2019(02)LCX0003
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
THE HON'BLE MR.JUSTICE B.A. PATIL
Sri Avinash Aradhya,
& Sri Mallokaradhya
Versus
The Commissioner of Central Tax
CRIMINAL PETITION NO.497/2019
C/W
CRIMINAL PETITION NO 498/2019
, dated 18.02.2019
Cases Quoted -
..
Advocated By -
Petitioner's: Sri C.V. Nagesh, Senior Counsel for Sri Sandeep Patil, Advocate
Respondent's: Sri Jeevan J. Neeralgi, Standing Counsel
O R D E R
These two petitions have been filed by petitioners – accused under Section 438 of Cr.P.C to release them on anticipatory bail in the event of their arrest in O.R.No.40/2018-19 by the respondent for the offence punishable under Section 137 of Goods and Services Tax Act, 2017 (Hereinafter it has been used as ‘GST Act’ for short).
2. I have heard learned senior counsel Sri C.V. Nagesh for petitioners and learned standing counsel Sri Jeevan J. Neeralgi for respondent and perused the record.
3. Before going to consider the submission made by the learned counsel appearing for the parties, I feel it just and proper to mention in brief the gist of the complaint. Companies of Aradhya group along with M/s. Spiegel Enterprises Pvt. Ltd., M/s Bhavasteel Metalalloys Pvt. Ltd., M/s Infocert Enterprises, M/s Bhavani Steel Corporation, M/s Vijayalakshmi Industries were indulging in continuous issuance of fake invoices without actual supply of goods with an intention to enable them fraudulently avail the input tax credit.
4. It is further case of the prosecution that invoices are issued and circulated among the companies M/s Spiegel Enterprises Pvt. Ltd., M/s Bhavasteel Metalalloys Pvt. Ltd., M/s Infocert Enterprises, M/s Bhavani Steel Corporation, M/s Vijayalakshmi Industries till they reach back to the originating companies i.e., M/s Aradhya Groups without actual movement of goods, thereby transferring the irregular input credit to the originating companies for payment of GST and sales tax. It is further alleged that the act is an offence and it is criminal in nature. On the basis of the same, complaint was registered.
5. It is submitted by the learned senior counsel that as per the GST Act, maximum punishment which is liable to be imposed even if an offence has been made out and convicted is five years and even as per Section 138 of the GST Act, the said offence is compoundable before the Commissioner on payment. He further submitted that even there is no irregularity no loss of revenue has been caused to the State or Central Government. He further submitted that they have paid the GST by creating invoice. It is further submitted that the accused have not availed any loan or not raised any amount from the bank, even in the input tax, the credit has also been given and that has not been deducted or claimed from the State or Central Government. It is submitted that they are ready to co-operate with the investigation. He further submitted that in the preamble it is made clear that it is intended to levy and collect tax. It has not been defected by the accused. The Learned counsel further submitted that they are apprehending their arrest and even the objection which has been filed by the respondent to the present petition itself clearly goes to show that there is a apprehension of arrest. He further submitted that they are not defaulter to the bank or to the State. It is further submitted that the only allegations which has been alleged as against the petitioners – accused is that they have given only inflated transaction, therefore, he submitted that input tax credit and the sale is not an offence under the said Act. He further submitted that liberty of the person is also involved in this case. They are ready to abide by the terms and conditions to be imposed by this Court and ready to offer surety. On these grounds, both petitioners pray to allow the petition and to release them on bail.
6. Per contra, learned standing counsel on behalf of the respondent vehemently argued and submitted, if the entire case is looked into without there being any movement of goods, the petitioners have claimed input tax credit and thereby without payment of any tax by them, they claimed input tax credit. In that event the economy of the country is going to be affected. He further submitted that though it is the contention of the petitioner – accused that the input tax credit has been paid, but actually, no tax has been paid to anybody. It is only a paper transaction and it is going to affect the trade transfer of the nation and in the State. He further submitted that it is a scam and if it is allowed to be continued then it will be having its own cumulative effect on the economy as a whole. He further submitted that still investigation is in progress and if the petitioners – accused are released on bail, it is going to affect the entire investigation and they may tamper with the prosecution case. On these grounds, he prays to dismiss the petition.
7. I have carefully and cautiously gone through the contents of the complaint and other materials, which has been produced in this behalf.
8. Though several contentions have been raised with reference to the initiation of the action under the GST Act, since the scope of these petitions is limited only to consider the bail application, in that light, the other points which have been raised have not been dealt with in these petitions.
