Rajasthan High Court

Sanjeev Jain S/O Ramesh Jain vs Union Of India on 31 May, 2021

Bench: Prakash Gupta

                                              1

           HIGH COURT OF JUDICATURE FOR RAJASTHAN
                       BENCH AT JAIPUR

        S.B. Criminal Miscellaneous Bail Application No. 3608/2021

Sanjeev Jain S/o Ramesh Jain, Aged About 38 Years, R/o 21A, ZP, Near
TV   Tower,    Pitampura,        Shalimar      Bagh,    North       West    Delhi-110088
(Currently Confined to Central Jail, Jaipur)
                                                                ----Accused Petitioner
                                           Versus
Union    Of   India,   Anti-Evasion,         Central    Goods       And     Services     Tax
Commissionerate, Jaipur Through Special Public Prosecutor
                                                                           ----Respondent

Connected With S.B. Criminal Miscellaneous Bail Application No. 3981/2021 Ramesh Jain S/o Shri Bhimsain Jain, Aged About 63 Years, R/o 21A, ZP, Near TV Tower, Pitampura, Shalimar Bagh, North West Delhi - 110088 (Currently Confined to Central Jail, Jaipur)

----Accused Petitioner Versus Union Of India, Anti-Evasion, Central Goods And Services Tax Commissionerate, Jaipur Through Special Public Prosecutor

----Respondent

For Petitioner(s) : Mr. Sameer Jain, Adv. (through VC) For Respondent(s) : Mr. Shivangshu Naval, Adv. (through VC)

HON'BLE MR. JUSTICE PRAKASH GUPTA

Order

Date of Order :: 31/05/2021

These two bail applications have been filed by the

petitioners under Section 439 CrPC.

Facts of the case are that a letter dated 27.11.2020 was

received from the Assistant Commissioner, CGST Division-C, Bhiwadi to

the effect that income tax credit (for short, 'ITC') on the invoices issued

by M/s. Veto Merchandise had been wrongly availed. Alongwith the

aforementioned letter, a letter written by the Deputy Commissioner,

Circle-I, State Tax, Jaipur dated 3.3.2020 was also enclosed, wherein it

was stated that upon verification of M/s. Veto Merchandise, Jaipur

(GSTIN- 08AA0FV2648B1Z1), the said firm was found non-existent at

its principal place of business and, therefore, the invoices issued by M/s.

Veto Merchandise, Jaipur (GSTIN-08AA0FV2648B1Z1) to M/s. Swissline

Intertrade Pvt. Ltd. F-438, Phase-1, Ind. Area, Bhiwadi (GSTIN-

08AAJCS6595A1Z3) were also fake / bogus. The Dy. Commissioner,

State Tax had also informed that no business activities were done at the

business premises of M/s. Veto Merchandise and that the registration of

the said firm had been cancelled and complete ITC had been blocked.

Returns and other relevant details of M/s. Swissline

Intertrade Pvt. Ltd. F-438, Phase-1, Ind. Area, Bhiwadi (GSTIN-

08AAJCS6595A1Z3) were checked on AIO and it was found that earlier

M/s. Swissline Intertrade Pvt. Ltd. F-438, Phase-1, Ind. Area, Bhiwadi

(GSTIN-08AAJCS6595A1Z3) was registered under Central Excise and

later, it was registered under the GST regime. Since July, 2017 (after

enactment of GST), M/s. Swissline had filed GSTR 3B returns upto

February, 2020 and the total taxable supplies shown in GSTR 3B returns

were Rs. 300.09 crores. M/s. Swissline Intertrade Pvt. Ltd. had paid tax

amounting Rs. 48.87 crores through ITC and Rs. 2.20 lakhs only

through cash. It had also paid cash Rs. 4.71 lakhs under RCM. The cash

: ITC ratio of M/s. Swissline Intertrade Pvt. Ltd. is 0.04 : 99.96.

From registration details of M/s. Swissline Intertrade Pvt.

