Directorate General Of GST Intelligence vs. Sudhir Agarwal

Facts

The Directorate General of GST Intelligence (DGGI) filed a petition under Section 482 of the CrPC challenging an order dated December 16, 2019, passed by the Chief Metropolitan Magistrate (CMM), New Delhi. The CMM had granted bail to the respondent, Sudhir Agarwal, in proceedings initiated under Section 132 of the Central Goods and Services Tax Act, 2017. The prosecution alleged that the respondent fraudulently evaded GST and availed bogus Input Tax Credit (ITC) of approximately ₹7.90 crores using fake bills and invoices without actual supply of goods. The respondent was arrested on November 16, 2019. The CMM granted bail considering the respondent had deposited ₹2 crores under protest. The DGGI argued that the CMM erred in granting bail, especially as the respondent had not actually deposited the ₹2 crores and had a prior involvement with DRI for Customs Duty evasion.

Held

The Court held that it found no reason to cancel the bail granted to the respondent after a period of more than half a decade. The Court noted that the petitioner department had not raised any objection before the CMM regarding the deposit of ₹2 crores or the bail application. Even if the amount adjusted from the ITC ledger was not considered a rightful payment, the Show Cause Notice was issued only after a delay of over five years, and the petitioner department was not keen on investigating and adjudicating the matter. The Court observed that serious allegations were made initially, but the department took no active steps for over five years, suggesting its primary interest was in the respondent's custody rather than the adjudication of the case. The Court emphasized that the respondent could not be subjected to unending incarceration due to the department's inaction. The Court found the department's attitude detrimental to the purpose of taxation statutes and the exchequer. Therefore, the petition was dismissed.

Key Issues

1. Whether the learned CMM erred in granting bail to the respondent under Section 132 of the CGST Act, 2017, on the assumption that ₹2 crores had been deposited by the respondent, when such a deposit was disputed by the petitioner? The petitioner argued that the respondent had not deposited ₹2 crores and that the CMM erroneously granted bail on this assumption. The petitioner further contended that the respondent was involved in a matter booked by the DRI for evasion of Customs Duty and that the CMM failed to consider these aspects. The petitioner also argued that the respondent's claim of depositing ₹2 crores by adjusting ITC balance was not a rightful payment of government dues. The respondent contended that the ITC balance in the company's account was adjusted to the extent of ₹2 crores against the total demand. The respondent also argued that the Show Cause Notice was issued only after a significant delay of over five years from the initial allegations, and the petitioner department had not taken active steps in adjudicating the case, indicating a lack of interest in pursuing the matter to its logical conclusion. The respondent also highlighted that no objection was raised by the petitioner's counsel before the CMM regarding the deposit or the bail application.