Kerala High Court
Badha Ram vs Intelligence Officer on 8 December, 2023
BA 10492/23 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
TUESDAY, THE 12TH DAY OF DECEMBER 2023 / 21ST AGRAHAYANA, 1945
BAIL APPL. NO. 10492 OF 2023
CRIME NO.7/2023 OF CONTROL ROOM, KTM, KOTTAYAM
(CRIME FILE NO.GST/INS-7/2023)AGAINST THE ORDER/JUDGMENT CMP 7164/2023
OF ADDITIONAL CHIEF JUDICIAL MAGISTRATE (E&O),ERNAKULAM
PETITIONER/SOLE ACCUSED:
BADHA RAM,
AGED 32 YEARS
S/O JOITARAM, MODAKA DWARA, JERAM, JALLOR, RAJASTHAN, NOW
RESIDING AT SOUPARNIKA, NEAR UNION CLUB, THIRUNAKKARA WEST
NADA, KOTTAYAM., PIN - 686001
BY ADVS.
C.S.MANILAL
S.NIDHEESH
RESPONDENTS/STATE & COMPLAINANT:
1 INTELLIGENCE OFFICER,
KERALA STATE GST DEPARTMENT, INTELLIGENCE UNIT, ALAPPUZHA.,
PIN - 688001
2 STATE OF KERALA,
REPRESENTED BY PUBLIC PROSECUTOR,HIGH COURT OF KERALA, PIN
- 682031
SRI.MOHAMED RAFIQ, SPL. GOVT. PLEADER, TAXES
PUBLIC PROSECUTOR SRI.M.C. ASHI
THIS BAIL APPLICATION HAVING COME UP FOR ADMISSION ON 08.12.2023,
THE COURT ON 12.12.2023 DELIVERED THE FOLLOWING:
BA 10492/23 2
"C.R."
MOHAMMED NIAS C.P., J.
..............................................
B.A.No. 10492 of 2023
..............................................
Dated this the 12th day of December, 2023
ORDER
This is an application filed under Section 439 of the Code of Criminal
Procedure seeking regular bail.
2. Petitioner is the sole accused in crime file No.GST/INS-7/2023 registered
based on the complaint of the 1 st respondent under Section 132(1) of the Kerala
State Goods and Service Act, 2017.
3. The gist of the prosecution case is as follows:- Petitioner is the accused in
the above crime registered based on the complaint of the 1 st respondent under
Section 132(1) of the Kerala State Goods and Service Act, 2017. The accused is a
dealer under the GST Act. He has two offices, one at Pulimoodu Junction, Kottayam
and the additional business place at Kochar Road, Pazhavangadi, Trivandrum. He is
a wholesale distributor of mobile accessories and electronic items, which are
taxable with 18% GST. It is alleged that he is supplying goods without issuing
invoices, evading the tax payment due from 2018 onwards. The accused is involved
in tax evasion estimated at 6.14 crores. A raid was conducted in the office of the
accused on 09.11.2023, and he was arrested on 13.11.2023.
4. The learned counsel for the petitioner, Sri. Manilal, submits that the
petitioner is a registered dealer regularly paying returns from 2018 to 2023. The 1 st
respondent wrongly included the income of two other concerns conducted by the
petitioner's brother's sons, who have separate GST registrations. The total income
had been arrived at by wrongly taking the income of all three concerns. The 1st
respondent has already seized documents, electronic records and other
accompanying material, so further custodial interrogation is not necessary. The
remand report does not state that continued custody of the petitioner is necessary.
There is no scope for influencing the witnesses as they are officials. The petitioner is
innocent and has not committed any offence. All the transactions are done based on
invoices and bills, and all the transactions are recorded in the computer that was
seized during the search. Hence, he prayed for the release of the petitioner on bail.
5. The learned counsel for the petitioner further argues that going by the
provisions of GST, particularly Section 132, it has to be seen that the power of arrest
can be invoked only after an assessment is made and not before. He relied on the
judgment of the Madras High Court reported in Jayachandran Alloys (P) Ltd. v.
Superintendent of GST & C. Ex., Salem [MANU/TN/3348/2019] and that of the
Madhya Pradesh High Court reported in Jagdish Arora and others v. Union of
India [MANU/MP/1035/2020] in this regard. It is also argued that custody of the
petitioner was given for five days. After that, permission has been granted to
interrogate the petitioner in jail for four days. Under such circumstances, since the
investigation has progressed, there is no necessity for continued detention. He also
argues that the entire hard copies of the documents found on the computer were
already taken.
6. The learned Special Government Pleader, Taxes, Sri. Mohamed Rafiq,
opposing the bail application, filed a report with the following contentions. An
extensive investigation in the field of mobile phone accessories and electronics in
the search conducted has unearthed a significant case of tax evasion by the accused
herein being the proprietor of M/s. Lakshmi Mobile Accessories. The enquiry
revealed that he supplied goods without issuing invoices, evading tax due to the
government exchequer. It was revealed that he was involved in large-scale tax
evasion by suppressing his actual outward taxable supplies. Based on the
permission of the Joint Commissioner, a search was conducted at the residence and
place of business, which revealed huge tax evasion. Mr. Rafiq submitted that a
search was conducted on 9.11.2023, and the primary materials revealed that there
was an evasion of more than Rs.6 crores. Only after the investigation is completed
can the exact liability be quantified. It is also pointed out that between his arrest
and the search on 13.11.2023, his staff was dismissed from service, and the
documents in the computer were removed and manipulated. It is also pointed out
that he absconded after the search and that the investigation is only at the
preliminary stage, and releasing the petitioner at this stage would certainly affect a
proper investigation. The allegation that he supplied goods without issuing any
invoice is not answered even now. The contention that the arrest can be made only
after the quantification cannot be accepted as it goes against the very section itself.
