The Hon’ble High Court of Gujarat vide its order dated 12.09.2022 in the matter of Munavver Ismail Memon Vs. State of Gujarat in R/Criminal Misc. Application No. 14368 of 2022, allowed the bail application filed by the applicant and the ordered to release the applicant on regular bail, finding that the bail application has been objected by the department mainly on the ground that the investigation is still going on, which is not enough. The department should have pointed out that the further custody of the applicant is necessary. 

The applicant filed the application before the Hon’ble High Court under Section 439 of the Code of Criminal Procedure, seeking bail in connection with the File No.CHIEF CST/ENF–CO/EOW/ STO-1/2021-22 registered with office of the Chief Commissioner of State Tax, Enforcement Co-Ordination, Gujarat State, Ahmedabad and State Tax Officer-1, (EOW), office of the Chief Commissioner of State Tax, Enforcement Co-Ordination, Gujarat State, Ahmedabad for the offences punishable under Sections 132(1)(a) and 132(1)(i) of Central Goods and Services Tax Act and Gujarat Goods and Services Tax Act, 2017.

Facts of the Case: –

• The applicant is proprietor of M/s. N R Beauty World and doing his business of cosmetic items at Surat City, State of Gujarat.
• That based on the intelligence, it came to the knowledge of the Department that the applicant is involved in tax evasion activities. The modus was supplying goods without issuance of any invoice for which the applicant has created software that was used for tax evasion and showing less sales of business items.
• It is alleged that the applicant has made hidden (unaccounted sales) in cash as well as formed ‘kachcha’ invoices which were not included in accounts, which he has to maintain as per the law.
• That various documents in the form of electronic gadgets have been seized and recovered during the course of investigation, and it came to the knowledge of the authority that he has caused a loss of Rs.10.94 crore to the Government Exchequer.
• Thereafter, the applicant was arrested on 24.03.2022 and produced on the same day before the Court of learned Metropolitan Magistrate and since then, he is in judicial custody. His bail applications filed before the Court of Magistrate & City Sessions Court, was rejected vide orders dated 20.06.2022 and 20.07.2022 respectively.
• Further, the complaint as prescribed under the provisions of the Act has already been filed on 20.05.2022 by the Authority concerned. Feeling aggrieved by the refusal to grant bail by the Court concerned, the applicant has preferred present application to grant him regular bail.

Applicant’s Submissions: –

• It was submitted on the behalf of the applicant that there is no corroborative evidence found by the respondent authority during the course of search and therefore, the entire allegations are based on certain entries. However, adjudication process has not been finalized and entire working has been made on assumptions and presumptions.
• The applicant is regularly uploading the sales transactions on the web portal, in such circumstances, it is on record that, the case is based on documentary evidence and necessary materials have already been seized by the department and now, further custody of the applicant is not necessary.
• That no show cause notice has been issued to the applicant to determine the liability under the provisions of the Act. Moreover, it was submitted that without prejudice to its rights and contentions, the applicant herein, willing to deposit 10% of the amount within a period of six months from the date of his release before department and he will also file an undertaking to this effect.
• That the complaint as prescribed under the act has already been filed and the investigation is over. The Applicant is a permanent resident of Surat and he having roots in the society. 
• Further the maximum punishment is up to five years and case is triable by Magistrate and the offence is compoundable one and case would not likely to conclude in a reasonable time.
• With the above contentions, it was urged that the constitutional right of liberty must be protected, unless further custody of the applicant is necessary as the basic jurisprudence of bail is that, bail is a rule and jail is an exception. Thus, considering the facts and circumstances of the present case, discretion may kindly be exercised in favour of the applicant.

Respondent’s Submissions: –

• On the other hand, it was submitted on the behalf of the respondent- State that the applicant had acted contrary to the provisions of the Act and did not declare the business transaction in his GST Returns.
• That the investigation is still going on to understand the mode of physical delivery of goods issued against unaccounted transactions and therefore, if he is released on bail, the investigation would adversely affected and considering the background facts of the applicant, he can temper with the evidence and influence the witnesses.
• That the applicant defrauded the State Exchequer to the tune of Rs.10.94 crore and offence committed is grave economic offence which need to be viewed with a different approach so far bail is concerned. Thus, he prays that, the applicant should not be enlarged so as to ensure the proper investigation.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, referred to the judgment of Hon’ble Apex Court in the case of Chidambaram Vs. Directorate of Enforcement, (2020) 13 SCC 791, wherein it was held that ‘even allegations of grave economic offence, it is not a rule that bail should be denied in every case and whether bail is granted or not, will have to be on the case-to-case basis of the facts involved therein and securing the presence of the accused to stand trial.” I deem it fit to exercise the discretion in favour of the applicant.’
• It was found by the Hon’ble Court that in the instant matter the unaccounted transactions, the evasion of tax has been unearthed by the department. Moreover, the department has already filed the complaint before the Court concerned.
• Further the Hon’ble Court considering the fact that ‘the department has objected the bail application mainly on the ground that investigation is still under way’, was of the view that merely raising the contention that investigation is still going on is not enough, but department should have pointed out that the further custody of the applicant is necessary.
• It is on record that, no liability is fixed or determined as per the statutory provisions of the Act. It is the right of the assessee to file an appeal against the assessment subject to deposit of the 10% disputed liability which may not exceed Rs.2 crore.
• It was noticed by the Hon’ble Court that Rs.39,88,318/- has already been recovered during the course of investigation from the applicant. Therefore, when trial of the case would not likely to conclude in a reasonable time and the applicant is in custody since 24.03.2022 and considering the bonafide shown by the applicant to deposit the amount, I am inclined to release the applicant on bail subject to deposit of Rs.60 lakhs, before the Office of Chief Commissioner of State Tax, Ashram Road, Ahmedabad within a period of six months in six equal installments from the date of his release.
• Further it was held that the aforesaid amount already recovered from the applicant shall be accepted by the department. The applicant shall file an undertaking to this effect before the Court concerned and this Court within a period of 15 days from the date of his release. However, If the applicant fails to comply with the condition, the bail granted to the applicant shall stands cancelled automatically.

The Hon’ble Court with the above findings allowed the application and ordered to release the applicant on bail in connection with the above-stated case, on executing a personal bond of Rs.10,000/- (Rupees Ten thousands only), with one surety of the like amount to the satisfaction of the learned Trial Court and subject to the conditions: – He shall – (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 within a week; (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;

Lastly, it was stated by the Hon’ble Court that the Authorities will release the applicant only if he is not required in connection with any other offence for the time being. If breach of any of the above conditions is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter. Bail bond to be executed before the learned Lower Court having jurisdiction to try the case. It will be open for the concerned Court to delete, modify and/or relax any of the above conditions, in accordance with law.