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April 19, 2021

If Business is run by Manager it is not a sufficient ground for Bail in GST Evasion Case

by Mahesh Mara in GST

If Business is run by Manager it is not a sufficient ground for Bail in GST Evasion Case

What is section 138 of the CGST act, 2017?

Section 138 of the CGST act 2017 deals with compounding of offences by payment of the prescribed compounding fees. Compounding of an offence means payment of a sum of money in monetary terms instead of undergoing prosecution. Application for compounding of an offence can be either before or after institution of the prosecution proceedings. Specified offences can be compounded only once.

As per Rule 162 of the GST Law, the application of compounding shall be filed in FORM GST-CPD-01. On receipt of the application, the commissioner shall call for a report from the concerned officer with reference to the particulars furnished in the application or any other relevant information for the examination of such application. After providing opportunity of being heard to the applicant and taking into account the contents of the application, if satisfied that the applicant has co-operated in the proceedings before him and has made full and true disclosure of facts relating to the case. Commissioner may by order in FORM GST-CPD-02 allow the application indicating the compounding amount and grant him immunity from prosecution or reject such application within 90 days of the receipt of the application stating the grounds of rejection. However, the application shall not be allowed unless the tax, interest and penalty liable to be paid, has been paid in case for which the application has been made. Immunity granted to applicant may, at any time be withdrawn by Commissioner, if he is satisfied that such person had, in the course of compounding proceedings, concealed any material particulars or had given false evidence.

The applicant, within a period of 30 days from the date of receipt of order allowing compounding, shall pay the compounding amount as ordered by the Commissioner and shall furnish the proof of such payment to him. On payment, the proceedings indicated will abate and no criminal proceedings can be launched.

The amount of compounding of offences under this section shall be such as may be prescribed, subject to:

  • The minimum amount not being less than Rs. 10,000 or 50% of tax whichever is higher and
  • The maximum amount not being less than Rs. 30,000 or 150% of tax whichever is Higher.
  • Compounding of offences is not permissible to the following offences:

(i) A person who has compounded once in respect of supply value exceeding Rs.  One Crore.

(ii) A person who is convicted by a Court under this Act.

(iii) A person permitted to compound offences once in respect of offences specified in clauses (a) to (f) of section 132(1) and offences specified in clause (l) which are relatable to offences specified in (a) to (f).

(iv) 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.

(v) A person who has been accused of committing an offence in section 132(1)(g) or 132(1)(j) or 132(1)(k)

(vi) Prescribed class of persons.

Fact and Issue of the case

Smt. Chhaya Devi, proprietor of M/s Prabhat Jarda Factory Overseas, E-37, Sector-8, Noida. The search was conducted on 28.10.2020 at the various premises connecting with M/s Prabhat Jarda Factory Overseas, E-37, Sector-8, Noida and on subsequent dates by the officers/officials of CGST, Noida. During course of search on 28.10.2020 incriminating documents/furnished goods were seized.

In view of search conducted by the officials of GST Department, which establishes that Smt. Chhaya Devi, proprietor of M/s Prabhat Jarda Factory Overseas, E-37, Sector-8, Noida has violated the provisions of Section 132(1)(a) to (h) of CGST Act, 2017 and therefore, M/s Prabhat  Jarda Factory Overseas, E-37, Sector-8, Noida, on account of clandestine removal of finished goods without issuance of any invoice, without payment of any applicable duties, have evaded duties amounting Rs.62,10,28,165/- which is more than Rs.5,00,00,000/-

The offence alleged against the applicant is economic offence in which the evasion of duty amounting Rs.62,10,28,165/- is made against the applicant. Although the offence is punishable with imprisonment of five years yet the evasion of huge amount of duty is a great loss to the Government Exchequer. As such the alleged offence is economic.

Observation of Court

Admittedly in the case in hand the applicant is the proprietor of the company and is responsible to the company for conduct of the business of the company, even if the business is being managed by the so-called manager.

The prosecution can be launched after completion of assessment and also acts contrary to the provisions of sub-section(1) of Section 132 of CGST Act, 2017. The list of offences under Section 132(1) have no correlation to the assessment, issuance of any invoice or bills without supply of goods and service tax or both in violation of provisions of this Act and avails input tax credit without any invoice or bill or made offence under sub-section (b) and (c) of sub-section (1) of Section 132 of the Act, 2017. The prosecution of these offences do not depend upon completion of assessment. The Honourable Apex Court held in K.K. Ahuja Vs. V.K. Vora and another (2009) 10, SCC 48, the vicariously liability are fulfilled the legal requirement of being a person in law (under Statute Governing Companies) responsible to the company for the conduct of the business of company and also fulfilled the factual requirement of being a person In-charge of business of the company.

In Sanjay Chandra Vs CBI as relied by the learned counsel for the applicant, the Honourable Apex Court laid down guidelines. The relevant considerations in granting bail are gravity of the alleged offence and severity of the punishment prescribed by law. Both parameters are taken to be consideration simultaneously. Constitutionally protected liberty must be respected unless the detention becomes a necessity. Bail is a rule and jail is an exception. It would be unnecessary burden on the State to keep a person in jail, who is yet to be proved guilty. The balance approach is to grant bail subject to certain conditions rather than to keep the individual under detention for indefinite period.

The Honourable Court in Y.S. Jagan Mohan reddy Vs. CBI (2013) 7 SCC 439 held that the 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 present case, no effort is made on behalf of the applicant to compound the offence either before the institution of the prosecution or at post prosecution stage.

Conclusion

In view of the facts and circumstances of the case and the submissions made by learned counsel for both sides and going through the record, without commenting on the merits of the case, the court do not find it a fit case for bail. Accordingly, the bail application of applicant-Smt. Chhaya Devi, is hereby rejected.

Read the full order from below

Smt

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