Nileshbhai Natubhai Patel vs. State Of Gujarat

Held

The Court held that the applicant is entitled to regular bail. The Court considered the maximum punishment prescribed under Section 132(1)(i) of the CGST Act, 2017, which may extend to five years imprisonment and fine, particularly when the amount of tax evaded or ITC wrongly availed exceeds five hundred lakh rupees. It also noted the provision for compounding of offences under Section 138 of the Act, which allows for the abatement of criminal proceedings upon payment of tax, interest, penalty, and a compounding amount. The Court found it just and proper to exercise discretion in favour of the applicant, considering the potential for trial to take a significant amount of time. The applicant was ordered to be released on bail upon furnishing a personal bond of Rs.2,00,000/- with one surety of the like amount, subject to conditions including not misusing liberty, not acting against the prosecution's interest, surrendering passport, not leaving India without permission, and providing current address details. The Court did not expressly leave any issue undecided.

Facts

The applicant, Nileshbhai Natubhai Patel, was arrested on February 23, 2022, in connection with alleged offences under Section 132(1)(c) of the CGST Act, 2017, and GGST Act, 2017. The arrest was made by the Assistant Commissioner of State Tax-4, Enforcement Division – 2, under powers exercised via Section 69 of the GGST Act, 2017. The prosecution alleges that 39 suppliers of M/s. Madhav Copper Limited were fictitious entities, leading to the wrongful availment of Input Tax Credit (ITC) by M/s. Madhav Copper Limited, amounting to Rs.138.71 Crores. The applicant contends that M/s. Madhav Copper Limited purchased goods under tax invoices after verifying GST registration and that all purchases were made from registered dealers with valid GSTINs, supported by tax invoices and e-way bills, with payments made through banking channels. The applicant also notes that a show cause notice for Rs.20,86,67,524/- for the period 01.07.2017 to 03.10.2019 under Section 74/122 of the GGST Act, 2017, has been filed, with a partial deposit made under protest, but this notice has not yet been adjudicated.

Key Issues

1. Whether the invocation of powers under Section 69 of the GGST Act, 2017, read with Section 132 of the GGST Act, 2017, for the arrest of the applicant was justified without prior adjudication of tax liability under Sections 73 or 74 of the GGST Act, 2017, and without establishing 'reason to believe' as mandated by Section 132 of the CGST Act? Petitioner's arguments: The applicant argued that Section 69 of the GGST Act, 2017, should not be used indiscriminately. The power to arrest requires proper application of mind and a 'reason to believe' that an offence has been committed, which necessitates prior determination of tax liability under Sections 73 or 74. The applicant contended that the procedure under Chapters XI and XIV of the GGST Act, 2017, was bypassed. Reliance was placed on the decision in Arnesh Kumar v. State of Bihar. The applicant also argued that the conditions precedent of Section 132(6) of the CGST Act, 2017, were bypassed, and statements recorded under Section 70 of the GGST Act, 2017, are only relevant when examined as witnesses, which did not occur. Revenue's arguments: The judgment does not record specific arguments made by the revenue or State.