Afzal Hanif Nagaria vs The Union Of India And Ors
2021 Latest Caselaw 3834 Bom

                                                                                                 27-ABA-450-2021.doc




                                                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                      CRIMINAL APPELLATE JURISDICTION

                                          CRIMINAL ANTICIPATORY BAIL APPLICATION NO.450 OF 2021

                                  Afzal Hanif Nagaria                                         Applicants

                                            Versus

                                  The Union Of India And Anr.                                 Respondents
                                                                   .....
                                  Mr. Taraq Sayed a/w Ms. Chandani Tanna, Ms. Shrushti Relekar, i/b.
                                  India Law Alliance, Advocate for the Applicant.
                                  Mr. Jitendra B. Mishra, Special P. P. For Respondent No.1.
                                  Ms. M. R. Tidke, APP for the Respondent - State.
                                                                  .....

                                                                 CORAM         :    PRAKASH D. NAIK, J.

                                                                 DATE          :    2nd MARCH, 2021

                                  PER COURT:

1. This is an application for anticipatory bail in connection

with Summons No. CBIC-DIN-20201267VR000000DFES dated

2nd December 2020 issued by the respondent No.1. The Summons

was issued under Section 70 of the Central Goods and Services Tax

Act, 2017 (for Short "CGST Act"). The applicant was summoned to

appear for enquiry in connection with M/s. Neha Impex under CGST

Act, 2017. The applicants attendance is necessary to give evidence

and produce documents or things in his possession such as purchase Manish S. Digitally signed by Manish S. Thatte

Thatte Date: 2021.03.09

invoices and ledgers for the period 2017-18 to 2 nd December, 2020, 15:34:43 +0530

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bank statement, shipping bill, transport documents in respect of ASP

Impex, Universal Traders, Fab India Impex, Fab India Exports, Tex

Fab India, Nagaria Exports, Alliance Corporation, Pacific

International and Faisal Traders.

2. It is the case of the respondent No.1 that the applicant

along with his father Mohammed Hanif Nagaria and brother Faisal

Hanif Nagaria carry business of exports of ready-made garment and

imitation jewellery. They have incorporated nine companies. In

furtherance of their business the applicants' company/firms

purchased goods from M/s. Neha Impex & M/s Rohini Impex for

export. The aforesaid firms in turn purchased their goods from

Mahalaxmi Traders, allegedly non-existent. M/s. Neha Impex & M/s

Rohini Impex and Mahalaxmi Traders were allegedly floated by the

applicant, his father and brother by preparing false documents with

intention to avail and utilize inadmissible 'Input Tax Credit' and to

avail the export benefits. The father and the brother of the applicant

were summoned and interrogated on 26th & 27th November, 2020.

They were arrested in accordance Section 132(1)(b), 132(1(c) and

Section 132 (e)(e) of CGST Act

3. The applicant preferred application for anticipatory bail

before the Sessions Court apprehending arrest. The said application

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was rejected by the Sessions Court vide order dated 30 th January,

2021.

4. The learned counsel for the applicant submitted that the

applicant has been falsely implicated in this case. The father and

brother of the applicant were already arrested and they were granted

bail. The applicant along with his father had incorporated four

companies, namely, M/s. Alliance Corporation, M/s. Tex Fab India,

M/s. Fab India Exports and M/s. Nagaria Exports and they are in the

business of ready-made garments. The applicant is silent partner in

the firms. Goods were purchased from M/s. Neha Impex & M/s

Rohini Impex for the purpose of export in the month of September,

2020. The applicant and his father never met proprietors of M/s.

Neha Impex and M/s. Rohini Impex and all purchase transactions

had taken place through brokers. After following due procedure,

goods were exported and the amount was realized from buyers. The

applicant is relying upon the bank statements evidencing the

payment made to M/s. Neha Impex and M/s. Rohini Impex and

payment received from the buyer. Reliance is also placed on the

copies of lorry receipts and shipping bills which shows the movement

of goods. It is therefore contended that the purchases from M/s.

