M/S. Aaria Projects Lts. vs. The Senior Intelligence Officer

Held

The Court held that prosecution for offences under Section 132(1)(b) and (c) of the CGST Act, 2017, which include issuing or receiving invoices without supply of goods and wrongful availment of ITC, is not dependent on the completion of assessment or adjudication proceedings. This was based on the Division Bench's observation in W.P. No. 4764 of 2019 and batch, which held that such offences have no correlation to assessment and prosecutions do not depend on its completion. Regarding the permissibility of arrest for compoundable offences and the requirement of prior sanction, the Court referred to the same Division Bench judgment. The Division Bench had rejected the argument that arrest is impermissible as long as offences are compoundable, deeming it an argument of convenience in such cases. The Court also noted that the Division Bench found technical objections raised by petitioners regarding entitlement and necessity for arrest to be liable for rejection. In light of these observations and the specific allegations against M/s. Aaria Projects Limited involving fake invoices and wrongful ITC, the Court concluded that it was not a fit case to grant anticipatory bail. The Court dismissed the Criminal Petition.

Facts

The petitioners, Directors of M/s. Aaria Projects Limited, sought anticipatory bail in proceedings initiated by the Directorate General of GST Intelligence (DGGI), Hyderabad Zonal Unit. The DGGI alleged that M/s. Aaria Projects Limited issued fake GST invoices without supply of goods/services, amounting to Rs. 10.98 Crores, and received fake invoices without goods/services, amounting to Rs. 18.81 Crores, leading to wrongful availment and utilization of Input Tax Credit (ITC). This allegedly caused a significant loss to the exchequer. The investigation involved recording the statement of Akella Sai Kumar, a Director, who admitted his role. The petitioners argued that the company was a sub-contractor for government projects and that the authorities failed to follow due procedure, including issuing proper notices and obtaining necessary sanctions before initiating proceedings and arresting a director. They also contended that the offences are compoundable, making arrest unnecessary.

Key Issues

1. Whether the prosecution for offences under Section 132(1)(b) and (c) of the CGST Act, 2017, which involve issuing or receiving fake invoices without supply of goods/services and wrongful availment of ITC, is dependent on the completion of assessment or adjudication proceedings? 2. Whether the arrest of Directors is permissible even if the alleged offences are compoundable under Section 138 of the CGST Act, 2017, and prior sanction from the Commissioner under Section 132(6) is not recorded? Petitioner's Arguments: The petitioners contended that the allegations of issuing fake invoices without supply of goods are baseless as the company was engaged in civil works as a sub-contractor. They argued that the authorities failed to follow due procedure, including issuing notices under Section 41-A or 70(1) of the CGST Act before taking custody and recording statements. They also highlighted irregularities in the arrest of Akella Sai Kumar and questioned the absence of prior sanction from the Commissioner for prosecution. Furthermore, they submitted that since the offences are compoundable, arrest is unwarranted, and the authorities should have resorted to assessment and adjudication first. Respondent's Arguments: The respondent argued that further investigation is ongoing to collect material evidence regarding irregular passing of ITC. They contended that if the petitioners are released on anticipatory bail, there is a possibility of manipulating records.