9. Before going to consider the submission made by the learned counsels appearing for the parties, I feel it just and proper to extract Sections 132, 137 and 138 of the GST Act which reads as under:
132. Punishment for certain
offences:-
(1) Whoever commits any of the following offences, namely:-
(a) supplies any goods or services or both without issue of any invoice, in
violation of the provisions of this Act or the rules made thereunder, with the
intention to evade tax;
(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 utilisation 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 but fails to pay the same to the Government
beyond a period of three months from the date on which such payment becomes due;
(e) evades tax, fraudulently avails input tax credit or fraudulently
obtains refund and where such offence is not covered under clauses (a) to (d);
(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 in the discharge of his duties under
this Act;
h) acquires possession of, or in any way concerns himself in transporting,
removing, depositing, keeping, concealing, supplying, or purchasing or in any
other manner deals with, any goods
which he knows or has reasons to believe are liable to confiscation under this
Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in any
other manner deals with any supply of services which he knows or has reasons to
believe are in contravention of any (i) receives or is in any way
concerned with the supply of, or in any other manner deals with any supply of
services which he knows or has reasons to believe are in contravention of any
|(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under
this Act or the rules made thereunder or (unless with a reasonable belief, the
burden of proving which shall be upon him, that the information supplied by him
is true) supplies false information; or (l) attempts to commit, or abets the
commission of any of the offences mentioned in clauses (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
wrongly 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 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 one hundred lakh rupees but does not exceed two hundred
lakh rupees, with imprisonment for a term which may extend to one year and with
fine;
(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 of an offence under this section,
then, he shall be punishable for the second and for every subsequent offence
with imprisonment for a term which may extend to five years and with fine.
(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section
(1) and sub-section (2) shall, in the absence of special and adequate reasons to
the contrary to be recorded in the judgment of the Court, be for a term not less
than six months.
(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), all offences under this Act, except the offences referred to in
sub-section (5) shall be noncognizable 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 subsection shall
be cognizable and non-bailable. (6) A person shall not be prosecuted for any
offence under this section except with the previous sanction of the
Commissioner.
137. Offences by companies:- (1) Where an offence committed by a person under
this Act is a company, every person who, at the time the offence was committed
was in charge of, and was responsible to, the company for the conduct of
business of the company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished
accordingly.
(2) Notwithstanding anything contained in sub-section (1), where an offence
under this Act has been committed by a company and it is proved that the offence
has been committed with the consent or connivance of, or is attributable to any
negligence on the part of, any director, manager, secretary or other officer of
the company, such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be proceeded against
and punished accordingly.
(3) Where an offence under this Act has been committed by a taxable person being
a partnership firm or a Limited Liability Partnership or a Hindu Undivided
Family or a trust, the partner or karta or managing trustee shall be deemed to
be guilty of that offence and shall be liable to be proceeded against and
punished accordingly and the provisions of subsection (2) shall, mutatis
mutandis, apply to such persons.
(4) Nothing contained in this section shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to prevent the
commission of such offence.
(4) Nothing contained in this section shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to prevent the
commission of such offence. the Commissioner on payment, by the person accused
of the offence, to the Central Government or the State Government, as the case
be, of such compounding amount in such manner as may be prescribed:
Provided that nothing contained in this section shall apply to –
(a) a person who has been allowed to compound once in respect of any of the
offences specified in clauses (a) to (f) of sub-section (1) of section 132 and
the offences specified in clause (l) which are relatable to offences specified
in clauses (a) to (f) of the said sub-section;
(b) a person who has been allowed to compound once in respect of any offence,
other than those in clause (a), under this Act or under the provisions of any
State Goods and Services Tax Act or the Union Territory Goods and Services Tax
Act or the Integrated Goods and Services Tax Act in respect of supplies of value
exceeding one crore rupees;
(c) a person who has been accused of committing an offence under this Act which
is also an offence under any other law for the time being in force;
(d) a person who has been convicted for an offence under this Act by a court;
(e) a person who has been accused of committing an offence specified in clause
(g) or clause (j) or clause (k) of sub-section (l) of Section 132; and
(f) any other class of persons or offences as may be prescribed:
Provided further that any compounding allowed under the provisions of this
section shall not affect the proceedings, if any, instituted under any other
law:
Provided also that compounding shall be allowed only after making payment of
tax, interest and penalty involved in such offences.