Neha Impex & M/s Rohini Impex were legitimate transactions and all

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the purchased goods had been exported. The applicant is willing to

cooperate with the investigation. He need not be subjected to

custodial interrogation. It is submitted that the father and brother of

the applicant were released on bail vide order dated 16th December,

2020. The applicant had complied directions of learned Sessions

Court vide interim order and attended respondent's office. His

statement is recorded. The applicant has not claimed/filed GST

returns and no loss is caused to exchaquer. Sachin Gaikwad has

denied acquaintance with applicant. Through Jagdish Chouhan and

Mourya Sachin Gaikwad was introduced to Sameer Patel. It is further

submitted that Section 64 of the CGST ACT relates to summary

assessment in special cases wherein the Officer should be in

possession of evidence showing that there is tax liability of the

person and the officer believed that any delay in assissing such tax

liability would result in adverse effect on revenue. After conducting

requisite assessment, the officer may proceed to determine the tax in

other dues, under this Act in terms of Section 73 or 74. After proper

assessment and subsequent initiation of proceedings under Sections

73 & 74 of CGST Act by issuing show cause notice in personal

hearing a subsequent order demanding tax that the recovery

proceeding under Section 78 and 79 can be invoked. It is further

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submitted that the applicant is only a partner in four out of the nine

entities incorporated by his father. There are documents on record to

show the transactions were genuine. The respondents have failed to

provide information specifically in relations to the transactions made

and the tax involved in respect to the said four entities in which the

applicant is partner. Section 70 of CGST Act deals with power to

summon a person to give evidence. It provides for information that

assessee may give to proper office to facilitate the investigation. The

applicant attended office of respondent on 6 th January, 2021 to 8th

January, 2021 and thereafter on 11th and 12 January, 2021. The

applicant had provided all the documents in respect to the four

entities which is evident from letter dated 11 th January, 2021. The

applicant has cooperated with the investigation. He was only

interrogated on the first date and was required to attend the office

on subsequent date. The father and the brother of the applicant were

already subjected to custodial interrogation. The bank statements,

lorry receipts which are placed on record substantiate the contention

of the applicant that the transactions are legitimate.

5. Learned counsel for the applicant relied upon the

decision of the High Court of Delhi delivered in the case of Lupita

Saluja Vs. DGGI and Anr. It is submitted that in the aforesaid

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decision, the Court had observed that the material on record

establishes that the suppliers have supplied goods to the company

and it is misconceived that the suppliers were non existent. In the

present case it cannot be said that there were no actual transactions.

Goods were purchased and the same were exported which is evident

from the amount deposited in the account. Learned counsel also

relied upon decision of Karnataka High Court, in the case of Shravan

Mehra Vs. Superintendent of Central Tax, Anti Evasion, GST

Commissionerate, Bangalore. In this case anticipatory bail was

granted on the ground that maximum punishment is five years and

taking into consideration magnitude of offence and it is not

punishable with death or improsonment for life. Offence is

compoundable with authority. He relied on and the decision of the

High Court for the State of Telangalana at Hyderabad in the case of

P. V. Ramana Reddy Vs Union of India, decision of this Court in the

case of Mr. Ashok Kumar s/o Shri. Chandrapal Singh and Ors. V/s.

Commissoner CGST & Central Excise, Navi Mumbai

Commissionerate and Anr1, decision in the case of Jaychandran

Alloys (P) Ltd. V/s. Superintendent of GST & C.Ex. Salem 2 and

Hanumanthappa Pathrera Lakshmana V/s. State, Senior Intelligence,

1 2020(41) G.S.T.L. 311 : 2020 (82) GST 58.

2 2019(25) G.S.T.L. 321 (Mad.)


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Officer, D.G. of GST Iltelligence, Bengaluru 3 etc. On the basis of the

ratio laid down in the decisions, learned counsel for the applicant

submitted that the action could be initiated only after the assessment

and in the event transactions are genuine which are fortified by the

documents, the applicant need not be subjected to custodial

interrogation.

6. Learned counsel for the respondent relied upon the

affidavit in reply and opposed the application for anticipatory bail. It

is submitted that the transactions are bogus. firms M/s. Neha Impex

& M/s. Rohini Impex had issued invoices showing supply of goods to

nine firms being managed by Faisal Nagaria the brother of applicant

and Hanif Nagaria father of applicant and the applicant. The

applicant is partner in four firms and the remaining firms also

managed by same set of persons. The two dummy units M/s. Neha

Impex & M/s Rohini Impex were apparently created with the

intention of availing 'Input Tax Credit' and to cover up for the goods

being exported by the said accused which they have procured

without any documents. It is submitted that, during the interrogation

the applicant have failed to cooperate. He has not answered

questions regarding business put to him by the respondents and the

only contention adverted by him is that he is not aware of the facts 3 2020(38) G.S.T.L. 447 (Kar.)

