Case Law Details
Directorate General of Goods & Services Tax Intelligence & Ors. Vs Rakesh Kumar Goyal (Patiala House Court)
As matter is kept today for order.
1. Ld. Senior Counsel for accused/applicant has prayed for grant of bail on the ground of parity with the co-accused. It is submitted that the applicant’s companies have paid the amount of duty to the supplier who actually deposited the same with the government as per the provisions under the GST laws. It is further submitted that after receipt of the goods with corresponding tax invoice, the applicant’s companies availed the credit (referred as input tax credit under the GST laws) of the GST paid on such supplies to its supplier, as per Section 16 of the CGST Act. It is further submitted that in case of imported goods, the applicant’s companies discharged tax obligation at the time of import as part of Customs duty levied under the Customs Act, 1962 read with Customs Tariff Act, 1975. It is also averred by Ld, senior counsel that accused joined the investigation as and when called by the department. It is further argued that Hon’ble Jharkhand High Court in the case of Nikit Mittal v. State of Jharkhand (2019) 76 GST 708 (Jharkhand), wherein upon an undertaking received from the accused to join investigation and offer to reverse the alleged fraudulently availed Input Tax Credit, the benefit of anticipatory bail was granted by the Court and accused here is ready and willing to reverse the blocked and un-utilized credit amounting to INR 2,55,18,717/- Crores. It is further submitted that the Learned ACMM has rejected the submission of the applicant that the law laid down by Division Bench of the Hon’ble Delhi High Court in the case of Makemytrip (India) Pvt. Ltd. 32 Vs. Union of India, reported as (2016) 44 STR 481 (Del.), is not applicable in the present case due to the law laid down by Hon’ble Telangana High Court in the matter of P.V. Ramana Reddy Vs. Union of India, reported as 2019-TIOL-873-HCTELANGANA-GST. It is submitted that the Makemytrip (India) Pvt. Ltd. Vs. Union of India reported as (2016) 44 STR 481 (Del.), the principle that the notice should be issued prior to arrest of person, this judgment was uphold by the Hon’ble Supreme Court in case of Union of India Vs. Makemytrip (India) Pvt. Ltd., reported as 2019 (22) G.S.T.L. J59 (S.C.) by way of specific order. The same has been dealt by the Hon’ble Punjab and Haryana High Court in the case of Akhil Krishan Maggu Vs. Dy. Dir., D.G. of GST Intelligence, reported as 2020 (32) GSTL 516 (P&H). It is further submitted that COFEPOSA matter is already over and accused has also won in other cases filed by the department. It is further contended by Ld. Counsel that in Make mytrip judgement, Makemytrip (India) Pvt. Ltd. 32 Vs. Union of India, reported as (2016) 44 STR 481 (Del.), it was held by Hon’ble High Court which was further upheld by the Hon’ble Supreme Court in case of Union of India Vs. Makemytrip (India) Pvt. Ltd., reported as 2019 (22) G.S.T.L. J59 (S.C.) that without assessment of tax and fixing the liability accused can not be arrested, moreover, an adjudication and prior notice is necessary before the arrest.
In support of his submissions, Ld. Counsel for DGGSI has placed reliance upon the following judgements:
- Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST & C.Ex. SalemMANU/TN/3348/2019
- Anil Mahajan Vs. Commissioner of Customs & Anr. [2000 (53) DRJ 501]
- Ashok Kumar & Ors. Vs. Commissioner CGST & Central Excise, Navi Mumbai Commissionerate & Ors.MANU/MH/1002/2020
- Nikit Mittal Vs. State of Jharkhand MANU/JH/1339/2019
- Makemytrip (India) Pvt. Ltd. Vs. Union of India (2016) 44 STR 481 (Del.)
- Union of India Vs. Makemytrip (India) Pvt. Ltd. 2019 (22) G.S.T.L. J59 (S.C.)