Ltd. F-438, Phase-1, Ind. Area, Bhiwadi (GSTIN- 08AAJCS6595A1Z3), it

was gathered that GST registration of the company was cancelled on

5.2.2020 and it had three Directors:

i. Sh. Bimal Kumar Jain S/o Shri Abhey Kumar Jain, Resident of JP-1, Maurya Enclave, Block-JP, Maurya Enclave, Pitampura, Delhi ii. Sh. Ramesh Kumar Jain, S/o Shri Bhimsem Jain, Resident of ZP-21, Maurya Enclave, Block-ZP, Maurya Enclave, Pitampura Delhi

iii. Smt. Saroj Bala D/o Abhey Kumar Jain, Resident of DP-218, Maurya Enclave, Block-DP, Maurya Enclave, Pitampura, Delhi.

Similarly, Sanjeev Jain S/o Ramesh Jain was alleged to be

Director of another firm called M/s. Mohit Metals Pvt. Ltd., G-1208 B &

C, RIICO Industrial Area, Rampur Mundana, Bhiwadi, Alwar, Rajasthan

(08AAECM0087C1ZR) and he also held 65% shares of the company.

Petitioner Ramesh Jain was alleged to have availed of

wrongful input tax credit to the tune of Rs. 47,91,05,784/- and passed

on fake / bogus ITC to the tune of Rs. 48,40,60,293/- without any

purchase or sale of goods. Likewise, petitioner Sanjeev Jain was alleged

to have availed of wrongful input tax credit to the tune of Rs.

13,35,44,893/- and passed on fake / bogus ITC amounting to Rs.

12,64,19,263/- without any purchase or sale of goods.

Acting upon the aforementioned letters, a complaint was

filed against them before ACJM (Economic Offence), Jaipur and they

were arrested on 19.12.2020. The petitioners filed bail applications

before the trial court, which came to be dismissed vide order dated

8.2.2021/20.2.2021. Hence, these bail applications.

Mr. Sameer Jain, learned counsel for the petitioners submits

that as per Section 134 of the Central Goods and Services Tax Act, 2017

(for short, 'the Act of 2017'), the alleged offence is triable by a Judicial

Magistrate, First Class. He further submits that as per arrest memo

(Annexure-1), the petitioners have been arrested for the offence under

clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of

Section 132 of the Act of 2017. As per the provisions of Section 132 of

the Act of 2017, maximum sentence provided for the alleged offence is

5 years, which is reducible to 6 months. He has drawn the attention of

the Court towards Section 137 of the Act of 2017 and submits that

where an offence committed under this Act is a Company, every person

who, at the time of commission of the offence, was in charge of and

was responsible for the conduct of the 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, but in the

instant case, Department has neither given any prosecution sanction

nor initiated any action for the alleged offence against the Company,

which is a taxable person in view of Section 122 of the Act of 2017. He

further submits that for the alleged offence a taxable person is liable to

pay a penalty of an amount equivalent to the tax evaded in terms of

Section 122 (1) of the Act of 2017 and in view of sub-section (3) of

Section 122 of the Act of 2017, who aids or abets the offence shall be

liable to a penalty which may extend to twenty five thousand rupees

only. The petitioners who are the employees of the Company have been

falsely implicated in this matter. He further submits that as per Section

138 of the Act of 2017, the alleged offence is compoundable by the

Commissioner.

He further submits that although the petitioners were

arrested for the offence under clause (a) or clause (b) or clause (c) or

clause (d) of sub-section (1) of Section 132 of the Act of 2017, but the

charge sheet was filed against them for the offence under Section

132(1) (b) (c) (l) of the Act of 2017 alongwith other offences. He

further submits that clause (b) of sub-section (1) of Section 132 of the

Act of 2017 deals with issuing any invoice or bill and clause (c) of sub-

section (1) of Section 132 deals with availing input tax credit, whereas

clause (l) of sub-section (1) of Section 132 of the Act of 2017 deals with

attempt to commit or abet the commission of any of the offences

mentioned in clauses (a) to (k) of this Section, for which the maximum

sentence is six months. If viewed from this angle, the alleged offence is

bailable. He further submits that clauses (a) (b), (c) and (d) of sub-

section (1) of Section 132 of the Act of 2017 are exclusive clauses and

under sub-section (5) of Section 132 of the Act of 2017, offences

specified therein have been made cognizable and non-bailable, whereas

all other offences are non cognizable and bailable under sub-section (4)

of Section 132 of the Act of 2017. He has drawn the attention of this

Court towards internal page 2 of the charge sheet (page 31 of the bail

application) and submits that the company M/s. Swissline Intertrade

Pvt. Ltd. had paid tax amounting to Rs. 48.87 crores through ITC and

Rs. 2.20 lakhs through cash. It had also paid cash Rs. 4.71 lakhs under

RCM.