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of the business and his father is conducting the same. The applicant

failed to provide the details of CHA or shipping agent who assisted

him in exporting the goods. During the course of investigation,

statement of Jagdish Bhikhabhai Chauhan proprietor of M/s. Rohini

Impex was recorded on 26th November, 2020. Statement of Sachin

Waman Gaikwad, proprietor of M/s. Neha Impex was recorded on 5 th

January 2021. In their statements they have stated that they had

never done any business of ready-made garment and they do not

know the applicant nor the firms managed by applicant, his father

and brother. From E-way bills issued by M/s. Neha Impex & M/s.

Rohini Impex, it is seen that the four firms in which the applicant is

a partner, has been issued invoice showing total assessable value as

Rs.130.90 Crores and the total tax in respect of the said transaction

is 8.08 Crores. The details of the transactions are provided in the

affidavit-in-reply. It was also submitted that out of the amount of

Rs.130.90 Crores payable by the firms of applicant to M/s. Neha

Impex & M/s. Rohini Impex an amount of 14.87 crores has been paid

till date. M/s. Neha Impex & M/s. Rohini Impex have not provided

any goods to the applicant. The applicant is yet to pay 116.03 Crores

to the so-called suppliers whereas the said suppliers have denied ever

having supplied any goods to the applicant's firms. The applicant has

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to pay amount of Rs.116.03 Crores to the suppliers. Suppliers have

not paid any tax on goods. He further submitted that the facts clearly

prove that the applicant had procured the invoices from the said two

firms. The said firms have been created only to facilitate the

procurement of invoice and to evade tax. The entire benefit of illegal

activities of the said firms are flowing to nine firms being managed

by the applicant and his family members. While granting bail to the

father and brother of the applicant it was observed by the Court that

the main culprit in this case is applicant and Sameer patel who have

not yet been accosted by the department. Complicity of the applicant

is writ large. The custodial interrogation of the applicant is necessary.

The submission of the applicant that payment was made to M/s.

Neha Impex & M/s. Rohini Impex cannot be considered, in view of

the fact that the said concern never conducted any business and the

proprietors of M/s. Neha Impex & M/s. Rohini Impex had

categorically stated that they have never sold any goods to any

person. Learned counsel for the respondent also relied upon the

decision in the case of Mr. Ashok Kumar s/o Shri. Chandrapal Singh

and Ors. V/s. Commissoner CGST & Central Excise, Navi Mumbai

Commissionerate and Anr. (Supra). It is submitted that, this Court in

this decision observed that respondent's contention that applicants

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detention in custody is necessary to prevent him from causing the

evidence of offence to dissapear or tampering evidence is well

founded. The submission that, officer under the CGST Act cannot

take custody of the arrested persons cannot be accepted. He also

relied upon the decisions in the case of P. V. Ramana Reddy Vs Union

of India (supra). In this decision it was observed that to say that

prosecution can be launched only after completion of assessment

goes contrary to section 132 of CGST Act, 2017. The said decision

was confirmed by the Apex Court. Learned counsel also pointed

order passed by division bench of this Court in writ petition No. 3804

of 2019. In this case it was contended that investigation cannot

commences without following Section 154 or 155 of Cr.P.C. The

Court refused to grant relief. Reliance is also placed on decision of

Madhya Pradesh High Court. In the case of Shailesh Rajpal V/s.

Rajpal V/s Commissioner 2020 (32) GSTL 336 (MP) and Himani

Munjal V/s. Union of India decided by Rajasthan High Court, 2019

(31) GSTL 608 (Raj). It is submitted that Section 69 of CGST Act,

2017, bestows the power on the commissioner, if he has reason to

believe that, a person has committed an offence, specified in clause

(a)(b)(c) or (d) of Section 132 which is punished under clause (I) or

(ii) of sub Section (1) or Subsection (2) of said Section. The CGST

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Act, 2017 is a self contained Act, and the commissioner of CGST

Act, 2017 is authorized and bestowed with the powers to arrest a

person if he has reason to believe that the said person has committed

an offence which is liable to punishment under Section 132 (1)(i) of

the Act. The act also provided the safeguard of liberty to the person

arrested in as much as the person arrested has to be produced before

the Magistrate within 24 hours.

7. The Hon'ble Supreme Court in Special Leave Petition

No.4322-4324/2019 filed by the Union of Indian challenging the ad-

interim relief granted by the Bombay High Court in the case of Union

of Indian V/s. Sapana Jain & others vide its order dated 29th May,

2019 has held as under :-

"We make it clear that the High Court's while entertaining such request in future, will keep in mind that this court by order dated 27th May, 2019 passed in SLP (Crl) No. 4430/2019 had dismissed the SLP 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".