(2) The amount for compounding of offences under this section shall be such as
may be prescribed, subject to the minimum amount not being less than ten
thousand rupees or fifty percent of the tax involved whichever is higher, and
the maximum amount not being less than thirty thousand rupees or one hundred and
fifty per cent. of the tax, whichever is higher.
(3) On payment of such compounding amount as may be determined by the
Commissioner, no further proceedings shall be initiated under this Act against
the accused person in respect of the same offence and any criminal proceedings,
if already initiated in respect of the said offence, shall stand abated.
10. By going through the above provision, question which arises before the Court is whether the alleged offences are non cognizable or cognizable. This aspect has been dealt with by the Hon’ble Apex Court in the case of Om Prakash & Anr. v. Union of India &
Anr. reported in AIR 2012 SC 545 at paragraph Nos. 24 to 27, it has been held as under:
24. As we have indicated in the first paragraph of this judgment, the question which we are required to answer in this batch of matters relating to the Central Excise Act, 1944, is whether all offences under the said Act are non-cognizable and, if so, whether such offences are bailable? In order to answer the said question, it would be necessary to first of all look into the provisions of the said Act on the said question. Sub-section (1) of Section 9A, which has been extracted hereinbefore, states in completely unambiguous terms that notwithstanding anything contained in the Code of Criminal Procedure, offences under Section 9 shall be deemed to be non-cognizable within the meaning of that Code. There is, therefore, no scope to hold otherwise. It is in the said context that we will have to consider the submissions made by Mr.Rohatgi that since all offences under Section 9 are to be deemed to be noncognizable within the meaning of the Code of Criminal Procedure, such offences must also be held to be bailable. The expression “bailable offence” has been defined in Section 2(a) of the code and set out hereinabove in paragraph 3 of the judgment, to mean an offence which is either shown to be bailable in the First Schedule to the Code or which is made bailable by any other law for the time being in force. As noticed earlier, the First Schedule to the Code consists of Part I and Part II. While Part I deals with offences under the Indian Penal Code, Part II deals with offences under other laws. Accordingly, if the provisions of Part 2 of the First Schedule are to be applied, an offence in order to be cognizable and bailable would have to be an offence which is punishable with imprisonment for less than three years or with fine only, being the third item under the category of offence indicated in the said Part. An offence punishable with imprisonment for three years and upwards, but not more than seven years, has been shown to be cognizable and non-bailable. If, however, all offences under Section 9 of the 1944 Act are deemed to be non-cognizable, then, in such event, even the second item of offences in Part II could be attracted for the purpose of granting bail since, as indicated above, all offences under Section 9 of the 1944 Act are deemed to be noncognizable.
25. This leads us to the next
question as to meaning of the expression “non-cognizable”
26. Section 2(i), Cr.P.C. defines a noncognizable offence”, in respect whereof a
police officer has no authority to arrest without warrant. The said definition
defines the general rule since even under the Code some offences, though
“non-cognizable” have been included in Part I of the First Schedule to the Code
as being non-bailable. For example, Sections 194, 195, 466, 467, 476, 477 and
505 deal with noncognizable offences which are yet non-bailable. Of course, here
we are concerned with offences under a specific Statute which falls in Part II
of the First Schedule to the Code. However, the language of the Scheme of 1944
Act seem to suggest that the main object of the enactment of the said Act was
the recovery of excise duties and not really to punish for infringement of its
provisions. The introduction of Section 9A into the 1944 Act by way of amendment
reveals the thinking of the legislature that offences under the 1944 Act should
be non-cognizable and, therefore, bailable. From Part 1 of the First
Schedule to the Code, it will be clear that as a general rule all non-cognizable
offences are bailable, except those indicated hereinabove. The said provisions,
which are excluded from the normal rule, relate to grave offences which are
likely to affect the safety and security of the nation are lead to a consequence
which cannot be revoked. One example of such a case would be the evidence of a
witness on whose false evidence a person may be sent to the gallows.
27. In our view, the definition of “noncognizable offence” in Section 2(1) of the Code makes it clear that a non-cognizable offence is an offence for which a police officer has no authority to arrest without warrant. As we have also noticed hereinbefore, the expression “cognizable offence” in Section 2(c) of the Code means an offence for which a police officer may, in accordance with the First Schedule or under any other law for the time being in force, arrest without warrant. In other words, on a construction of the definitions of the different expressions used in the Code and also in connected enactments in respect of a noncognizable offence, a police officer, and, in the instant case an Excise Officer, will have no authority to make an arrest without obtaining a warrant for the said purpose. The same provision is contained in Section 41 of the Code which specifies when a police officer may arrest without order from a Magistrate or without warrant.
