Case Law Details
Hetram Vs DGGI (Gurugram Court)
This is the application for hail filed by applicant-accused Hetram in criminal complaint under section 132(1)(h) & (c) of GST Act, 2017 (hereinafter called the Act).
2. It is submitted by learned counsel for applicant that the applicant is Director of M/s Rajnandini Metal Ltd. thereinafter referred as M/s Rajnandini) which is engaged in the business of purchasing scrap and melting it into metal rods. A loan of Rs.65 Crore has been availed by the company for running the business from a Nationalized Bank and in the company 250 workers are employed.
3. The applicant has been falsely implicated in the case on the allegations that his company M/s Rajnandini has fraudulently availed input tax credit (ITC) to the extent of Rs.77 Crore as his supplier firms M/s Curil Tradex Pvt. Ltd., M/s Vivrak Impex Pvt. Ltd., M/s V.R.Trading and M/s Shri Ram Trading, were found to be non existent at their registered places of business. However, out of these four companies, M/s Curil Tradex Pvt. Ltd.. Vivrak Impex Pvt. Ltd. and V.R.Trading were searched by the State GST Department on 24.11.2021, 26.11.2021 and 19.11.2021 and they were found operational and in existence at their respective registered addresses. With regard to M/s Shriram Trading whose registration is alleged to have been cancelled, nothing has been brought on record as to when it became non existent. Not even a single transporter of the goods/scrap from the supplier to the premises of the company has stated that it did not transport the goods. Applicant’s company has record and photograph of each and every truck entering the factory along with toll receipts in order to avoid any pilferage or dispute. So, the goods were duly received and duly documented. Entire value of the goods along with GST in question has been paid by M/s Rajnandini to its supplier firm by proper banking channel. There is nothing on the file to suggest that applicant or his company is beneficiary of the alleged offence. Applicant’s company was also searched by the department and there is no allegation of any mismatch in the stock/goods stored or sold by M/s Rajnandini at any point of time. So, it cannot be alleged that M/s Rajnandini did not receive goods/stock from the supplier firms. The applicant has fully co-operated in the investigation and there has been no attempt to influence any witness or temper any evidence nor he is on flight risk.
4. The allegation against the applicant Is only of wrongly availing the ITC. When the applicant has paid the value of the goods along with GST by proper channel and on search by the department the companies were found present, it cannot be said that the firms were non existent. If any supplier firm has closed its business or committed any fraud the applicant-accused cannot be held liable for the same. The applicant is alleged to have committed offence under section 132(1)(b) & (c) which is punishable only with the imprisonment of 5 years which cannot be said to be a heinous crime. There is no stringent twin condition provided in the Act for grant of bail as is in the case of offences under PMLA Act, 2002 and Companies Act, 2013. The applicant is in custody since 20.5.2022 and has been interrogated only once and no departmental custody has ever been sought. He is not required for any custodial interrogation.
5. Learned counsel for the applicant further submits that Hon’ble Supreme Court in C.Pradeep Vs. Commissioner of GST and Central Excise, Selam granted relief against coercive action against the applicant therein subject to the petitioner deposit 10% of the alleged unadjudicated liability within 10 days of his release. The applicant is also ready to deposit the amount of 10% within ten working days. Hon’ble Delhi High Court in Central Goods & Service Tax Delhi (East) Vs/. Sh Nawal Kumar & Ors. Crl. M.0 231/2020 decided on 4.6.2021, after noticing C.Pradeep’s case (supra), dismissed a petition seeking cancellation of anticipatory bail granted by learned ASJ, New Delhi with regard to offence under section 132(1)(a)&(b). In that case also, the allegations were of availing fake ITC of Rs.85.40 Crores without actual supply of goods. He further referred to Pawan Goel & Anr. Vs. DGGI, Gurugram B.A No.458/2021 and Crl.M.A No.2101/2021 decided on 4.6.2021 to contend that in that case also the allegations were of availment of ITC to the tune of Rs.22.42 Crore without actually receiving the goods, however the anticipatory bail was allowed noticing that an amount of Rs.2.5 Crore had already been deposited with the department. Tarun Jain Vs. DGGI B.A No.3771 and Crl.M.A No.16552/2021 decided on 26.11.2021 by the Hon’ble Delhi High Court, involving wrongfully utilizing ITC of Rs.72 Crores is also referred to submit that anticipatory bail was granted without deposit of 10% of the unadjudicated liability. Reliance has also been placed on Saurav Gupta Vs. CGST (Delhi East) B.A No.2815/2021 decided on 2.8.2021 wherein anticipatory bail has also been granted under section 132(1)(b) of GST Act, 2017 wherein the liability was of Rs.56 Crores.
