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August 15, 2020

Right to Bail Denied, If Huge Economic Offence is Committed in GST

by Rubina Dsouza in GST, Legal Court Judgement

Right to Bail Denied, If Huge Economic Offence is Committed in GST

Introduction

In spite of strict laws and rules Frauds and Tax evasion have been happening. GST has been no exception to this and we have witnessed case of GST frauds as well. Claiming of Bogus purchases and acquiring relief of ITC is considered as an punishable offence under GST. But will Bail be granted on such economic offence? Will the gravity and seriousness of crime be considered for entitlement for benefit of Bail?.

We will understand this with an extremely interesting case law of Vikas Goel v. Deputy Director, Directorate General of Goods and Service Tax Intelligence. Further this article will also throw light on the various other concepts about right to bail, bailable and non bailable offences, economic offences etc.

Is Right to Bail a Fundamental Right?

The Right to Bail shall come under Article 21 of the Indian Constitution- Right to Personal Liberty, bail or release on personal recognizance is available as a right in bailable offences not punishable with death or life imprisonment.

The Supreme Court has special powers under Article 136 of the Constitution of India to grant bail in proceedings generally arising out of orders passed by High Courts. The bail under the bailable offences is the right as the basic principle is “bail and not jail”.

What is a Bailable and Non Bailable Offence?

Bailable offence are considered as less grave or less serious in nature. Bailable offences are covered under Section 2(a) of CrPC. An offence in order to be bailable would have to be an offence which is punishable with imprisonment for less than three years or with fine only. E.g of Bailable Offence are Bribery (Section 171E- IPC), Public Nuisance (Section 290- IPC), Death by Rash or Negligent Act (Section 304A-IPC).  

In accordance to Section 50 of CrPC Whenever a person is arrested without warrant, it is the duty of the police officer to communicate the full detail of the offence for which the person is arrested.

A Non- Bailable offence  is of a heinous and serious nature.  In accordance to section 2(a) of CrPC, non-bailable offence includes all those offences which are not included in bailable offence.  

A person accused of a non-bailable offence does not have right to be released on bail but the bail can be granted at the discretion of the court, subject to certain conditions given in Section 437 of CrPC.  

A non-bailable offence is an offences which are punishable with death, imprisonment of life or imprisonment for more than seven years.

What is an Economic Offence?

Economic offence is separately categorised under the criminal offence. Economic offence does not only effect the individual with financial loss but also has serious repercussion or consequences on the nations economy. Economic offences include financial scams, money laundering, bogus or fake invoices, counterfeiting of currency, tax evasion, robbery, selling of controlled substance, frauds etc.

These crimes have serious impact on nations security and economy. These offence are dealt by various legislation’s and authorities depending upon the nature of the crime. For e.g. A crime under Tax evasion shall be under the legislation of the Income Tax Act and  the Central Board of Direct Taxes shall be its Enforcement Authority.

Prevention of Money Laundering Act, 2002 and The Indian Penal Code are few under Acts which deal with Economic offences depending upon the nature of offence.

Whether the economic magnitude of offence and gravity and seriousness of crime will effect the entitlement for benefit of Right to Bail?

The High court of Punjab and Haryana has thrown light on the above issue in the case of Vikas Goel v. Deputy Director, Directorate General of Goods and Service Tax Intelligence, Gurugram Zonal Unit.

Facts of the Case:

  1. The petitioner has filed a second petition under section 439 of Code of Criminal Procedure 1973 for grant of regular bail in a case under Section 132 of the CGST Act, 2017 read with Section 10 of the IGST in exercise of the powers conferred under Section 69 of the CGST Act, 2017.
  2. Notice of motion has been issued. The respondent counsel has contested the petition.
  3. There have seen serious allegations against the petitioner being the mail accused along with the co- accused for maintain and claiming false and bogus bills etc and the same have been adjusted as ITC  without actual transportation of goods or sale of goods.
  4. The accused has wrongly claimed a relief of more than Rs. 80 crore only paper transaction were done without any actual sale.

Issue Involved:

  1. Whether the Petitioner after being involved in such Huge Economic offense will be eligible to claim his right to bail?
  2. Does gravity and the serious nature of an offence effects the Right to claim bail?

Relevant Sections:

Section 439 in The Code Of Criminal Procedure, 1973

439. Special powers of High Court or Court of Session regarding bail.

1)A High Court or Court of Session may direct-

a) that any person accused of an offence and in custody be released on bail, and if the offence is of the nature specified in subsection (3) of section 437, may impose any condition which it considers necessary for the purposes mentioned in that sub- section;

b) that any condition imposed by a Magistrate when releasing an person on bail be set aside or modified: Provided that the High Court or the Court of Session shall, before granting bail to a person who is accused of an offence which is triable exclusively by the Court of Session or which, though not so triable, is punishable with imprisonment for life, give notice of the application for bail to the Public Prosecutor unless it is, for reasons to be recorded in writing, of opinion that it is not practicable to give such notice.

2. A High Court or Court of Session may direct that any person who has been released on bail under this Chapter be arrested and commit him to custody.

Section 69 of CGST Act- Power to Arrest

1)Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person.

2) Where a person is arrested under sub-section (1) for an offence specified under subsection (5) of section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours

3) Subject to the provisions of the Code of Criminal Procedure, 1973,––

a. where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate;

b. in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.

Section 132 of CGST Act- Punishment for certain offences

1.Whoever commits any of the following offences, 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 availment or utilisation of input tax credit or refund of tax;

c. avails input tax credit using such invoice or bill referred to in clause (b);

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

Section 10 of IGST Act- Placeof supply of goods other than supply of goods imported into, or exported from India

1. The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

a. where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

b. where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

c. where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

d. where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

e. where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

2. Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

Observation and Findings:

  1. The petitioner  is found with serious allegations  as the main accused along with his co accused involved in claiming false and bogus bills etc and adjusting the same as ITC without making any actual transportation of goods or sale of goods.
  2. The amount involved is Huge as the petitioner has wrongly claimed a relief of more than Rs. 80 crore only paper transaction were done without any actual sale.
  3. The court also gave reference to the case of  State of Bihar and another Vs. Amit Kumar @ Bacha Rai, 2017(3) R.C.R.(Criminal) 690 where Hon’ble Supreme Court has held the accused was  alleged  to be the kingpin of crime and was charged with economic offence of huge magnitude the bail was therefore denied.
  4. Therefore keeping in view the fact that in the present case the petitioner-accused has been charged with economic offence of huge magnitude and the gravity and serious nature of crime committed the entitlement for grant of bail was rejected.

Ruling and order

In view of the gravity and serious nature of crime and the economic offence of huge magnitude the petitioner is not fit for benefit of regular bail. The case was therefore dismissed and the plea for bail was rejected.

Therefore, the gravity and seriousness of the offence and the huge magnitude of economic offence will be a reason for denial of the benefit of bail.

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