Vaibhav Ghanshyambhai Pragada vs. State Of Gujarat
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The applicants, Vaibhav Ghanshyambhai Pragada and Raj Suchak, sought regular bail under Section 439 of the Cr.P.C. in connection with offences registered under Sections 132(1)(b) and 132(1)(c) of the CGST Act, 2017. The Directorate General of Goods and Services Tax Intelligence (DGGI) initiated proceedings after receiving input about dubious transactions in Technical Grade Urea trading. A search at M/s. Nirmala Corporation, a proprietorship concern of applicant Raj Suchak, led to the seizure of Rs. 2,19,95,000/- in unaccounted cash. Investigations revealed that the applicants were allegedly involved in fraudulently availing and passing on ineligible fake input tax credit amounting to Rs. 16.53 crores by supplying bogus invoices through non-existing firms. The applicants were arrested on April 28, 2022, and their bail applications were rejected by the lower courts. The present applications were filed before the High Court.
Held
The Court allowed the applications for regular bail. The Court reasoned that there is no straight-jacket formula for bail, and it depends on the facts of each case. Citing Union of India Vs. K.A. Najeeb, the Court held that undertrials cannot be indefinitely detained pending trial. In this case, the investigation was virtually over, and the amount disclosed. The Court found the Revenue's contention that investigation was underway not tenable, especially since a complaint had been filed. The Court noted that detention for further period would be unwarranted when the trial would take considerable time and the Revenue failed to demonstrate the necessity of further custody. The Court also considered that the seized amount exceeded 10% and could be treated as a deposit. The maximum punishment being 5 years and the offence being compoundable were also factors. Relying on P. Chidambaram Vs. Director of Enforcement, the Court held that even in grave economic offences, bail should not be denied in every case, and consideration must be on a case-to-case basis. The Court granted bail on executing a personal bond of Rs. 10,000/- with one surety of like amount, subject to conditions including not misusing liberty, not acting against prosecution interest, surrendering passports, not leaving India without permission, and providing updated addresses.
Key Issues
1. Whether the arrest of the applicants was in contravention of mandatory provisions and rules, particularly Section 69 of the CGST Act, and violated Article 21 of the Constitution of India, given the alleged lack of cogent reasons for arrest? (Petitioner's contention). The petitioner argued that arrest powers under Section 69 should be used sparingly with recorded reasons, and no such reasons were provided. They also contended that since more than 10% of the disputed tax liability (Rs. 2,19,95,000/- seized cash) was seized, it should be treated as a pre-deposit under Section 107(6), implying a deemed stay against coercive recovery. Furthermore, they argued that the investigation was exhaustive, complaint filed, and maximum punishment is 5 years, making prolonged detention a violation of Article 21. The Revenue contended that the offence is economic in nature with heavy loss to the exchequer, thus discretion should not be exercised in favour of the applicants. They argued that sufficient reasons existed for arrest due to commercial fraud and evasion of tax, and release would hamper investigation. The Revenue also stated that a co-accused is absconding and the applicants are originators of fake invoices, necessitating their custody for effective investigation.
Sections Cited
Section 132(1)(b), Section 132(1)(c), Section 70, Section 69, Section 107(6), Section 439
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Cause title — parties, addresses and appearances
COMMON ORAL ORDER
Both these applications arises out of the one and same proceedings, they were heard together and therefore, same have been decided by this common order.
The applicants have filed present applications under Section 439 of Cr.P.C., seeking regular bail in connection with the offences registered under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Service Tax, 2017 (hereinafter referred to as ‘CGST Act’ for short, in File No. : DGGI/INV/GST/ 1093/2022. 3. Heard learned Senior Counsel Mr. Manish Bhatt, assisted by Mr. A.N. Mehta, learned advocate for and R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 on behalf of the applicants, Mr. Utkarsh Sharma, learned Standing Counsel appearing for the respondent no. 2 and Mr. Manan Mehta, learned APP for the respondent State.
Mr. Manish Bhatt, learned Senior Counsel for the applicants urged the following contentions : (i) It was submitted that pursuant to the summons issued under Section 70 of the Act, statements of both the applicants were recorded under duress and made to confess that, their firms had availed input tax credit on the basis of the invoices received without actual receipt of the goods from 7 registered entities and further transferred / passed, by issuing invoices without actually delivery of goods and thereafter, both the applicants were arrested on 28.04.2022 under Section 69 of the Act. It is in this context. It was submitted that no offence is made out against the applicants and their arrest is in contravention of mandatory provisions and rules made thereunder, as power under Section 69 should be used sparingly and reasons must be recorded for the arrest. In the facts of present case, no cogent reasons being assigned by the competent authority for the arrest of the applicants and therefore, the action on the part of the authority is in complete violation of R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 Article 21 of the Constitution of India; (ii) It was submitted that during the search, the authority seized cash amount to the tune of Rs.2,19,95,000/-, which is more than 10% of the alleged amount; (iii) Referring to Section 107(6) of the Act, it was contended that the provision provides for deemed stay against the coercive recovery of dues on pre-deposit of 10% of the disputed tax liability. Here in the present case, as stated in (ii) ground, more than 10% has been seized by the authority and on instructions, he urged that it may be treated as deposit; (iv) It was submitted that complaint before the Court has already been filed during the proceedings. The investigation has been exhaustively undertaken by the authority and during the search and seizure, necessary documents as well as electronic evidence including laptops, mobile, pen drive, have been seized and same is with the department; (v) The maximum punishment is upto 5 years. The applicants are in custody since 28.04.2022 and they having deep roots in the society and they are not habitual offenders.; R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 (vi) Considering the pendency of the cases, there is no chances to conclude the trial in reasonable time and therefore, keeping behind the bar applicants, for indefinite period would certainly violate the fundamental right of freedom as guaranteed under Article 21 of the Constitution of India;
In the aforesaid contentions, learned Senior counsel submitted that discretion may kindly be exercised in favour of the applicants by enlarging them on bail imposing suitable conditions.