6. On notice, bail application has been opposed by learned counsel for the complainant department (hereinafter called the department). It is submitted that the averments made in the application are wrong. The investigation is pending and is at crucial stage. During investigation, it has come to the notice of the department that M/s Rajnandini, company of the applicant-accused had received goods invoices without actual supply of goods from four suppliers namely M/s Curil Tradex Pvt. Ltd., M/s Vivrak Impex Pvt.Ltd., V.R.Trading and M/s Shri Ram Trading. These firms were found to be non-existent and non operational and have passed on ITC of Rs.77.2 Crores approximately. M/s Shri Ram Trading Company, sole Proprietorship firm of Mukesh Kumar having registered principal place of business at Khaja Khera Road, Sirsa, Haryana has shown taxable supply to M/s Rajnandini of goods having taxable value of Rs.55.77 Crore. The registration of the said firm has been cancelled on 8.9.2021 it having been obtained by means of fraud or misrepresentation and suppression of facts. During inspection, visits the company could not be located. The summons sent to him at is address were received back unserved and Mukesh could not be traced at any of the addresses. Supplier of Shri Ram Trading Company, M/s Radha Krishan Metal, M/s Sai Baba Trader, M/s Laxi Trader- Traders were also found non-existent.
7. Search of premises of the applicant was also conducted and various documents relating to supply from M/s Shri Ram Trading Company were seized. It has been pointed out by the applicant that they have paid tax of Rs.1,84,65,031/- on the supply of M/s Shri Ram Trading Company. Similarly, M/s Curil Tradex Pvt. Ltd. has shown taxable supply to M/s Rajnandini having taxable value of Rs. 148.45 Crores and involving ITC of Rs.26,72,23,205/-. Statement of Hitesh. Director of M/s Curil Tradex Pvt. Ltd. was recorder u/s 70 CGST who stated that somebody had fraudulently used his document and he had nothing to do with the Curil Tradex. M/s Curil Traded was found to be non operational and bogus firm the document of the applicant. agreement was also round to be forged.
8. M/s. V.R.Trading, sole Proprietary firm of Mr. Sanjay Chaudhary has shown supply of Rs. 150 Crore to Ms Rajnandini involving 11V of Rs.27.12 Crore and during visit address of’ the same could not be located. Thus, the applicant Ms Rajnandini has received bogus supply of taxable value of Rs. 427.89 Crore involving ITC of Rs.77.02 Crore thereby violatirg the provisions of section 132(1) (b) & (c) of CGST Act, 2017 which is punishable upto 5 years of imprisonment and the offence is cognizable and non-bailable. M/s Rajnandini is engaged in showing bogus receipt of goods from non-existent. non-operational entities and fraudulently availing benefit of 1Tc of such supplies on which no GST has been actually paid to the Government.
9. Learned counsel for the complainant submits that ‘Socio economic offences constitute a class apart and need to he visited with different approach.’ He has referred to state of Bihar & Another Vs. Amit Kumar @Bachcha Rai (2017) 13 Supreme Court Cases 751. P.V.Ramana Reddy vs. UOI, CWP No.4764 of 2019 decided on 18.4.2019 (Telangana High Court): Sanjay Dhingra Vs. DGI Crl.M.No. 50256:2019 decided on 23.1.2020 (P&H), Vikas Goyal vs DGGI, Crl.M.No. 18992:2019 decided on 24.7.2019
( P& H) Jatender Mann Vs. DGGL. Crl.M No. 16714. 2018 decided on 27.8.2019 (P&H) Anil Kumar Jain Vs. Deputy. Director. DGG1, Cr1.M.No.3972/2020 decided on 4.2.202:) (P&H): Malvinder Mohan Singh Vs. State of NCT of Delhi decided on 10.8.2020 ( )elhi).
