Varun Rakesh Bansal vs State Of Gujarat
2022 Latest Caselaw 8756 Guj

  R/CR.MA/15878/2022                           CAV ORDER DATED: 04/10/2022




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/CRIMINAL MISC.APPLICATION NO. 15878 of 2022

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VARUN RAKESH BANSAL Versus STATE OF GUJARAT ========================================================== Appearance:

Ms. Megha Jani Advocate with MR DILIP T MAMTORA(10296) for

MR MEET D PANSURIA(10170) for the Applicant(s) No. 1 MR PRANAV TRIVEDI APP for the Respondent(s) No. 1 ==========================================================

CORAM:HONOURABLE MS. JUSTICE GITA GOPI

Date : 04/10/2022

CAV ORDER

1. This application has been filed under section

439 of the Code of Criminal Procedure for regular bail in

connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/

Varun Bansal/2022-23/B.61, dated 28.07.2022 issued

under section 69(1) read with section 132(1)(c) of the

Gujarat Goods and Services Tax Act, 2017 (for short 'GST

Act') and Central Goods and Services Tax Act, 2017 (for

short 'CGST Act').

2. The present applicant is the erstwhile director

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of the company namely Active Metals Pvt. Ltd. till

October, 2019, who subsequently by resolution dated

15.11.2021, was appointed as an authorized

representative to look into the matters of CGST/SGST of

the company.

2.1 It is stated that, under section 67(2) of the

CGST and GST Act, a search was conducted on

20.06.2022 at the company and residential premises of

the Directors, and on 22.07.2022, a letter along with

order was issued under section 83 of the Act for

provisional attachment of the plant, machinery, vehicles

and stock of the company on the ground that input tax

credit was availed by the company by showing fake

purchases from bogus/suspicious entities.

2.2 The search was conducted during the period

from 20.07.2022 to 28.07.2022, and on 28.07.2022, the

applicant came to be arrested by issuing arrest

memorandum by the State Tax Officer, Enforcement

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Division, Rajkot, for the offence punishable under section

132(1)(c) of the CGST and GST Act, alleging that input

tax credit of Rs.10.71 crores in respect of fictitious

transactions amounting to Rs.59.55 crores was availed by

him.

3. Ms. Megha Jani along with Mr. Dilip T.Mamtora

and Mr. Meet D.Pansuria, learned advocates for the

applicant submitted that, the allegations against the

present applicant are of entering fake invoices into the

data provided to the department; however, the alleged

invoices provides transportation detail whereby the goods

were supplied and delivered to the accused purchaser.

Ms. Jani states that the entire case of the department is

based on documentary evidence, which have been either

uploaded by the applicant or seized by the department.

3.1 Ms. Jani submits that while arresting the

applicant, the mandatory procedure of section 69 of the

CGST Act, 2017 has not been followed, which envisages

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that if the commissioner has reasons to believe that a

person committed offence under clause (a) to (d) of

section 132(1), he shall by order authorized any officer of

central tax to arrest such person; however, in the case of

the applicant, such authorization of the Commissioner has

not been made available to the applicant and thus, the

entire exercise carried out is in blatant violation of the

procedure contemplated in section 69 of the CGST Act,

2017.

3.2 Ms. Jani further submits that the allegation of

availing wrongful input tax credit is without any basis and

contrary to the evidence; thus, states that the

documentary evidence for the purchase of goods

including transportation details had been provided by the

applicant, which itself suggests that there was a

movement of goods and therefore section 132(1)(c) is not

applicable in the present case. It is stated by Ms. Jani that

the goods were purchased from the entities mentioned in

the arrest memorandum against payments made through

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RTGS, which was admitted by the department in part-3 of

the remand application dated 06.08.2022, which was not

taken into consideration.

3.3 Ms. Jani stated that transactions with 10 firms,

whose registrations were cancelled by the department,

was based on some intelligence and system analysis and

as shown in the arrest memo, the purchase shown by the

company from 10 firms, were before the order of

cancellation of registration and thus, she submits that

section 132(1)(c) would not be applicable.

3.4 Ms. Jani submitted that 138 transactions, which

is alleged by the department, are against regular bills,

purchase number with party name, date of E-way bill

number, bill amount, CGST taxable amount, truck

number, lorry number and the transport company. The

total documents were produced before the department,

which shows the movement of goods

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3.5 Ms. Jani further submitted that the provisional

attachment of property under section 83, includes plant &

machinery, vehicle and stock, which are assessed by the

department as Rs.6,17,21,463/-; and further the applicant

has made payment of Rs.50 Lakhs on July, 2022. Ms. Jani

stated that complaint has been filed on 22.09.2022

alleging that the applicant is availing Input Tax Credit

using invoice and bills without any supply of goods or

services or fraudulently has availed the Input Tax Credit

without any invoice or bills.

3.6 Ms. Jani submitted that the witness list does

not suggests any of the transporters nor any transporter

has been made accused in the matter and as per the

witness list, the only four witnesses are from the

department. According to Ms. Jani, had there been any

suspicion transaction and communication with Angadiya

Pedi, then they ought to have been made witness in the

complaint.

