Afzal Hanif Nagaria vs. The Union Of INDIA And Ors.

Held

The Court rejected the application for anticipatory bail. The Court found that the revenue had presented sufficient evidence prima facie establishing the applicant's complicity in the alleged tax evasion scheme. The statements of Sachin Gaikwad and Jagdish Chauhan indicated they were dummy proprietors of the firms M/s. Neha Impex and M/s. Rohini Impex, and these firms had not supplied goods to the applicant. The alleged purchases from these firms, which in turn sourced from a non-existent entity (Mahalaxmi Traders), pointed towards fraudulent transactions. The Court noted that the applicant admitted to being a partner in four firms involved in these transactions. The Court also referred to the Supreme Court's stance in *Union of India V/s. Sapana Jain & others* and subsequent Bombay High Court decisions, which have refused to grant interim protection against arrest in similar cases. The Court acknowledged the objectives of pre-trial arrest, including preventing further offenses and ensuring proper investigation. Therefore, considering the evidence presented by the revenue and the legal precedents, the Court concluded that no case for granting anticipatory bail was made out.

Facts

The applicant, Afzal Hanif Nagaria, sought anticipatory bail in connection with a summons issued under Section 70 of the CGST Act, 2017. The summons required his appearance for an inquiry related to M/s. Neha Impex for the period 2017-18 to December 2, 2020. The revenue alleged that the applicant, along with his father and brother, conducted an export business using nine incorporated companies. They allegedly purchased goods from M/s. Neha Impex and M/s. Rohini Impex, which in turn purchased from Mahalaxmi Traders, a purportedly non-existent entity. These firms were allegedly floated by the applicant's family using false documents to avail inadmissible Input Tax Credit and export benefits. The applicant's father and brother were arrested under Sections 132(1)(b), 132(1)(c), and 132(1)(e) of the CGST Act. The applicant's anticipatory bail application was rejected by the Sessions Court.

Key Issues

1. Whether the applicant is entitled to anticipatory bail in light of the allegations of tax evasion and fraudulent transactions under the CGST Act, 2017, particularly concerning Sections 132 and 70. Petitioner's Arguments: The applicant contended he was falsely implicated. He argued that his father and brother were granted bail. He claimed to be a silent partner in four companies, and that purchases from M/s. Neha Impex and M/s. Rohini Impex were legitimate, evidenced by bank statements, lorry receipts, and shipping bills, with goods being exported and payments realized. He asserted he had cooperated with the investigation, provided documents, and that no loss was caused to the exchequer as he had not filed GST returns. He relied on precedents like *Lupita Saluja Vs. DGGI*, *Shravan Mehra Vs. Superintendent of Central Tax*, *P. V. Ramana Reddy Vs Union of India*, and *Mr. Ashok Kumar s/o Shri. Chandrapal Singh and Ors. V/s. Commissioner CGST & Central Excise*, arguing that action should only follow assessment and that custodial interrogation was unnecessary if transactions were genuine. Revenue's Arguments: The respondent opposed the application, asserting the transactions were bogus and the applicant's complicity was established. They highlighted statements from Sachin Gaikwad and Jagdish Chauhan, indicating they were dummy proprietors of M/s. Neha Impex and M/s. Rohini Impex, respectively, and had not supplied goods to the applicant. The respondent argued that the alleged purchases of goods worth Rs. 2.47 Crores from M/s. Neha Impex and M/s. Rohini Impex, who in turn purchased from a non-existent Mahalaxmi Traders, constituted tax evasion. They cited Supreme Court and High Court decisions, including *Union of India V/s. Sapana Jain & others* and *Ashish Jain V/s. Union of India & Ors.*, to argue against granting interim protection against arrest and emphasized the objectives of pre-trial arrest.