offence under this section is again convicted………
(3) the imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall
(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.
(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.
Now, coming on to the facts of the present case, as already, noted, the allegations against the accused / respondent are that he alongwith co-accused Adesh Jain had indulged in the act of opening bogus companies in the name of dummy proprietors and through these companies had issued fake invoices with no actual supply of goods and in this manner had wrongly taken the input tax credit. The allegations are clear enough to make out a case falling under clause (b) of sub-section (1) of Sec. 132 of . the CGST Act, 2017. The contention of Id. counsel for the accused/applicant that the application for judicial remand of the accused did not disclose the details of the offence except of making of a mention that Sec. 132(1)(b) is alleged, has no merits as admittedly when the application for judicial remand was preferred by the applicant before the Ld. Link MM, the entire record file including the arrest, search and seizures was put up for perusal and consideration. From the record, the Ld. Link MM vide his order dated 01.08.2018 had, therefore, formed the opinion that offence u/s 132(1) (b) of the CGST Act is attracted to the facts presented before him. Also, the contention of Id. Counsel for the accused/ respondent that the allegations disclosed the offence u/s 132(1)(f) of the CGST Act, again has no merits as the said clause concerns the falsification of the financial records or the statements of account for evading tax. As noted, in the present case, the allegations are of wrongfully availing input tax credit on the basis of invoices without actual supply of goods and it squarely falls within clause (b) of sub- section (1) of Sec. 132 of the CGST Act.
The other aspect is of the Ld. Link MM having formed the view that from the material available on record, the allegations of tax evasion against the accused/ respondent was of less than Rs. 5 crores and as such taking out the offence from the purview of sub-section (5) of Sec. 132 of the Act, thus, making it non-cognizable and bailable. Admittedly, the file which has been produced by the applicant/ petitioner clearly notes in the note-sheet of the inquiry that the accused / respondent as well as the co-accused Adesh Jain in their respective statements recorded u/s 70 of CGST Act on 31.07.2018 have stated that they both were indulging in the act of providing false invoices to other companies / firms/ agents and thus were passing on wrongful availment of input tax credit. They also stated, that they were deducting the commissions for the said act. The total tax evasion as alleged at that time was against both the accused and it was of the value of more than Rs. 27 crores and not of less than Rs. 5 crores against the accused / respondent. Thus, the case against the accused/ respondent as also against the co-accused Adesh Jain was of the offence punishable under clause (i) r/w sec. 132(1)(b) of the Act. In such circumstances, the accused/ respondent ought to have been remanded to judicial custody instead of being admitted to bail. Going further, even if it is to be believed that the amount of alleged tax evasion as on the date of production of the accused/ respondent upon his arrest was less than Rs. 5 crores, still the applicant by its application preferred before the Ld. CMM clearly averred that now the tax evasion is around 8.5 crores, thus, making the offence cognizable and non-bailable. The Ld. CMM vide order dated 14.08.2018 formed the opinion that mere increase in the amount of tax evasion in itself is no ground to cancel the bail already granted when there was no allegation of either the. accused / respondent attempting to tamper with the evidence or influence the witnesses or making an attempt to flee from justice. Admittedly, except of the plea of tax evasion being of about 8.5 crores, the applicant/ petitioner in its application for cancellation of bail preferred before the Ld. CMM did not take any other ground.
In respect of cancellation of bail, the law is well settled that very cogent and overwhelming circumstances are necessary for an order directing the cancellation of the bail, already granted. Generally speaking, the grounds for cancellation of bail, broadly (illustrative and not exhaustive) are:- interference or attempt to interfere with the due course 0, administration of justice or evasion or attempt to evade the due course of justice or abuse of the concession granted to the accused in any manner. The satisfaction of the Court, on the basis of material placed on the record of the possibility of the accused absconding is yet another reason justifying the cancellation of bail. However, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. (Ref: Dolat Ram & Anr. vs State of Haryana (1995) 1SCC 349).
