G.Eswara Rao vs. Directorate General Of Goods And Service Tax

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, there was no direct evidence collected against the petitioner to substantiate his involvement in tax evasion to the tune of Rs. 36 crores, other than the statements made by the CFO during his enquiry. While the respondents argued that the petitioner established companies in different states and evaded GST, no evidence had been collected to support the petitioner's direct involvement in evading ITC based on fake invoices. The Court acknowledged the apprehension of arrest for non-bailable offences. However, it found no prima facie case directly implicating the petitioner in the alleged tax evasion. The Court also considered that the main accused was a corporate body and the financial matters were handled by the CFO. It reasoned that the arrest and detention of the petitioner would damage his reputation, the allegations were not grave enough to deny bail, and there was no indication that the petitioner would abscond or tamper with evidence. Given that the CFO was already arrested and detained, and incriminating material had been collected, the petitioner was not required for custodial investigation. Therefore, the petitioner was entitled to anticipatory bail. The Court directed the respondents to release the petitioner on bail upon executing a personal bond of Rs. 10,00,000/- with two sureties for a like sum.

Facts

The petitioner, G. Eswara Rao, sought anticipatory bail in relation to a case registered under the GST Act, 2017, for alleged offences including tax evasion. The Directorate General of GST Intelligence (DGGI) had conducted searches and seized documents pertaining to M/s. Adarsh Global Trades and Services Private Limited. The Chief Financial Officer (CFO) of this company was arrested and later granted bail. During his enquiry, the CFO implicated the petitioner, stating he was instrumental in establishing shell companies, appointing relatives as figurehead directors, and was responsible for evading Input Tax Credit (ITC) amounting to Rs. 36 crores through fake invoices. The petitioner denied any connection to M/s. Adarsh Global Trades and Services Private Limited, asserting that the allegations were solely based on the CFO's statements and that there was no other oral or documentary evidence against him. He apprehended arrest due to his name surfacing in the CFO's statements.

Key Issues

1. Whether the petitioner can be granted relief under Section 438 of the Code of Criminal Procedure, 1973, in the given circumstances? Petitioner's arguments: The petitioner contended that he had no direct connection with M/s. Adarsh Global Trades and Services Private Limited and that the allegations were based solely on the statements of the CFO, with no other supporting oral or documentary evidence. He argued that the offences alleged were compoundable and non-bailable, and that he was ready to cooperate with the investigation. He also submitted that the arrest and detention of the petitioner would damage his reputation, the allegations were not grave, and there was no likelihood of him absconding or tampering with evidence. The CFO was already arrested and detained for 30 days, suggesting the petitioner was not required for custodial investigation. Respondents' arguments: The respondents argued that the petitioner was responsible for tax evasion to the extent of Rs. 36 crores. They contended that if the petitioner's submissions were accepted, it would cause significant loss to the State exchequer and hinder the ongoing investigation. They relied on the Supreme Court's decision in Union of India Vs. Padam Narain Aggarwal.