Bhushan Kailas Musale vs. The Union Of INDIA And Anr

Held

The Court held that criminal proceedings can proceed concurrently with assessment proceedings. It referred to the Telangana High Court judgment in *P.V. Ramana Reddy vs. Union of India* and the Supreme Court's decision in the same matter, as well as its own previous views, to support the contention that the Revenue can initiate criminal investigations parallel to assessment. The Court found that the applicants' argument that assessment proceedings must precede criminal action lacked substance. Regarding the prima facie involvement, the Court noted that the investigation revealed the applicants' involvement in obtaining undeserving tax benefits. The applicants were offered an option to cooperate by depositing Rs 54.55 crores, which they declined. Consequently, the Court concluded that no case for granting pre-arrest bail was made out based on the investigation conducted so far, which indicated the applicants' prima facie involvement. However, the Court continued the ad-interim protection for two weeks from the order's upload date, acknowledging the pendency of the issue before the Apex Court in the *Daulat* case.

Facts

Three applicants, Bhushan Kailas Musale, Sandeep Ramsevak Gupta, and Ashish Deokinandan Kanodia, sought anticipatory bail. The applicants are apprehended for offenses under Sections 132(1)(b) and (c) of the Central Goods and Services Tax Act, 2017 (CGST Act). Bhushan Musale allegedly operated a dummy firm, M/s. Purva Goods Carrier, involved in transportation. Ashish Kanodia was an accounts manager and shareholder of M/s. Green Shield Enterprises Pvt. Ltd., which dealt in fabrics and operated from the same premises as several other companies. Investigations revealed that transport firms used by M/s. Green Shield were dummy or non-existent, with Bhushan Musale allegedly handling paperwork and his wife signing bogus lorry receipts. Ashish Kanodia was also associated with M/s. Bombay Rayon Fashions Ltd., which was found to have obtained undeserving tax benefits through fake invoices. Sandeep Gupta, a chartered accountant, is alleged to have conspired with Ashish Kanodia and Bhushan Musale.

Key Issues

1. Whether the Revenue was required to complete assessment proceedings before initiating criminal action against the applicants under the CGST Act, as argued by the applicants, relying on the Division Bench judgment in *Daulat Samirmal Mehta vs. Union of India*? 2. Whether there is sufficient material on record to infer the prima facie involvement of the applicants in the alleged offenses, as contended by the Revenue? Contentions: Petitioner/Applicants: The Revenue has not followed the prescribed procedure for scrutiny, audit, show cause notice, and assessment. Therefore, there is insufficient material to infer prima facie involvement. They cited *Daulat Samirmal Mehta vs. Union of India* to support the argument that tax liability assessment must precede criminal action. They expressed willingness to cooperate with the investigation but sought protection. Revenue/Respondent No.1: The applicants' involvement is apparent from Ashish Kanodia's role as Accounts Manager in multiple companies, managing firms that received forged tax credits based on non-genuine invoices. The Revenue argued that criminal proceedings can run parallel to assessment proceedings, citing the Telangana High Court judgment in *P.V. Ramana Reddy vs. Union of India* and the Supreme Court's decision in the same matter. They also noted the applicants' refusal to deposit Rs 54.55 crores as an option to cooperate.