Pakki Srinivas 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 oral or documentary evidence collected against the petitioner to substantiate his involvement in evading tax to the tune of Rs. 36 crores, other than the statements made by the CFO of M/s. Adarsh Global Trades and Services Private Limited. The Court observed that while Section 70 of the GST Act mandates issuing summons, Section 69 allows for arrest without resorting to Section 70 if the investigating officer has reason to believe a person has committed an offence. However, in this case, summons had already been issued. The Court distinguished the present case from the Apex Court's decision in Union of India Vs. Padam Narain Aggarwal, finding no prima facie case directly linking the petitioner to tax evasion. The Court concluded 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 he would abscond or tamper with evidence. The CFO had already been in custody for 30 days, and incriminating material had been collected, suggesting custodial investigation of the petitioner was not required. Therefore, the petitioner was entitled to anticipatory bail.

Facts

The petitioner, Pakki Srinivas Rao, Finance Manager of Hero Wiretex Ltd., filed a criminal petition seeking anticipatory bail. He was summoned by the Directorate General of GST Intelligence (DGGI) under Section 70 of the GST Act, 2017, based on an assumption that his company was linked to M/s. Adarsh Global Trades and Services Private Limited. The DGGI had initiated an investigation against Adarsh Global, leading to the arrest of its Chief Financial Officer (CFO). The petitioner claimed he was not connected to Adarsh Global and was only an employee of Hero Wiretex. He argued that his apprehension stemmed solely from statements made by Adarsh Global's CFO during the inquiry, and there was no other evidence against him. The DGGI contended that the petitioner was responsible for tax evasion of Rs. 36 crores and that granting bail would harm the state exchequer.

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 Section 132(1)(i) read with Section 132(1)(b)(c) of the GST Act, 2017? Petitioner's arguments: The petitioner contended that he was not involved in the affairs of M/s. Adarsh Global Trades and Services Private Limited, the company under investigation, and was merely an employee of Hero Wiretex Ltd. He argued that his apprehension for arrest was based solely on statements made by Adarsh Global's CFO during an inquiry, with no other oral or documentary evidence substantiating his involvement. He also pointed out that the CFO had already been arrested and granted bail, and that the alleged offences were compoundable and non-bailable, and that he was ready to cooperate with the investigation. Respondents' arguments: The respondents (DGGI) argued that the petitioner was responsible for tax evasion amounting to Rs. 36 crores. They contended that summons under Section 70 of the GST Act had been issued to the petitioner and that the investigation was ongoing. They relied on the Supreme Court decision in Union of India Vs. Padam Narain Aggarwal to argue against granting anticipatory bail, asserting that it would cause heavy loss to the state exchequer.