Bail Not To Be Denied On The Ground That Investigation Is Underway – Under Trials Cannot Be Detained Indefinitely Pending Trial 

Facts: That the applicants filed the applications under Section 439 of Cr.P.C., seeking regular bail in connection with the offences registered under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Service Tax, 2017, in File No.: DGGI/INV/GST/ 1093/2022.

Applicants’ Submissions: –

• It was submitted on the behalf of the Applicant that pursuant to summons issued under Section 70 of the Act, the statement of the applicants were recorded under duress and they were made to confess that their firms had availed input tax credit on the basis of the invoices received without actual receipt of the goods from seven registered entities and further transferred/passed, by issuing invoices without actual delivery of goods. Thereafter, on 28.04.2022, both the applicants were arrested under Section 69 of the Act.
• Therefore, it was submitted that no offence is made out against the applicants and their arrest is in contravention of mandatory provisions and rules made thereunder, as power under Section 69 should be used sparingly and reasons must be recorded for the arrest.
• That in the present case, no cogent reason has been provided by the competent authority for the arrest of the applicant. Thus, the action on the part of the authority is in complete violation of Article 21 of the Constitution of India.
• Further, the authority has already seized cash amounting to Rs. 2,19,95,000/-, which is more than 10% of the alleged amount. It was urged that same may be treated as deposit under Section 107(6), which provides for stay against the coercive recovery of dues on pre-deposit of 10% of the disputed tax liability.
• That the complaint before the Court has already been filed during the proceedings. The investigation has been exhaustively undertaken by the authority and during the search and seizure, necessary documents as well as electronic evidence including laptops, mobile, pen drive, have been seized and same is with the department.
• The maximum punishment is up to 5 years. The applicants are in custody since 28.04.2022 and they having deep roots in the society and they are not habitual offenders. Besides, the trial is going to take reasonable time and therefore, keeping the applicants behind the bars for indefinite period would violate the fundamental right of freedom as guaranteed under Article 21 of the Constitution.  Therefore, in the circumstances, the discretion may kindly be exercised in favour of the applicants by enlarging them on bail with suitable conditions.

Respondents’/Revenue Submissions: –

• On the other hand, it was submitted on the behalf of the revenue/respondents that alleged offence is economic offence and keeping in view the gravity of offence and also, the heavy loss to the government exchequer, no case is made out for exercising discretion in favour of the applicants.
• That while arresting the applicants, sufficient reasons were being assigned by the authority concerned, as the applicants have committed commercial fraud resulting in evasion of huge amount of tax and therefore, if they are released on bail, the investigation would be hampered.
• The co-accused is still at run and there are all chances to increase the fraud amount and the present applicants being originator of fake invoices, their custody is necessary for effective investigation. Therefore, no case is made out for exercising powers to release the applicants on bail and the application may be rejected.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the relevant provisions, found that the respondent no. 2 received input that many firms engaged in trading of Technical Grade Urea are involved in dubious transactions and after analysis of GSTR-2A, 3B, it was revealed that the firms were involved in bogus invoice transactions to claim ineligible input tax credit.
• That on 26/27.04.2022, a search was conducted at the premises of M/s. Nirmala Corporation, which is Proprietorship concern of applicant Raj Suchak, and it was found that the firm is engaged into the trading of technical grade urea and acetic acid. The officers during the search recovered cash amount to Rs. 2,38,00,000/- as well as unaccounted cash to the extent of Rs. 2,19,95,000/- was seized.  It was also found during the investigation that the applicant Raj Suchak, supplied fake invoices to 7 different business entities which are found non-existing / bogus firms and the tax consultant/applicant VG Pragada was also involved in supplying bogus invoices of the 7 firms through RV Vaghasia on commission basis.  In brief, during the search proceedings it was revealed that the applicants are involved in fraudulently available and passing on in-eligible fake input tax credit amounting Rs.16.53 crores and thereby committed an offence under Section 132(1)(b) and 132(1)(c) of the Act.
• Pursuant to which, on 28.04.2022, the applicants were arrested and their arrest was authorized by the Judicial Magistrate, Rajkot upon their production before the Court. Further, their regular Bail Applications were rejected by the courts below.
• The Hon’ble Court thereafter, on perusal of facts and circumstances of the case found that the applicants were need to be enlarged on bail, as there is no straight jacket formula for consideration of bail to an accused, as it all depends upon the facts and circumstances of each case. In the case of Union of India Vs. K.A. Najeeb, 2021 (3) SCC 713, it was held that under trials cannot indefinitely be detained pending trial.  Further, in the present case investigation is virtually over and amount as referred having been disclosed during the search proceedings.  Therefore, the contentions raised by the respondent authority that investigation is underway is not tenable, when complaint has been filed before the competent court and the trial would take considerable time.  So, the respondent authority failed to make out a case that further custody of the applicant is necessary, the detention for further period is unwarranted.
• Further, the amount equal to 10% of the alleged amount has already been seized by the authority, which as contended on the behalf of the Applicants may be treated as deposit.  Besides, maximum punishment is up to 5 years and the offence is compoundable, moreover, the applicants do not have any criminal record.
• The Hon’ble Court taking reference of the judgment of Hon’ble Supreme Court in Chidambaram Vs. Director of Enforcement, (2020) 13 SCC 791, wherein it was held that ‘even if the allegation of grave economic offence, it is not a rule that bail should be denied in every case, since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provide so’, held that the applicants are ordered to be released on regular bail in connection with the File No. : DGGI/INV/GST/1093/2022, on executing personal bond of Rs.10,000/- (Rupees Ten thousands only) each, with one surety each of the like amount to the satisfaction of the learned Trial Court and subject to the conditions: – (a) not take undue advantage of liberty or misuse liberty; (b) not act in a manner injuries to the interest of the prosecution; (c) surrender passport, if any, to the lower court; (d) not leave India without prior permission of the Sessions Judge concerned; (e) furnish latest address of residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of the trial Court;

The Hon’ble Court with the above findings, directed the authorities to release the applicants if they are not required in connection with the any other offence.  If breach of any above condition is committed, the Sessions Judge concerned shall take appropriate action or issue warrant against the applicants. The bail bond to be executed before the learned trial Court having jurisdiction to try the case. It will be open for the sessions judge concerned to delete, modify and/or relax any of the above conditions, in accordance with law.

To read the complete judgment 2022 Taxo.online 701