8. Consequent to the decision of the Hon'ble Supreme

Court in the case of Union of India V/s. Sapana Jain and Others, the

Hon'ble Bombay High Court has refused to grant any bail to the

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similarly placed Applicants in such cases. The respondent relied upon

the decision of the Hon'ble Bombay High Court in the case of Ashish

Jain V/s. Union of India & Ors. In Writ Petition No. 3804 of 2019

wherein the Hon'ble High Court of Bombay has refused to entertain

writ petition filed by the petitioner seeking interim protection of

prevention from arrest in the nature of an anticipatory bail.

9. The Hon'ble High Court for the State of Telangana in

Writ Petition No. 4764 of 2019 in the case of P.V. Ramanna Reddy &

Ors V/s. Union of India in its order dated 18th April, 2019 had upheld

that authority and power of the Commissioner of CGST to arrest. The

Hon'ble High Court had also referred to the ratio laid down by the

Constitution Bench in Kartar Singh and ratio laid down in Kum.

Hema Mishra that jurisdiction under Article 226 of the Constitution

of India to grant protection against arrest should be sparingly used.

After verifying the allegations against the petitioners and the

circumstances prevailing in that case the Hon'ble High Court refused

to grant any interim relief to the petitioners.

10. The Telangana High Court also held that the object of

pre-trial arrest and detention to custody pending trial are manifold

such as :

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          a)       To prevent such person from committing any further

          offence.

          b)       Proper investigation of the offence

          c)       To prevent such person from causing the evidence of the

offence to disappear or tampering with such evidence in any

manner

d) To prevent such person from making any inducement,

threat or promise to any person acquainted with the facts of

the case so as to dissuade him from disclosing such facts to the

Court or to the Police officer.

11. According to respondent the transactions prima facie

suspicious. The complicity of the applicant is established during the

course of investigation. It is pertinent to note that the case of the

respondent is that all accused had acted in connivance with each

other. The applicant had admitted that the applicant is partner in

four firms. Statement of Sachin Gaikwad shows that, he does not

own any firm by name M/s. Neha Impex. Jaghish Chauhan had

approached him and requested him to meet his friend Mourya, who

in turn introduced him to Sameer Sayeed Patel for the purpose of

opening bank account with ICICI Bank. He provided blank cheque of

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Kotak Mahindra Bank. According to Sachin Gaikwad he did not

obtain any GST registration number. Blank cheques were provided

according to Sameer Patel. He had not obtained any registration

number. The statement of Jagdish Chauhan, would indicate that

several questions were put to him. He stated that he was approached

by Sameer Patel, who offered him job of collecting documents for the

purpose of opening Current account and rent agreements. He was

paid salary of Rs.15000/-. He was informed by Sameer Patel that he

wish to open a firm M/s. Rohini Impex in his name. He allowed him

to do so and opened the firm M/s. Rohini Impex. He had not signed

any cheques or RTGS forms for the said account. He also stated that

M/s. Neha Impex was created by Sameer Patel. He do not know any

person Sachin Gaikwad and that they do not own the premises

situated at A-1, Room No.8, Om Shivai CHS Ltd. Devipada Lane,

Near Gulmohar Society, Borivali East. Thus, prima facie there is

sufficient evidence against the applicant/accused. It is apparent that

the goods worth Rs. 2.47 Crores were allegedly purchased from M/s.

Neha Impex and M/s. Rohini Impex. They had in turn purchased the

goods from M/s. Mahalaxmi Traders. As per the investigation, M/s.

Mahalaxmi Traders is not in existence. The firms and the companies

of the applicant which are conducted by him along with his father

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and brother had according to respondent evaded tax. Sachin

Gaikwad has stated that he is not owner or proprietor of M/s. Neha

Impex. Statement of Jagdish Chauhan also transpired that he is

dummy proprietor of M/s. Rohini Impax. Owners of M/s. Neha

Impex and M/s. Rohini Impex have stated that they have not

provided any goods to applicant. The submission about payment to

M/s. Neha Impex & M/s. Rohini Impex cannot be considered to be

evidence of legal commercial contract since they have never

conducted any business. They have not sold goods. There is no

infirmity or illegality in summons issued by respondents. Considering

these circumstances, no case for grant of anticipatory bail is made

out.

ORDER

Anticipatory Bail Application No. 450 of 2021 is

rejected and stands disposed of accordingly.

                                               (PRAKASH D. NAIK, J.)




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