3.7 Reliance has been placed by Ms. Jani on the

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judgment of Arnesh Kumar Vs. State of Bihar & Anr.,

reported in 2014 (8) SCC 273, and P. Chidambaram v.

Directorate of Enforcement, reported in (2020) 13

SCC 791.

4. Mr. Pranav Trivedi, learned Additional Public

Prosecutor submitted that, the applicant in his statement

stated that he is managing all the purchase transactions,

and he is the main person indulged in the activity of

showing fake purchase transactions in the books of

accounts of the company, which resulted into availing

ineligible input tax credit, which caused huge revenue

loss to the government exchequer. Mr. Trivedi submits

that the company has shown fake purchases to the tune

of Rs.59.55 crores from 10 fictitious entities and thereby

wrongfully availed illegal input tax credit to the tune of

Rs.10.71 crores. Mr. Trivedi stated that such purchase

invoices were just paper invoices wherein no real

movement of goods were involved between seller and

purchaser.

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4.1 Mr. Pranav Trivedi, learned Additional Public

Prosecutor further submitted that, money were routed

through Angandiyas and ten companies with whom the

applicant had made fictitious transactions were cancelled

with effect from the date of registration and the reason

stated for the cancellation were either the address of the

firms were not found / not existed or the registration has

been obtained by wilful misstatement or suppression of

facts; and when detail checking of purchase transactions

of the Company were made, 138 purchase transactions

were found with 10 bogus firms.

4.2 In 30 invoices, the dispatch place from where

the goods had been loaded and dispatched was different

in E-way bill and lorry receipt; thus, the place from where

the goods were loaded could not be determined. Mr.

Pranav Trivedi, learned APP further stated that, in 34

invoices, when the movement of vehicles were checked

based on radio frequency identification, no such

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movement of vehicles and no such reliable documents of

movement were found, which creates doubts about the

goods actually received. Mr. Trivedi further submitted

that in 68 invoices, dispatch place of E-way bill and lorry

receipt were different and in all fake purchase to the tune

of Rs.59.55 crores from 10 fictitious entities could be

easily found out; and thereby it was seen that the

applicant had availed illegal Input Tax Credit to the tune

of Rs.10.71 Crores wrongfully and such availment of

Input Tax Credit were never deposited in the government

exchequer. Mr. Trivedi states that such wrongful

availment has been purposefully shown with a huge

amount of fake purchase in the books of account so as to

avail ineligible Input Tax Credit, and thereby, to reduce

payment to be made in cash for output tax liability and

also to claim it as expenditure. Mr. Trivedi submitted that

such purchases were only paper basis. Mr. Pranav

Trivedi, submitted that in the year 2020-21 the firm was

shown to be the manufacturer of brass while in 2021, the

trading is of scrap.

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5. Heard learned advocates on both the sides and

perused the material on record. In the impugned arrest

memo, the allegation against the applicant is of

committing offence under section 132(1)(c) of the GGST

Act & CGST Act. Section 132 of the GGST Act is pari

materia to the provisions under the CGST Act. It relates

to "Punishment for certain offences". For ready

reference, section 132(1) is reproduced hereunder;

"Section 132.(1) - Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offence, 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

R/CR.MA/15878/2022 CAV ORDER DATED: 04/10/2022

availment or utilization of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;

(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

R/CR.MA/15878/2022 CAV ORDER DATED: 04/10/2022

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 provisions of this Act or the rules made thereunder;

(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

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evaded or the amount of input tax credit wrongly availed or utilised 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 utilised 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 utilised 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

R/CR.MA/15878/2022 CAV ORDER DATED: 04/10/2022

a term which may extend to six months or with fine or with both."

5.1 In P. Chidambaram v. Directorate of

Enforcement, (2020) 13 SCC 791, the Apex Court held

as under:

"22. The learned senior counsel for the appellant has also placed reliance on the decision in Sanjay Chandra vs. CBI, (2012) 1 SCC 40 with specific reference to paragraph 39, which reads as hereunder:

"39. Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds: the primary ground is that the offence alleged against the accused persons is very serious involving deep-rooted planning in which, huge financial loss is caused to the State exchequer; the secondary ground is that of the possibility of the accused persons tampering with the witnesses. In the present case, the charge is that of cheating and dishonestly inducing delivery of

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property and forgery for the purpose of cheating using as genuine a forged document. The punishment for the offence is imprisonment for a term which may extend to seven years. It is, no doubt, true that the nature of the charge may be relevant, but at the same time, the punishment to which the party may be liable, if convicted, also bears upon the issue. Therefore, in determining whether to grant bail, both the seriousness of the charge and the severity of the punishment should be taken into consideration."

The said case was a case of financial irregularities and in the said circumstance this Court in addition to taking note of the deep-rooted planning in causing huge financial loss, the scope of consideration relating to bail has been taken into consideration in the background of the term of sentence being seven years if convicted and in that regard it has been held that in determining the grant or otherwise of bail, the seriousness of the charge and severity of the punishment should be taken into consideration.

