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May 14, 2021

Gujarat High Court grants bail to person involved in GST evasion

by Mahesh Mara in GST, Legal Court Judgement

Gujarat High Court grants bail to person involved in GST evasion

What is section 69 of the CGST act?

Section 69 in the Central Goods and Service Tax (CGST) Act gives power to authorities to arrest any person if there is “reason to believe” that he has committed tax evasion. If the Commissioner of GST believes a person has committed an offence u/s 132, he can be arrested by any authorised GST officer. Offenses u/s 132 where arrest provisions become applicable are-

  • A taxable person supplies any goods/services without any invoice or issues a false invoice
  • He issues any invoice or bill without supply of goods/services in violation of the provisions of GST
  • He collects any GST but does not submit it to the government within 3 months
  • Even if he collects any GST in contravention of provisions, he still has to deposit it to the government within 3 months. Failure to do so will be an offense under GST
  • He has already been convicted of an earlier offence u/s 132

Fact and Issue of the case

The applicant is arrested in connection with the alleged demand by the GST authorities without determining the extent liability of the said alleged demand. It is submitted that the arrest of the applicant in the alleged offence is effected only on the ipse dixit of the Tax Department and in colourable exercise of powers under section 69 of the Act. It is submitted that the very basis for arriving at a quantified sum of Rs.6.31 crores of the alleged tax evasion is obscure and no detail whatsoever has been provided in support thereof, which clearly shows that the same is a result of figment of imagination of the tax authorities. It is submitted that in absolutely unprecedented manner, the department has clubbed demands and liabilities in respect of 13 different entities, for making out a case of evasion against the applicant, which is absolutely foreign to tax law. It is also submitted that though the demands in respect of 13 different entities were clubbed to arrive at alleged amount of tax evasion of Rs.6.31 crores against the accused, nevertheless separate complaint is filed against the accused, wherein some of the accused are even shown as witnesses in the charge­ sheet.

The advocate of the applicant has submitted that the investigation in the case is over and the charge ­sheet in the form of complaint has already been filed. It is submitted that a complaint is filed on conclusion of the investigation. It is submitted that present case is based on documentary evidence which may at best attract a punishment maximum up to 5 years. It is submitted that the present offence is triable by the Magistrate and considering the burden of work and pending cases in trial court the applicant may be released on bail as the applicant is in jail since 14.12.2020.

Observation of the court

Public Prosecutor appearing on behalf of the respondent­State has opposed grant of regular bail considering the nature and gravity of the offence. It is submitted that the present applicant is one of the kingpin and mastermind of the whole racket involving 13 fictitious firms leading to evasion of tax to the tune of Rs.6.31 cores.  Learned Advocates appearing on behalf of the respective parties do not press for a further reasoned order.

The court has perused the materials placed on record and taking into consideration the facts of the case, nature of allegations, gravity of offences, role attributed to the accused, without discussing the evidence in detail, at this stage, this Court is inclined to grant regular bail to the applicant. This Court has considered following aspects;

  • The applicant is in jail since 14.12.2020;
  • Role attributed to the accused;
  • The investigation is over and the charge­sheet is filed;
  • The present case is based on documentary evidence which may at best attract a punishment maximum up to 5 years;
  • The prosecution has not established that the applicant can temper with the evidence.
  • The quantum of tax evasion
  • The applicant is ready and willing to deposit the amount before the concerned officer
  • This Court has also taken into consideration the law laid down by the Apex Court in the case of Sanjay Chandra Vs. Central Bureau of Investigation, (2012) 1 SCC 40

In the result, the present application is allowed. The applicant shall deposit an amount of Rs.2,00,000/­ before the State Tax Officer and on depositing the aforesaid amount and producing appropriate document with regard to the depositing of the amount the applicant is ordered to be released on regular bail in connection with the Arrest Memorandum being CCST/STO/FSU­11/SANJAY PATEL/2020­21/22 dated 14.12.2020 and further the applicant shall also file an undertaking to deposit the remaining amount of Rs.13,00,000/­ within the period of 08 (eight) weeks. It is clarified that if the aforesaid order of the Court is not complied with, the bail granted to the applicant shall automatically stands cancelled. It is also clarified that the aforesaid conditions will be without prejudice to the right and contentions of the present applicant before the appropriate authority.

Conclusion

The court made the decision in favour of the applicant and directed that the applicant is released on bail on executing a personal bond of Rs.10,000/­ (Rupees Ten Thousand Only) with one local surety of the like amount to the satisfaction of the learned 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 his passport, if any, to the lower court within a week;

d. Not leave the State of Gujarat without prior permission of the concerned Trial Court;

e. Mark presence before the concerned Police Station on alternate every Monday for initial six months and thereafter, on alternate Monday of every English calendar month, for a period of six months, between 10:00 a.m. and 2:00 p.m.;

f. Furnish latest 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 Trial Court;

Read the full order of court from below

Gujarat-High-Court-grants-bail-to-person-involved-in-GST-evasion

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