- Akhil Krishan Maggu Vs. Dy. Dir. D.G. of GST Intelligence 2020 (32) GSTL 516 (P&H)
- Rajesh Arora Vs. Union of India MANU/RH/0441/2020
- Abhay Sanatbhai Bhatt Vs. Commissioner of CGST MANU/GJ/0627/2019
- Akshay Dinesh Patel Vs. Commissioner of Central Goods and Services Tax MANU/GJ/1259/2020
- Hanumanthappa Pathrera Lakshmana State
MANU/KA/2222/2020 - Sanjay Chandra Vs. CBI MANU/SC/1375/2011
- V. Ramana Reddy Vs. Union of India 2019-TIOL-873-HC-TELANGANAGST
- V. Ramana Reddy Vs. Union of India 2019 (26) GSTL J175 (S.C.) 134 – 135
2. According to the brief fact of this case as stated on behalf of respondent, DGGSI. It is alleged that the companies owned and controlled by accused Rakesh Kumar Goyal have availed most of the amount of ITC from companies owned or controlled by said Rakesh Kumar Goyal himself. Thus, there was a complex web of circular trading among these companies which was used to pass on ITC, without any actual payment of GST at any stage.
It is further alleged that the investigation in this case revealed that companies owned or controlled by the applicant have issued invoices to companies of Shri Vikas Chowdhary without any corresponding supply of the goods. There are allegations of fraudulent passing on of ITC by companies owned and controlled by Rakesh Kumar Goyal. These companies have passed on inadmissible ITC of Rs. 61.02 Crores (approx.) to M/s Aastha Apparels Pvt. Ltd., M/s JBB Apparels Pvt. Ltd., M/s JBN Apparels Pvt. Ltd. and M/s Nautilus Metal Craft Pvt. Ltd. controlled and owned by Vikas Chowdhary and Vikas Chandan. Firms of co-accused have taken refund of around Rs. 61 crores in this manner in which accused has been the beneficiary by way of circular trading. whereas firm of accused have directly taken the IGST refund of around more than 9 crores.
3. In the present case, it is also alleged that most of the time companies of applicant falls under level 1 or level 2 (and sometimes level 3 or 4 also) but not paid any tax in cash but shown the same to have been paid in their returns. These companies showed supply of bills among themselves in invoices. There were no genuine purchases of goods or raw materials by these companies. Further, a few firms from which these companies claimed to have purchased goods were found to be nonexisting (i.e. Jeet Globle). These companies further issued invoices to companies of Vikas Chowdhary in which GST is mentioned. The amount of GST mentioned in invoices was taken by the companies of Vikas Chowdhary as ITC and, he got refund from the Govt. by showing export. Sometimes companies of applicant took refund by falsely showing export of the goods. and took. It is alleged that in fact, there had been no actual cash payment of GST at any stage so as to make payments to the Govt. Exchequer. In this manner without payment of any GST/IGST to the govt. Input Tax Credit was passed on and obtained by the companies in connivance with the companies of the co accused persons. Companies of Vikas Chowdhary also took refund in cash from Govt.. Offence allegedly committed by the accused in connivance with the co-accused like Vikas Chowdhary and others.
On the search of the firms of accused, no manufacturing activity was found, some firms were found to be non-existent on the given addresses and vehicles which were shown to have been transporting the goods either they were non-existent or were passenger vehicles or JCB loader. It is alleged that only invoices, without goods, were circulated amongst the companies of Rakesh Kumar Goyal which were ultimately sent to companies of Shri Vikas Chowdhary and Shri Vikas Chandan.
4. This bail application is strongly opposed by Ld. counsel for respondent on the ground that offence has been committed in a very planned manner in the connivance of co-accused in which huge losses are inflicted upon the Govt. Exchequer. Inter alia, it is further contended that accused has failed to join the investigation, he has not provided the necessary documents and information, he even has not got his statement recorded and thereby mislead the investigating agencies. Ld. counsel further refuted the bail on the ground of parity as the role of accused is of main accused and his company falls under Level-1. Applicability of judgement of Hon’ble Telangana High Court while differentiating with the ratio of the judgement in Makemytrip (India) Pvt. Ltd to the facts of this case also pleaded.