Learned Standing counsel Mr. Utkarsh Sharma and Mr. Manan Mehta, learned APP, relying on the contentions raised in the affidavit, raised the following issues : (i) Alleged offence is economic offence and keeping in view the gravity of offence and also, the heavy loss to the government exchequer, no case is made out for exercising discretion in favour of the applicants; (ii) While arresting the applicants, sufficient reasons were being assigned by the authority concerned, as the applicants have committed commercial fraud resulting in evasion of huge amount of tax and therefore, if they are released on bail, the investigation would be R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 hampered; (iii) The co-accused is still at run and there is all chances to increase the fraud amount and the present applicants being a originator of fake invoices, their custody is necessary for effective investigation.
In the aforesaid contentions, the learned Standing Counsel and APP submitted that no case is made out for exercising powers to release the applicants on bail and therefore, applications may be rejected.
In order to appreciate the rival submissions, the following facts of the case are required to be recorded.
The respondent no. 2 received input that many firms engaged in trading of Technical Grade Urea are involved in dubious transactions and after analysis of GSTR-2A, 3B, it was reveal that the firms were involved in bogus invoice transactions to claim ineligible input tax credit. On 26/27.04.2022, search was carried out at the premises of M/s. Nirmala Corporation, which is Proprietorship concern of applicant Raj Suchak. The firm is engaged into the trading of technical grade urea and acetic acid. During the search proceedings, the officers have recovered cash amount of Rs.2,38,00,000/- and out of the amount, the unaccounted cash found to the extent of R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 Rs.2,19,95,000/- and same was seized. That it was further found during the investigation that the applicant Raj Suchak, supplied fake invoices to 7 different business entities which are found non- existing / bogus firms. In this incident, the tax consultant applicant VG Pragada was also involved in supplying bogus invoices of the 7 firms through RV Vaghasia on commission basis. In nutshell, during the search proceedings it was revealed that the applicants are involved in fraudulently available and passing on in-eligible fake input tax credit amounting Rs.16.53 crores and thereby committed an offence under Section 132(1)(b) and 132(1)(c) of the Act. The applicants after compliance of mandatory provisions have been arrested on 28.04.2022 and upon their production before the Court, their arrest have been authorized by Judicial Magistrate, Rajkot. Their Regular Bail Applications were rejected by the courts below and being aggrieved with the orders, present applications have been preferred.
Having considered the facts and circumstances of the present case, this is a case where the applicants were need to be enlarged on bail for the following reasons : (i) There is no straight jacket formula for consideration of bail to an accused, as it all R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 unwarranted; (ii) The authority has already seized more than 10% amount and on instructions, learned senior counsel stated that the seized amount be treated as deposit, without prejudice to the rights and contentions of the applicants; (iii) The applicant VG Pragada is not the Proprietor of any firm, related to the applicant Raj Suchak, as being a tax consultant, on commission basis, he acted for and on behalf of Raj Suchak; R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 (iv) Maximum punishment is upto 5 years and the offence is compoundable; (v) regular bail in connection with the File No. : DGGI/INV/GST/1093/2022, on executing personal bond of Rs.10,000/- (Rupees Ten thousands only) each, with one surety each of the like amount to the R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 satisfaction of the learned Trial Court and subject to the conditions that they shall: No. Conditions (a) not take undue advantage of liberty or misuse liberty; (b) not act in a manner injuries to the interest of the prosecution; (c) surrender passport, if any, to the lower court within a week; (d) not leave India without prior permission of the Sessions Judge concerned; (e) furnish latest address of residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of the trial Court;
The authorities shall release the applicants if they are not required in connection with the any other offence. If breach of any above condition is committed, the Sessions Judge concerned shall take appropriate action or issue warrant against the applicants. The bail bond to be executed before the learned trial Court having juri iction to try the case. It will be open for the sessions judge concerned to delete, modify and/or relax any of the above conditions, in accordance with law. Nothing stated hereinabove, shall tantamount to R/CR.MA/9614/2022 ORDER DATED: 12/07/2022 the expression of any opinion on the merits of this case. Rule is made absolute to the aforesaid extent. Direct service permitted. (ILESH J. VORA,J) P.S. JOSHI/18.07
Reproduced from the public record of the Gujarat High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.