10. I have heard learned counsel Cur the applicant-accused and learned counsel for the respondent and perused the record.
11. Applicant-accused Hetram is seeking bail in connection with offence under section 132(1)(b)8c(c) of GST Act. 2017 with the allegations against him that M/s Rajnandini, of which the applicant Hetram is Director, has fraudulently avaled ITC to the extent of Rs. 77.02 Crore as the supplier firms were found non-existent/non-functional. In this regard, at the very outset, it is relevant to point out that concededly the premises of M/s Curil Tradex Pvt. I.td.. M.s Vivrak Impex l.td. and V.R.Trading were visited on 24.11.2021, 26.112071 and 19.11.9021 by the State GST Department and those firms were ound operational and in existence. At this stage, it has not been seriously disputed that ilk applicant has paid the tax on the entire value of goods purchased along with GST through proper banking channels and that during visit there was no mismatch/shortage in his stock/sold goods. It has been rightly submitted by applicant counsel that if any subsequent stage the firms have stopped working for one reason or the other, the applicant cannot be held liable for the same. So far as M/s Shri Ram trading registration of which has statedly been cancelled, is concerned, it has not been brought on record to point out as to at what stage and when the registration of the firm was cancelled and it. became non existent. The applicant claims to have employed 250 workers in his unit and there is no counter claim to the same. The applicant. may have many suppliers. it was also pointed out during argument that a purchaser (M/s Rajnandini in the present case) can
not verily and cross check the authenticity of the claim of his supplier qua the payment of GST though the department can do it. Furthermore, the maximum punishment of imprisonment provided for the of–fence alleged in the case is extendable to a period of 5 years and fine. There is no provision of stringent twin conditions before grant of bail as is contained in PNTA Act, 2002 and companies Act, 2013 is in this factual background of the case that the plea of the applicant-accused, who is in custody since 19.5.2022, for bail is to he considered.
12. In C.Pradcep Vs. Commissioner of GST and Central Excise Selam (supra), referred by learned counsel for the applicant-accused, it was observed by the Hon’ble Supreme Court as under:
“Learned counsel for the petitioner submits that ……………………………….. been completed by 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 idler 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 he 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 shah stand dismissed for non-production without further reference to the court.
Subject to the above notice returnable with three weeks. Dasti in addition is permitted.
For a period of one week. no coercive action he 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…–
12. C.Pradeep’s case (supra) has been referred by Hon’ble Delhi High Court in case of Nawal Kumar and others (supra) while rejecting challenge to an order passed by learned ASJ Delhi granting anticipatory hail, subject to deposit of Rs.I0 Crores out of total liability within ten days to an accusal alleged to have availed fake ITC of Rs.54.86 Crores and 30.54 Crores from fictitious and non existent firms. (Pradeep’s case has also been referred in Tarun Jain and Saurav Gupta (supra).
13. In Pawan God and others (supra) Hon’ble Delhi High Court allowed an application for anticipatory bail of the applicant therein with the allegation of availment of wrongful ITC of Rs.22.42 Crores without receiving the goods and only. on the basis of ingenuine invoices. Hon’ble Delhi High Court also referred to a Division Bench decision of Hon’ble Punjab & Haryana High Court in Akhil Krishan Baggu and another Vs. Deputy Director General of GST Intelligence and others CWP No.24 I q5 or 2019 (O&M) wherein C:Pradeep was also referred and considering various relevant judicial pronouncements inter-alia observed that arrest should be last option and it should he restricted to ‘hose exceptional cases where arresting the accused is imperative in the facts and circumstances of the case. Personal liberty is a very precious fundamental right and it should be curtailed only when it becomes imperative according to the peculiar facts and circumstances of the case.