7. Heard both sides and perused the records.
8. The petitioner is a proprietor registered under the GST and a wholesale
distributor of mobile accessories and electronic items coming under HSN code
8517, which is taxable at 18%. The department alleges that the petitioner was
supplying goods without issuing invoices to his customers and was evading tax due
to the Government. The transaction by the petitioner was with an intention to
suppress his actual outward taxable supplies and thus was involved in large-scale
tax evasion. Permission for the search was sought under Section 67(2) of the Act at
the principal place of business and the additional place granted by the Joint
Commissioner on 20.10.2023. In the search that followed, business transaction
books of 480 pages from the business places of Lakshmi Mobile Accessories at
Kottayam were seized. On verification, it was found that the petitioner had
suppressed a total turnover of Rs.34,15,42,040/- for the years 2021-2022,
2022-2023 and 2023-2024 and has evaded tax approximately to the tune of
Rs.6,14,77,567/- being 18% of the taxable turnover. It was also found that the
petitioner was doing business even from the VAT regime, and therefore, the
suppression for the years 2017-2018, 2018-2019, 2019-2020 and 2020-2021 had to
be verified. Based on the above accusations, the petitioner had committed
cognizable and non-bailable offences under Section 132(5) of the GST Act, 2017.
The prosecution also alleges that on 19.11.2023, the petitioner had given a
statement that the software used at his business premises was changed immediately
after the search and the Accountant of the firm was also dismissed from service.
Therefore, they suspect that the accused is tampering with the evidence and
influencing the witnesses in the case. It is on these grounds that the grant of bail is
opposed. Considering the above grounds urged on the side of the prosecution and
perusing their report, it appears that their apprehension is well founded. The
investigation is only at a nascent stage.
9. As regards the contention of the learned counsel for the petitioner that
there is no power to arrest and that the prosecution or the steps for arrest can be
taken only after the completion of the assessment proceedings, the same has to be
rejected for multiple reasons. The list of offences mentioned in sub-sections of
Section 132 of the GST Act has no correlation to any assessment. Issue of invoices
or bills without supply of goods and availing of the input tax credit by using such
invoices or bills are made offences under clauses (b) and (c) of sub-section (1) of
Section 132 of the CGST Act. The prosecution for these offences does not depend
upon the completion of the assessment. The alternate argument that the petitioner
can compound the offence under the CGST Act both before and after the institution
of the prosecution also cannot be accepted as there is nothing on record to show
that the petitioner has offered to compound the offence or has paid the tax payable
on such compounding or has admitted the liability. Therefore, the argument that
arrest can only be after the completion of the assessment has no legs to stand.
10. Of course, the power to arrest is one, and the exercise of the same is
another. In the instant case, it has to be seen that for a proper investigation of the
offence and to prevent the petitioner from causing the evidence of the offence to
disappear or to tamper with the same, continued custody of the petitioner is
warranted. The power to arrest under Section 69 can be invoked if the
Commissioner has a reason to believe that the person has committed offences that
are prescribed and which are punishable under Section 132 of the CGST Act, 2017.
Thus, the reference to Section 132 in Section 69 is only to indicate the nature of the
offences based on which reasonable belief is found and recorded by the
Commissioner to pass an order for arrest. The contra view taken by the Madras
High Court in Jayachandran Alloys's case (supra) and also followed by the Madhya
Pradesh High Court in Jagdish Arora's case (supra) cannot be treated as good law.
No doubt, before placing a person on arrest, which cannot be routinely or
mechanically done, the conditions precedent to arrest for the alleged offences set
out in Section 132 of the CGST Act must be fulfilled. But, once the ingredients of
the offence are made out, the Commissioner or the competent authority can
determine if the offender is to be arrested or not. If it is to ensure a proper
investigation and prevent the possibility of tampering with evidence or intimidating
or influencing the witnesses, the power can certainly be exercised. However, in
cases of alleged violation of a technical nature, like where a demand of tax is based
on a difference of opinion regarding the interpretation of law or such analogous
grounds, the power to arrest must be very carefully exercised, having regard to the
provisions of S.41 Cr.P.C. that stipulated the situations requiring an arrest. It is also
relevant to note that the expression 'any person' in Section 69 includes any person
suspected or believed to be concerned with tax evasion for availing legal input tax
credit.
Having considered the rival submissions, it has to be seen that there is an
evasion of more than Rs.6.5 crores alleged against the petitioner. A serious
allegation is made, which warrants a thorough investigation. Under such
circumstances, when the investigation is going on, I am not inclined to grant bail to
the petitioner at this stage. Accordingly, the bail application will stand dismissed.
Sd/-
MOHAMMED NIAS C.P.
JUDGE
okb
APPENDIX OF BAIL APPL. 10492/2023
PETITIONER ANNEXURES
Annexure 1 TRUE COPY OF THE OCCURRENCE REPORT
Annexure 2 TRUE COPY OF THE REMAND REPORT
Annexure 3 TRUE COPY OF THE APPLICATION
Annexure 4 TRUE COPY OF THE ORDER IN C.M.P 7164/2023
DATED 21-11-2023