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23. Thus, from cumulative perusal of the judgments cited on either side including the one rendered by the Constitution Bench of this Court, it could be deduced that the basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial. However, while considering the same the gravity of the offence is an aspect which is required to be kept in view by the Court. The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case. Keeping in view the consequences that would befall on the society in cases of financial irregularities, it has been held that even economic offences would fall under the category of "grave offence" and in such circumstance while considering the application for bail in such matters, the Court will have to deal with the same, being sensitive to the nature of allegation made against the accused. One of the circumstances to consider the gravity of the offence is also the term of sentence that is prescribed for the offence the accused is alleged to have committed. Such consideration with regard to the gravity of

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offence is a factor which is in addition to the triple test or the tripod test that would be normally applied. In that regard what is also to be kept in perspective is that even if the allegation is one 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 provides so. Therefore, the underlining conclusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for either grant or refusal of bail though it may have a bearing on principle. But ultimately the consideration will have to be on case to case basis on the facts involved therein and securing the presence of the accused to stand trial."

5.2 The Hon'ble Supreme Court in case of Sanjay

Chandra Vs. CBI, [2012 1 SCC 40], has referred the

case of State of Kerala Vs. Raneef, [(2011) 1 SCC

784], to observe that in deciding the bail applications an

important factor which should certainly be taken into

consideration by the court is the delay in concluding the

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trial. Here, taking into consideration the course of

investigation adopted by the Department, the evidence,

so collected, the trial will take considerable time and it

may happen, if denied bail, the judicial custody be

prolonged beyond the statutory period of punishment

which is for five years.

5.3 After the arrest on 28.07.2022, on 22.09.2022,

the complaint came to be lodged by the department.

During this process of almost two months necessary

investigation had been made and documents along with

the list of witnesses have been filed in the Court of Chief

Judicial Magistrate, Jamnagar.

5.4 Section 132(1)(i) provides for punishment as

that 'in cases where the amount of tax evaded or the

amount of input tax credit wrongly availed or utilised 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; and section 132(2)

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provides that, 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.

5.5 Section 138 of the Act makes provision for

compounding of offences under the Act, even after the

institution of prosecution, on payment, by the person

accused of the offence, such compounding amount in

such manner as may be prescribed. The compounding

shall be allowed only after making payment of tax,

interest and penalty involved in such offences, on

payment of compounding amount as may be determined

by the commissioner, the criminal proceeding already

initiated in respect of the said offence shall stand abated.

5.6 Pre-charge evidence is required to be recorded.

It is true that fraudulent ITC claim has created huge

liability for the government, but equally it is necessary

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that the accused gets an opportunity to defend his case.

The department during the course of judicial custody of

the present applicant has made necessary investigation

and collected documentary evidence through the

applicant himself and those supported documents has

been produced with the complaint before the Chief

Judicial Magistrate. The argument of the learned APP that

investigation is still in progress and release of applicant

would create hindrance in further investigation, does not

make good the level on merits, since the department

already had sufficient time to investigate their claim and

to gather evidence, which they have alleged are in

connection with fraudulent claim of Input Tax Credit and

alleged evasion.

5.7 The department has already attached the

property under section 83 which is valued as

Rs.6,17,21,463/-. Further the amount of Rs.50 Lakhs has

been paid by the applicant and if necessary under sub-

section (1) of section 138 of the Act, the Commissioner

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would have all the authority to compound the offence on

payment being made by the alleged accused. The details

of all the fake companies have been recorded. 138

transactions have been found to be suspicious and

against that the applicant claims the said to be actual

transfer against the payment by RTGS. Both the sides

would get an opportunity to prove their case. Further

custody of the applicant does not appear to be necessary,

since the department, if provided by law, can go on with

the further investigation and produce necessary

documents in support of their case, as sufficient time for

the investigation was taken prior to filing of the complaint

by the department.

6. Hence, considering the facts and circumstances

of the case and in view of the observations made above,

the present application is allowed. The applicant is

ordered to be released on regular bail in connection with

Arrest Memo No.DCST/Enf/Div-10/STO-3/Varun

Bansal/2022-23/B.61, dated 28.07.2022 on executing a

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personal bond of Rs.1,00,000/- (Rupees One Lakh only)

with one surety of the like amount to the satisfaction of

the trial Court and subject to the conditions that he shall;

[a] not take undue advantage of liberty or misuse

liberty;

[b] not act in a manner injurious 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

concerned trial court;

[e] furnish the present 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 concerned trial court;

7. The authorities shall adhere to its own Circular

relating to COVID-19 and, thereafter, 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

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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 lower Court having jurisdiction to try the case.

8. Rule is made absolute to the aforesaid extent.

Direct service is permitted. Registry to communicate this

order to the concerned Court/authority by Fax or Email

forthwith.

(GITA GOPI,J) Pankaj