He further submits that Shri Bimal Kumar Jain is the

Director of the Company. As per the case of the prosecution, he created

the company M/s. Swissline Intertrade Pvt. Ltd. and invested money for

the petitioner Ramesh Jain in M/s. Swissline Intertrade Pvt. Ltd.,

whereas the petitioner Ramesh Jain was the employee in the company

and getting Rs. 20,000/- per month.

He further submits that petitioner Sanjeev Jain has been

alleged to be the Director of M/s. Mohit Metals Pvt. Ltd, whereas the

Director of the said Company is Sunil Dutta and the petitioner Sanjeev

Jain was also an employee in the said company and getting Rs.

30,000/- per month. Sunil Duta is also a Director in M/s. Veto

Merchandise, Hanuman Nagar, Gudia Market, Office No. 27, New Loha

Mandi Road, Hotel Ka Saamne, Manchanda, Jaipur (GSTIN-

08AAOFV2648B1Z1).

He further submits that notices were issued to Ms. Saroj

Bala, Sunil Dutta, Akhilesh Yadav and Bimal Kumar Jain, who are

Directors of the Company, but they did not appear and the petitioners

who cooperated and appeared before the respondents, have been

arrested and made victim of the circumstances. He further submits that

Bimal Kumar Jain was arrested by Enforcement Directorate in Money

Laundering case where interim bail / parole was granted to him. If the

Directors are not coming for recording their statement, then action

ought to have been taken against them.

He further submits that as per the case of the prosecution,

the petitioners Ramesh Kumar Jain and Sanjeev Jain are actively

involved in availing wrong ITC, which goes to show that the petitioners

are not the Directors of the company and they are only the employees

of the company.

He further submits that after completion of investigation,

charge sheet has already been filed. Now the petitioners are not

required for any investigation or interrogation purposes. Petitioner

Ramesh Jain is about 63 years of age who is suffering from acute Sleep

apnea and a Certificate in this regard has been issued by the Doctor of

Dispensary, Central Jail, Jaipur. The petitioners have no criminal

antecedents to their discredit. They are not habitual offenders. There is

no allegation against the petitioners for tampering with the witnesses.

The petitioners have in judicial custody for long and the conclusion of

trial will take long time, hence they may be enlarged on bail.

In support of his contentions, he has placed reliance on the

following judgments:

i) Arnesh Kumar Versus State of Bihar reported in (2014) 8 SCC 273

ii) Sanjay Chandra Versus CBI reported in (2012) 1 SCC 40

iii) Pradeep Kumar Bansal Versus Union of India (order dated 4.11.2020 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 12093/2020)

iv) Shiv Kumar Sharma Versus Union of India (order dated 15.3.2021 passed by the Coordinate Bench of

this Court in S.B. Cr. Misc. Bail Application No. 3031/2021)

v) Hemant Kumar Singhal Versus Union of India and another connected case (order dated 4.11.2020 passed by the Coordinate Bench of this Court in S.B.

