Mahendra Javatraj Jain vs. Superintendent And Anr

Held

The Court held that the applicant's claim of being a 'sleeping partner' does not absolve him from liability. The Court reasoned that Section 90 of the CGST Act creates joint and several liability for partners of a firm for tax, interest, or penalty. The applicant's admission of being a partner in M/s. Rushabh Bullion, coupled with the firm's alleged fraudulent availment of ITC amounting to Rs. 7.11 Crores, made his custodial interrogation necessary. The Court distinguished the case of Jitendra Ganeshlal Dhakad, noting that his bail was granted after his investigation was complete, and that order did not provide succor to the present applicant. The Court found that based on the material on record, there was reason to believe the applicant had committed the alleged offence, necessitating his custodial interrogation. The application for anticipatory bail was rejected.

Facts

The applicant, Mahendra Javatraj Jain, sought anticipatory bail apprehending arrest in connection with an alleged offence under Section 132 of the CGST Act. The respondent, Superintendent, CGST & Central Excise, alleged that M/s. Rushabh Bullion, a firm in which the applicant is a partner, fraudulently availed Input Tax Credit (ITC) amounting to Rs. 7.11 Crore during the financial years 2019-20 and 2020-21 from two suppliers, M/s. Goldmine Bullion and M/s. Riddhi Siddhi Gold. The applicant claimed to be a sleeping partner, with the active partner being Jitendra Ganeshlal Dhakad, who had been released on bail. The applicant argued he was not answerable to the charges due to his non-active role. However, the applicant had responded to summons and his statement was recorded, admitting his partnership in M/s. Rushabh Bullion.

Key Issues

1. Whether the applicant, claiming to be a sleeping partner, is absolved from liability for the alleged fraudulent availment of Input Tax Credit (ITC) by the partnership firm M/s. Rushabh Bullion, under Section 137(3) and 137(4) of the CGST Act? Petitioner's arguments: The applicant contended that as a sleeping/non-acting partner, he was not directly involved in the business dealings of M/s. Rushabh Bullion. He relied on sub-sections (3) and (4) of Section 137 of the CGST Act, arguing that these provisions absolve him from responsibility. He also pointed to the bail granted to Jitendra Ganeshlal Dhakad, the active partner, as a precedent. Revenue's arguments: The respondent argued that the applicant admitted to being a partner in M/s. Rushabh Bullion in his statement recorded on 17.03.2022. They asserted that under Section 90 of the CGST Act, partners of a firm are jointly and severally liable for the firm's tax, interest, or penalty. The respondent highlighted that the firm allegedly availed ITC fraudulently to the tune of Rs. 7.11 Crore, and the applicant's custodial interrogation was deemed imperative due to his response to summons.