G. Bhaskar Rao vs. Directorate General Of Goods And Service Tax, Intelligence

Held

The Court held that the petitioner could be granted relief under Section 438 of the Cr.P.C. The Court noted that, as per the respondents' submissions, no document or oral evidence had been collected against the petitioner to substantiate his management of the company's day-to-day affairs. The apprehension of arrest stemmed from the CFO's statements. While acknowledging that Section 69 of the GST Act allows arrest without prior summons under Section 70 in certain circumstances, the Court found no prima facie case directly linking the petitioner to the tax evasion of Rs. 36 crores. The Court observed that the main accused was a corporate body, and financial matters were handled by the CFO. It concluded that there was no record substantiating the petitioner's prima facie involvement, and his arrest would damage his reputation. The gravity of the offences was not considered high enough to deny bail, nor were there circumstances suggesting the petitioner would abscond, tamper with records, or influence witnesses. Given that the CFO was already arrested and incriminating material collected, custodial investigation of the petitioner was deemed unnecessary. Therefore, the petitioner was entitled to anticipatory bail.

Facts

The petitioner, G. Bhaskar Rao, a Director of Adarsh Global Trades and Services Private Limited, sought anticipatory bail. The Directorate General of Goods and Service Tax (DGGI) had initiated proceedings against the company and its Chief Financial Officer (CFO). The CFO was arrested and later granted bail. During his enquiry, the CFO implicated the petitioner, stating he was responsible for the company's day-to-day activities and for evading Input Tax Credit (ITC) amounting to Rs. 36 crores by creating fake invoices. The petitioner denied involvement in the company's daily affairs, asserting there was no evidence against him beyond the CFO's statements. He apprehended arrest based on these statements and sought bail, highlighting that the CFO was already arrested and material documents collected, and that the alleged offences were compoundable.

Key Issues

1. Whether the petitioner can be granted relief under Section 438 of the Code of Criminal Procedure, 1973, in the context of alleged offences under the Goods and Services Tax Act, 2017? Petitioner's Arguments: The petitioner argued that he was not connected with the day-to-day affairs of the company and lacked direct involvement in the alleged tax evasion. He contended that there was no oral or documentary evidence to substantiate his role, other than the statements made by the CFO during his enquiry. The petitioner also pointed out that the CFO was already arrested and material documents collected, and that the alleged offences were compoundable. He expressed readiness to cooperate with the investigation. Respondents' Arguments: The respondents, represented by the learned Special Public Prosecutor, contended that the petitioner was responsible for evading taxes to the extent of Rs. 36 crores. They argued that no summons under Section 70 of the GST Act had been served on the petitioner, and that investigation was ongoing. They relied on the Supreme Court decision in Union of India Vs. Padam Narain Aggarwall to argue against granting anticipatory bail, asserting that acceding to the petitioner's submissions would cause heavy loss to the State exchequer.