Cr. Misc. Bail Application No. 8676/2020)

vi) Anil Kumar Gupta Versus Union of India (order dated 19.2.2021 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 15605/2020)

vii) Anup Ashopa Versus Union of India (order dated 7.7.2020 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 4028/2020)

viii) Gaurav Maheshwari Versus State, reported in 2020 (38) G.S.T.L. 178 (Raj.)

ix) Gaurav Maheshwari Versus State (order dated 13.5.2020 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 1422/2020)

x) Ashwani Kumar Bagpatiya @ Golu Versus Union of India (order dated 5.3.2021 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 465/2021)

xi) Atul Chopra Versus State of Rajasthan (order dated 22.11.2019 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Second Bail Application No. 15418/2019)

xii) Rakesh Kumar Khandelwal Versus Union of India (order dated 14.10.2019 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 12440/2019) On the other hand, Mr. Shivangshu Naval, learned counsel

for the respondent submits that this is a case of tax evasion. He

submits that M/s. Swissline had filed GSTR 3B returns upto February,

2020 and the total taxable supplies shown in GSTR 3B returns were Rs.

300.09 crore. M/s. Swissline Intertrade Pvt. Ltd. had paid tax

amounting Rs. 48.87 crores through ITC and Rs. 2.20 lakhs only

through cash. It had also paid cash Rs. 4.71 lakhs under RCM. The cash

: ITC ratio of M/s. Swissline Intertrade Pvt. Ltd. is 0.04 : 99.96. The

petitioners are not the employees but they are shareholder Directors of

the company. Petitioner Ramesh Jain is having 27% sharing in M/s.

Swissline Intertrade Pvt. Ltd. Similarly, petitioner Sanjeev Jain is the

Director of M/s. Mohit Metals Pvt. Ltd. and has 65% share in the said

company.

So far as Section 138 of the Act of 2017 relating to

compounding of offences is concerned, learned counsel for the

respondent submits that compounding can be allowed only after making

payment of tax, interest and penalty involved therein.

The petitioner Ramesh Jain had availed of wrongful input tax

credit to the tune of Rs. 47,91,05,784/- and passed on fake / bogus ITC

to the tune of Rs. 48,40,60,293/- without any purchase or sale of

goods. Similarly, petitioner Sanjeev Jain had availed of wrongful input

tax credit to the tune of Rs. 13,35,44,893/- and passed on fake / bogus

ITC amounting to Rs. 12,64,19,263/- without any movement of goods.

He further submits that the petitioners have been charge

sheeted under Section 132 of the Act of 2017. Section 132 of the Act of

2017 deals with punishment. He has drawn the attention of the Court

towards clauses (b)(c) and (l) of sub-section (1) of Section 132 of the

Act of 2017, which are reproduced as under:

b) Whoever 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 utilization of input tax credit or refund of tax;

           c)    whoever 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;
           d)    ..
           e)    ..
           f)    ..
           g)    ..
           h)    ..
           i)    ..
           j)    ..
           k)    ..
           l)    whoever attempts to commit, or abets the

commission of any of the offences mentioned in clauses (a) to (k) of this Section shall be punished.

He has also drawn the attention of the Court towards sub-

section (5) of Section 132 of the Act of 2017, which is reproduced as

under:

"(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 sub-section shall be cognizable and non- bailable."

He submits that in view of sub-section (5) of Section 132 of

the Act of 2017, the offence committed under clause (b) or (c) of sub-

section (1) of Section 132 of the Act of 2017 are cognizable and non-

bailable and the maximum sentence provided therefor is 5 years.

So far as Section 137 of the Act of 2017 with regard to non

initiation of any action against the Company is concerned, learned

counsel submits that the matter is still under process. While filing the

charge sheet, the respondent had kept their right reserved to examine

the witnesses and also to adduce more documentary evidence. If

additional facts emerge from investigation, supplementary charge sheet

will be filed. He further submits that since Bimal Kumar Jain had been

arrested by the Enforcement Directorate, the respondent could not

examine him. Other persons are also yet to be examined. He further

submits that the petitioners created bogus entities only for the purpose

of selling / purchasing fake bills. He further submits that petitioner

Sanjeev Jain was being paid commission of 1-1.5% on every fake bill.

He further submits that culpability of the accused persons is to be seen

in entirety.

Learned counsel further submits that now-a-days, white

collar crimes are increasing rapidly in the country. He further submits

that the alleged offence committed by the petitioners is an economic

offence.