In the application preferred before this Court, the ground additionally taken up by the applicant/petitioner is of the accused/ respondent having extended threats to the witnesses who as per the applicant are those persons who were used as dummy proprietors of the bogus firms by the accused/respondent and the co-accused. This is a serious issue as it has the effect of tampering with the evidence and also of influencing the witnesses who may otherwise come up before the applicant/department against the accused/respondent. Id. Counsel for the accused/respondent contended that the statements of the witnesses who have alleged that they are being threatened by the accused/respondent cannot be believed as these statements are doctored statements having been prepared only to cause undue harassment to the accused/ respondent and to falsely implicate him in the present case. This contention of Id counsel has no basis as this is not the stage to conduct an inquiry as to the veracity of these statements. The assertion of the department that the accused/ respondent is threatening the witnesses and as such is affecting the investigation is based on the statements of the witnesses recorded to the said effect and having been shown during the course of advancing arguments and also of having been filed with the present application. I may also here gainfully refer to the judgment of Hon’ble Supreme Court of India in Kanwar Singh Meena vs State of Rajasthan & Anr, Crl. Appeal No. 1662/2012 decided on 16.10.2012 wherein it was observed that “Section 439 of the Code confers very wide powers on the High Court and the Court of Sessions regarding bail. But, while granting bail, the High Court and the Sessions Court are guided by the same considerations as other courts. That is to say, the gravity of the crime, the character of the evidence, position and status of the accused with reference to the victim and witnesses, the likelihood of the accused fleeing from justice and repeating, the offence, the possibility of his tampering with the witnesses and obstructing the course of justice and such other grounds are required to be taken into consideration. Each criminal case presents its own peculiar factual scenario and, therefore, certain grounds peculiar to a particular case may have to be taken into account by the court. The court has to only opine as to whether there is prima facie case against the accused. The court must not undertake meticulous examination of the evidence collected by the police and comment on the same. Such assessment of evidence and premature comments are likely to deprive the accused of a fair trial”. It was further observed that “While cancelling bail under Section 439(2) of the Code, the primary considerations which weigh with the court are whether the accused is likely to tamper with the evidence or interfere or attempt to interfere with the due course of justice or’ vade the due course of justice. But, that is not all. The High Court or the Sessions Court can cancel bail evidence in cases where the order granting bail suffers from serious infirmities resulting in miscarriage of justice. If the court granting bail ignores relevant materials indicating prima facie involvement of the accused or takes into account irrelevant material, which has no relevance to the question of grant of bail to the accused, the High Court or the Sessions Court would be justified in cancelling the bail. Such orders are against the well recognized principles underlying the power to grant bail. Such orders are legally infirm and vulnerable leading to miscarriage of justice and absence of supervening circumstances such as the propensity of the accused to tamper with the evidence, to ‘flee from justice, etc would not deter the court from cancelling the bail. The High Court or the Sessions Court is bound to cancel such bail orders particularly when they are passed releasing accused involved in heinous crimes because they ultimately result in weakening the prosecution case and have adverse impact on the society”.
As already noted, not only there are serious allegations against the accused/ respondent of his having made fictitious sales of value of more than Rs. 200 crores and having consequently caused loss to the government of the GST evasion / wrongful availment of input tax credit of the value of more than Rs. 27 Crores, it is also alleged that the accused/ respondent had indulged in the act of threatening the witnesses who were otherwise coming forward to give their statement to the department / petitioner as to how the bogus firms were created and how their documents were misused. There are, thus, merits in the application of the applicant/petitioner seeking cancellation of bail of the accused/respondent. The application is accordingly allowed and the order granting bail to the accused/respondent is hereby set aside. Accused/respondent is taken into custody and is directed to be produced before the Ld. CMM, PHC, New Delhi on 24.12.2018.
Needless to say that any observations of this Court in this order are only prima facie observations.
Copy of this order be given dasti to the Id. counsels for the parties as prayed.