5). In support of his submissions, Ld. Counsel for DGCI has placed reliance upon the following judgements:
- Appeal No.1938/2017 – Anil Kumar Yadav Vs. State (NCT) of Delhi,
- Masroor v. State of Uttar Pradesh and another (2009) 14 SCC 286
- State of U.P. v. Amarmani Tripathi, (2005) 8 SCC 21 : 2005 SCC (Cri) 1960 (2) at page 31
- Kanimozhi Karunanithi Vs. CBI – Bail Application No.724 of 2011 decided on 08.06.2011 by Delhi High Court.
- S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439,
6. The law in regard to grant or refusal of bail is very well settled by Hon’ble Supreme Court and Hon’ble High Court in innumerable judgements. The court while granting bail should exercise its discretion in a judicious manner and not as a matter of course. Though at the stage of granting bail a detailed examination of evidence and elaborate documentation of the merit of the case need not be undertaken, there is a need to indicate in such orders reasons for prima facie concluding why bail was being granted particularly where the accused is charged of having committed a serious offence. Any order devoid of such reasons would suffer from non-application of mind. It is also necessary for the court granting bail to consider among other circumstances, the following factors are also to be considered before granting bail and they are:
(a) The nature of accusation and the severity of punishment in case of conviction and the nature of supporting evidence.
(b) Reasonable apprehension of tampering with the witness or apprehension of threat to the complainant.
(c) Prima facie satisfaction of the court in support of the charge.
7. Here in this case as prayed on behalf of accused to grant bail on the ground of parity with the other co-accused persons, the ground of parity is not available here since accused, unlike the co-accused persons, despite his arrest in this case has not co-operated with the investigation and he even refused to give his statement. He even has not provided the Telly data in order to help in completing the investigation. There is nothing which accused has offered to deposit with the complainant in lieu of his evasion of GST. It is a case where circular trading was going on, where confusion is created with respect to the First Level of supplier so as to avoid the tax liability. As on today as per the allegation made against the accused’s firms that it were shown to have been manufacturing the goods and passing on input tax credit to the companies of the co-acussed without actually carrying out any manufacturing by creating forged and fabricated documents. Parity also not available on the ground that accused firm has been most of the time falls under level 1 or level 2 but not paid any tax in cash but shown the same to have been paid in their returns. Furthermore, there are allegations against the accused that the total ITC passed on by the companies of R.K. Goyal is estimated to more than Rs.180 Crore, including ITC passed/ circulated amongst his own companies.
8. So far as, the contention of Ld. Counsel about discharging of tax liability and willingness of the accused to reverse the blocked and un-utilized credit amounting to INR 2,55,18,717/- Crores is concerned, the liability of accused is much higher in this case. As it alleged against him that in the commission of the alleged offence accused has claimed to have purchased the raw material but fail to produce any documents in this regard. In fact as alleged, no manufacturing was going on in the firms of the accused, statement of guard have been taken which shows there was nothing on the site to show any sort of manufacturing. Moreover 12 companies have been shown running on three addresses. Accused has been shown as the main offender who allegedly involved in large scale fraudulent passing on of ITC by companies owned and controlled by accused Rakesh Kumar Goyal himself. These companies have passed on inadmissible ITC of Rs. 61.02 Crores (approx). The manner and conduct of entire offence make it graver. Furthermore, there are allegations against the accused that the total ITC passed on by the companies of R.K. Goyal is estimated to be more than Rs.180 Crore, including ITC passed/ circulated amongst his own companies.
9. On the point of applicability of ratio in judgement of Makemytrip (India) Pvt. Ltd. is concerned reliance is placed upon hon’ble Supreme Court in Special Leave Petition (Crl.) 4322-4324 of 2019, titled Union of India v. Sapna Jain &Ors, vide order dated 29.06.2019, ordered as under:
“As different High Courts of the country have taken divergent views in the matter, we are of the view that the position in law should be clarified by this Court. Hence, the notice.