In support of his submissions, he has placed reliance on the

following judgments:

i) Serious Fraud Investigation Office Versus Nittin Johari and Another reported in (2019) 9 SCC 165

ii) Nimmagadda Prasad Versus Central Bureau of Investigation reported in (2013) 3 SCC 466.

iii) Bharat Raj Punj & Anr. Versus Commissioner of Central Goods and Service Tax Department and Others (order dated 12.3.2019 passed by the Coordinate Bench of this Court in S.B. Cr. Writ Petition No. 76/2019)

iv) Sumit Dutta Versus Union of India (order dated 20.4.2021 passed by the Coordinate Bench of this Court in S.B. Cr. Misc. Bail Application No. 5371/2021)

Heard. Considered.

In the case of Arnesh Kumar (supra), Hon'ble Apex Court

observed as under:

"a person accused of offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without fine, cannot be arrested by the police officer only on its satisfaction that such person had committed the offence punishable as aforesaid. Police officer before arrest, in such cases has to be further satisfied that such arrest is necessary to prevent such person from committing any further offence; or for proper investigation of the case; or to prevent the accused from causing the evidence of the offence to disappear; or tampering with such evidence in any manner; or to prevent such person from making any inducement, threat or promise to a witness so as to dissuade him from disclosing such facts to the Court or the police officer; or unless such accused person is arrested, his presence in the court whenever required cannot be ensured."

In the case of Sanjay Chandra (supra), the Hon'ble Apex

Court observed as under:-

"Right to Bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the Court, whether before or after conviction, to assure that he will submit to the jurisdiction of the Court and be in attendance thereon whenever his presence is required."

The Hon'ble Apex Court further observed:

"46. We are conscious of the fact that the accused are charged with economic offences of huge magnitude. We are also conscious of the fact that

the offences alleged, if proved, may jeopardise the economy of the country. At the same time, we cannot lose sight of the fact that the investigating agency has already completed investigation and the charge-sheet is already filed before the Special Judge, CBI, New Delhi. Therefore, their presence in the custody may not be necessary for further investigation. We are of the view that the appellants are entitled to the grant of bail pending trial on stringent conditions in order to ally the apprehension expressed by CBI."

In the case of Pradeep Kumar Bansal (supra), taking into

consideration the length of custody of the petitioner, the maximum

punishment awarded under the Act of 2017 being five years, offences

being compoundable, and absence of the criminal antecedents, a

Coordinate Bench of this Court granted bail to the petitioner therein.

In the case of Shiv Kumar Sharma (supra), taking into

consideration the fact that the petitioner was a senior citizen and was in

custody for last about 5 months; all the evidence being documentary in

nature and no apprehension shown by the prosecution about the

accused petitioner of tampering with the evidence/witnesses and co-

accused having already been released on bail, a Coordinate Bench of

this Court granted bail to the petitioner therein.

On the other hand, in the case of Serious Fraud

Investigation Office (supra), the judgment passed by the Hon'ble Apex

Court in the case of Y.S. Jagan Mohan Reddy Versus Central Bureau of

Investigation reported in (2013) 7 SCC 439 was referred, where Hon'ble

Apex Court observed thus:

"34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be

viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.

35. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public / State and other similar considerations.

In the case of Nimmagadda Prasad (supra), Hon'ble Apex

Court observed as under:-

"Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country."

In the case of Bharat Raj Punj (supra), the Coordinate

Bench of this Court observed as under:

"20. The case set up by the Department is that the petitioner has claimed input tax credit on fake invoices, which fact is not controverted by the petitioner. Hence, Department has all rights to take any action permissible by law."

In the case of Sumit Dutta (supra), a Coordinate Bench of

this Court dismissed the bail application of the petitioner therein on the

ground that the petitioner was partner in M/s. Veto Merchandise and a

sum of Rs. 47 crore was claimed as Input Tax Credit without any

movement of goods. His bail application was also dismissed on the

ground that fake bills and invoices input tax credit was passed on to

firms which were existing in papers.

Taking into consideration the submissions advanced by

learned respective counsel and more particularly in view of the fact that

the petitioners have already remained in custody for about 5 1/2

months, whereas the maximum punishment provided under the Act of

2017 is five years and also considering the fact that investigation is