Murali Barathwaj vs. Directorate General Of GST Intelligence

Held

The Court held that the condition of furnishing a further bank guarantee of Rs. 9 crores for the release of the petitioner's passport was onerous. The reasoning was based on the fact that the show cause notice issued after the investigation indicated only an amount of Rs. 11,52,000/- as irregular ITC availed and utilized by SGIPL. Furthermore, the petitioner had already made a payment of Rs. 1 crore towards alleged tax dues. Considering these factors and the existing security of over Rs. 14 crores, the Court found it fit to relax the condition. The ratio decidendi is that stringent financial conditions for passport release should be proportionate to the established tax liability, especially when substantial security is already in place and the alleged dues are significantly reduced post-investigation. The Court directed the trial court to release the petitioner's passport and ordered the petitioner to provide his travel itinerary to the respondent 3 days in advance for any foreign travel.

Facts

The petitioner, Murali Barathwaj, is the sole accused in a case registered by the Directorate General of GST Intelligence (DGGI) for offences under the CGST Act, 2017. He was arrested on September 23, 2020, and subsequently granted bail by the High Court with several conditions, including depositing his passport. The allegations involved his company, M/s. Smartgen Infra Pvt. Ltd. (SGIPL), issuing fake GST invoices and wrongly availing Input Tax Credit (ITC). SGIPL had previously furnished a bank guarantee of Rs. 8,64,70,780/-. Later, the DGGI issued a show cause notice to SGIPL, dropping the demand for alleged tax evasion of Rs. 14,92,00,000/- and stating only Rs. 11,52,000/- as irregular ITC availed and utilized. The petitioner filed an application to relax the bail conditions, specifically the passport condition, seeking to avoid furnishing an additional bank guarantee of Rs. 9 crores.

Key Issues

1. Whether the condition imposed by the Court below, requiring the petitioner to furnish a further bank guarantee of Rs. 9 crores for the release of his passport, is onerous and should be relaxed, considering the concluded departmental investigation and existing security. The petitioner argued that the additional bank guarantee of Rs. 9 crores is onerous because the DGGI's investigation concluded with a significantly reduced demand of Rs. 11,52,000/- for irregular ITC, and SGIPL had already made a payment of Rs. 1 crore. He contended that the department was already secured with over Rs. 14 crores for more than 2.5 years. The petitioner sought to dispense with the additional bank guarantee to enable him to travel abroad. The respondent (CBIC) reported no objection to the relaxation of the bank guarantee condition but sought a direction for the petitioner to submit his itinerary in advance when traveling abroad.