63. As the applicant-respondents have been granted the privilage of pre-arrest bail by the High Court by the impugned orders, at this stage, we are not inclined to interfere with the same. However, we make it clear that the High Courts while entertaining such request in future, will keep in mind that this Court by order dated 27.5.2019 passed in SLP(Crl.) No. 4430/2019 had dismissed the special leave petition filed against the judgment and order of the Telangana High Court in a similar matter, wherein the High Court of Telangana had taken a view contrary to what has been held by the High Court in the present case. Beyond the above, we do not consider it necessary to observe anything further.”
And also on
The Hon’ble Telangana High Court in the matter of P.V. Ramana Reddy Vs. Union of India, reported as 2019-TIOL-873-HCTELANGANA-GST had held as under :
60. If, even before the GST regime is put on tracks, some one can exploit the law, without the actual purchase or sale of goods or hiring or rendering of services, projecting a huge turnover that remained only on paper, giving rise to a claim for input tax credit to the tune of about Rs.225.00 crores, there is nothing wrong in the respondents thinking that persons involved should be arrested. Generally, in all 64 other fiscal laws, the offences that we have traditionally known revolve around evasion of liability. In such cases, the Government is only deprived of what is due to them. But in fraudulent ITC claims, of the nature allegedly made by the petitioners, a huge liability is created for the Government. Therefore, the acts complained of against the petitioners constitute a threat to the very implementation of a law within a short duration of its inception.
61. In view of the above, despite our finding that the writ petitions are maintainable and despite our finding that the protection under Sections 41 and 41-A of Cr.P.C., may be available to persons said to have committed cognizable and non-bailable offences under this Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest, in view of the special circumstances which we have indicated above.”
Although Hon’ble Supreme Court and High Court of Telangana dealt with the issue of pre-arrest bail but intention of Superior Court is clear from the above cases that offence of such nature are serious in nature in comparison to those where Govt. is deprived of what is due to them. But here in such cases of fraudulent ITC claims, as alleged against the accused, a huge liability is created for the Government. The act of such nature is termed as threat to the very implementation of law. The Hon’ble Telangana High Court thus also dealt with the protection under Section 41 and 41-A Cr.P.C.,, therefore giving show cause notice prior to the arrest is answered in this judgement. This Court also placed reliance on this observation which is also uphold by Hon’ble Supreme Court. In view of this, contention of Ld. Counsel about issuance prior notice, and adjudication before arrest are also answered. Moreover, judgement of Hon’ble Telangana High Court is directly on the point of GST whereas, MakeMyTrip case, only deals with evasion of service tax. Both are altogether different kind of taxation in assessment as well as in implementation. This is also rightly answered by the DGGI that Hon’ble Delhi High Court in the case of Makemytrip vs. UOI & Ors. itself, in Para 74 and 75 Hon’ble Court has made distinction among the cases of Service Tax with cases under other Acts, such as Customs Act, Central Excise Act or Income Tax Act.
10. In support of the observations, this court have also place reliance upon Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439, the Supreme Court held as under:-
“34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.
35. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations.”
The gravity is to be judged by the impact, the offence has, on the society, economy and financial stability of the country. In the today’s time when country is fighting with corona virus pandemic and struggling all over on the economic front such evasion and false claims have further pushed the country towards poverty, unemployment and starving. Such offence are committed with cool mind and scrupulous planning. Therefore, in this case offence alleged against the accused is grave in nature considering the manner in which it committed and the amount involved in commission of the offence. As accused has not co-operated in investigation therefore, apprehension of tempering of witness as alleged against him is not unfounded. Ground of parity with the co-accused is not available to the applicant considering is role and involvement as discussed above.
11. In view of the discussion hereinabove, this court do not deem fit to grant bail to the accused. Hence, the present application is dismissed. Copy of this order be given dasti to the Ld. Counsel for applicant and IO.
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.
