Suresh Hukmat Rai Jadhwani vs. Union Of Inda Through Directorate General Of GST Intelligenceand Anr

Held

The Court held that there was prima facie material to warrant the interrogation of the applicant. The allegations, including the creation of 21 fake entities for availing and passing ITC without actual supply of goods, contravening Section 16 of the CGST Act, 2017, were serious enough to necessitate custodial interrogation for unearthing the full extent of the fraud. The Court relied on its previous judgment in Mr. Ashok Kumar s/o Shri. Chandrapal Singh and others vs. Commissioner CGST & Central Excise, Navi Mumbai Commissionerate and another, which held that verification of returns and determination of liability are not prerequisites for prosecution, and that an FIR is not a condition precedent for arrest under Section 69 of the CGST Act. The Court also referred to several other orders where similar applications for anticipatory bail in cases involving fake entities and fraudulent ITC were rejected. Consequently, the Court found no reason to exercise its discretion in favour of the applicant and concluded that personal interrogation was indispensable. The application for anticipatory bail was rejected, and the interim protection granted earlier was vacated.

Facts

The applicant, Suresh Hukmat Rai Jadhwani, sought anticipatory bail apprehending arrest pursuant to a summons issued under Section 70 of the Central Goods and Services Tax Act, 2017. Investigations revealed that the applicant allegedly created 18 firms for passing Input Tax Credit (ITC) without actual supply of goods, in contravention of Section 16 of the CGST Act. These firms allegedly issued fake bills, availed ITC of approximately Rs. 46.50 Crore, and passed on ITC of approximately Rs. 41.91 Crore. The applicant did not appear in response to the summons. His previous applications for pre-arrest bail were rejected by the Additional Sessions Judge, Nashik. This Court had previously granted interim protection, directing the applicant to report to the Directorate General of GST Intelligence. The respondent's affidavit indicated that the applicant's benefit was to the tune of Rs. 3.5 Crore, and the investigation had identified 21 fake entities.

Key Issues

1. Whether the applicant is entitled to anticipatory bail in light of the allegations of creating fake entities for fraudulent ITC, contravening Section 16 of the CGST Act, 2017, and the alleged non-cooperation with the investigation? 2. Whether the absence of a determined tax liability or a demand notice precludes the initiation of proceedings or the necessity for custodial interrogation under the CGST Act, 2017? Petitioner's Arguments: - The applicant argued that similar protection was granted by this Court in an identical action by State GST authorities. He contended that only a summons under Section 70 of the CGST Act had been issued, and no liability had been determined or demand notice issued, thus proceedings could not be initiated. He also submitted that if his benefit was only Rs. 3.5 Crore, the offence would be bailable, and that he was not statutorily required to maintain books of accounts. Revenue's Arguments: - The Union of India argued that the grounds raised by the applicant were not worthy of consideration. It was contended that a First Information Report (FIR) is not a prerequisite for action under the CGST Act, nor is a demand notice peremptory. The applicant had not cooperated with the investigation and provided evasive replies. The investigation revealed the applicant's complicity in creating 21 fake entities based on documents supplied by him, with monetary transactions establishing a nexus. Custodial interrogation was deemed indispensable.