14. In Manoj Bansal Vs. DGGI, CAW No.2869;2021 decided by hon’ble Punjab & Haryana High Court on 28.9.2021 interim bail granted to an accused in a case its 132(1)(b) & (c) of CGST, 2017 with the allegation of availing ITC of Rs. 15.4 Crore without any actual moment of goods and the supplier firms non-existent, was made absolute. It was observed as under:
“3. This matter has came up for hearing on 16 3.2021 when a coordinate bench of this Court had passed a detailed order vide which interim bail was granted to the petitioner. The Coordinate Bench had taken note of the argument raised by learned Senior Counsel to the petitioner including the argument to the effect that no notice under section 73 or 74 of the GST Act had been issued to the petitioner-company and to the effect that the prosecution could only be launched alter determination of tax liability and the petitioner could he made liable to pay tax with penalty only alter the said pre-condition of adjudication of tax with penalty only after the said pre-condition of adjudication of tax liability was fulfilled….”
15. In Akhil Krishan Maggu & Anr. Vs. Deputy DGGI & Ors. CWP No.24195 of 2019 decided on 15.11.2019, Division Bench of Hon’ble Punjab & Haryana High Court referred to the case of C.Pradeep (supra) and part I P.V. Ramand Reddy (supra) and provision of section 11 of the Cr.P.C has observed as under:
“From the above quoted enunciations of law relating to arrest during investigation i.e. prior to determination of tax evaded under Finance Act, 1994 (Service Tax) as well CGST Act 2017 by different High Courts and interim order passed by Hon’ble Supreme Court, We find that it is consistent opinion Of Courts that power of arrest should be resorted in exceptional circumstances and with full circumspection. The maximum sentence prescribed under GST Act is 5 years and it is directly linked with quantum of evasion of tax. Prosecution of any person is directly linked with determination of evasion of tax because if there is no evasion of tax, there cannot be criminal liability. The determination of tax liability does not fall within realm of criminal courts whereas liability of tax ad penalty is determined by adjudication authority under GST Act which is subject to challenge before Tribunal and Courts. To record statements under CGST Act, 2017 summons are served and if any person complies with summons, the mandate of section 41 and 41(a) of Criminal Procedure code should he taken care of.
The opinion expressed by Telangana High Court cannot be …….. applicable to each and every case and cannot be treated an authority to conclude that DGGI has power to arrest in every case during investigation and that too without determination of tax evaded as well as finding that the accused has committed an offence described u/s 132 of CGST Act, 2017.
16. hon’ble Division Bench further observed that arrest deprives any person from his right of liberty enshrined under Article 21 of the Constitution of India. The authorities referred by learned counsel for the department are not applicable being distinguishable on facts.
17 As noticed above. the accused of offences u/s 32(1)(b)and (c) of the Act, against whom there are allegations of fraudulently availing huge ITC, have even been granted anticipatory ban. The present case is for regular bail.
18. Coming back to the case in hand, it is relevant to note, in the peculiar facts and circumstances of the case, existence and non-existence of the supplier firms of M/s Rajnandini is yet to be determined and so is the tax liability of the applicant. In this case the applicant-accused is in custody since 193.2022. His custodial interrogation is no more required. Therefore, keeping in view the totality of (acts and circumstances of the case and without commenting anything On merit. the had application is allowed Applicant/accused Hetram is admitted to bail on his furnishing bail bonds and surety bonds to the satisfaction of learned Haqa/Duty Magistrate Gururgram.
19. However, this hail order is subject to the condition that the applicant shall deposit 10% of the total liability i.e. 7.2 Crore within 10 working days From today with the concerned competent authority. ‘The applicant-accused shall continue to join the investigation and co-operate with the-department. The applicant shall not leave the country without permission 01 the trial court Haqa Magistrate and shall not hamper the investigation, temper evidence or influence the witnesses in any manner. It is clarified that in case the payment of the above said 10% liability is not made, as directed above, this bail order Shall automatically stand cancelled without any Further order being passed in this regard and the applicant-accused Hetram shall surrender to the custody of the court.
20. A copy of this order be sent to learned Haqa/Duty Magistrate, Gurugram for compliance. File he consigned to record room after due compliance.