11. A close glancing of the above
proposition of law with present Act, the punishment imposed is five years. In
that light, the alleged offences are non- cognizable offences. By keeping the
above proposition of law and on plain reading of all these sections together,
one thing in the case is clear that the said offences are compoundable by the
commissioner on payment and maximum punishment of five years with fine and they
are not punishable with death or imprisonment for life. When the maximum
punishment which can be imposed is only up to five years with fine, will throw
light on the seriousness of the offence. Though it is argued during the course
of the argument made by the learned standing counsel for the respondent that the
activities involved by the petitioners would have a cumulative effect and if the
accused – petitioners are allowed to act in the manner in which they are doing,
ultimately economy of the country is going to be affected. In this context no
material is produced to show the magnitude of the loss of revenue going to be
caused and the manner in which it will affect the economy of the country. But
anyhow that is a matter which has to be considered and appreciated only when the
entire investigation is completed and full charge sheet is filed. Now this Court
is dealing with only anticipatory bail application, what are the parameters
which can be taken into consideration has been elaborately discussed by the
Hon’ble Apex Court in the case of Siddharam Satlingappa Mhetre Vs. State of
Maharashtra and others, reported in (2011) 1 SCC 694. At paragraph112 of the
said decision, it has been observed as to what are the parameters that can be
considered into while dealing with the bail application, which read thus:-
“112. The following factors and parameters can be taken into consideration while
dealing with the anticipatory bail: (i) The nature and gravity of the accusation
and the exact role of the accused must be properly comprehended before arrest is
made;
(ii) The antecedents of the applicant including the fact as to whether the
accused has previously undergone imprisonment on conviction by a court in
respect of any cognizable offence;
(iii) The possibility of the applicant to flee from justice;
(iv) The possibility of the accused’s likelihood to repeat similar or other
offences;
(v) Where the accusations have been made only with the object of injuring
or humiliating the applicant by arresting him or her;
(vi) Impact of grant of anticipatory bail particularly in cases of large
magnitude affecting a very large number of people;
(vii) The courts must evaluate the entire available material against the accused
very carefully. The court must also clearly comprehend the exact role of the
accused in the case. The cases in which the accused is implicated with the help
of Sections 34 and 149 of the Penal Code, 1860 the court should consider with
even greater care and caution because overimplication in the cases is a matter
of common knowledge and concern;
(viii) While considering the prayer for grant of anticipatory bail, a balance
has to be struck between two factors, namely, no prejudice should be caused to
the free, fair and full investigation and there should be prevention of
harassment, humiliation and unjustified detention of the accused;
(ix) The court to consider reasonable apprehension of tampering of the witness
or apprehension of threat to the complainant;
x) Frivolity in prosecution should always be considered and it is only the
element of genuineness that shall have to be considered in the matter of grant
of bail and in the event of there being some doubt as to the genuineness of the
prosecution, in the normal course of events, the accused is entitled to an order
of bail.”
12. In the light of the above proposition of law, by taking into consideration
the gravity of the offence and punishment which is liable to be involved , I am
of the considered opinion that by imposing some stringent conditions, if
accused – petitioners are ordered to be released on bail, it will meet the ends
of justice.
13. In that light, petitions are allowed and the petitioners/accused are ordered
to be enlarged on anticipatory bail in the event of their arrest in O.R.
No.40/2018-19 for the offence punishable under Section 137 of GST Act, 2017
subject to the following conditions:
1. Each of the petitioners shall execute a personal bond for a sum of
Rs.5,00,000/- (Rupees Five Lakh Only) with two sureties for the likesum to the
satisfaction of the apprehending authority / authorized officer
2. They shall surrender before the Investigating Officer within 15 days from
today.
3. They shall not tamper with the prosecution evidence or any documents
whichever is required for the purpose of investigation.
4. They shall co-operate during the course of investigation and they shall not
leave the country without prior permission of Special Court for Economical
Offences.
5. They shall not indulge in similar type of criminal activities covered under
the said Act.
In view of the disposal of the petitions, I.A.No.1/2019 filed in both petitions for interim bail does not survive for consideration and is disposed of accordingly