Sanjay Dhingra vs. Director General Of Goods And Services Tax Intelligence Gurugram Zonal Unit, Gurugram, (Haryana)

Held

The Court held that the petitioner is not entitled to bail. Regarding the first issue, the Court found that the allegations against the petitioner are serious and involve an economic offense of high magnitude. The Court referred to Supreme Court decisions in Nimmagadda Prasad and Y.S. Jagan Mohan Reddy, emphasizing that economic offenses constitute a class apart and require a different approach in bail matters due to their deep-rooted conspiracies, involvement of huge public funds, and potential threat to the country's financial health. The Court stated that arrest and prosecution can be launched under Section 69 of the Act without issuing a prior notice under Section 74, and mere remand to judicial custody does not entitle the petitioner to bail. Regarding the second issue, the Court noted the serious allegations of fake invoices worth approximately Rs. 931 crores, involving GST of approximately Rs. 127 crores without the movement of goods, leading to the availment of input tax credit. Considering the entire facts and circumstances, the Court found no justified ground to grant bail.

Facts

The petitioner, Sanjay Dhingra, was arrested on October 7, 2019, under Section 69 read with Section 132 of the Central Goods and Services Tax Act, 2017. The allegations are that the petitioner, along with others, generated and sold fake tax invoices without supplying goods through various firms and companies under their control or created in the names of employees. Input tax credit was availed by these firms based on fake invoices from non-existent companies, causing a wrongful loss to government revenue. The arrest was effected on the allegation that fake invoices created a liability of Rs. 127 crores for the government. The petitioner sought regular bail. The complaint has been presented, and no notice under Section 74 of the Act has been issued for tax determination.

Key Issues

1. Whether the arrest and continued custody of the petitioner are permissible under the Central Goods and Services Tax Act, 2017, particularly when no notice under Section 74 of the Act has been issued for tax determination? 2. Whether the petitioner is entitled to regular bail in light of the serious allegations of economic offense involving a substantial amount of alleged fraud? Petitioner's Arguments: The petitioner argued that only police remand was sought at the time of arrest, and further custody is not required. They contended that no notice under Section 74 of the Act has been issued for tax determination, and the complaint mentions an evasion of Rs. 13 crores concerning M/s Kwality Limited in relation to the petitioner. Respondent's Arguments: The respondent argued that judicial custody does not automatically entitle the accused to bail. They asserted that there is no absolute bar to arrest and prosecution before adjudication or assessment or prior notice. The respondent identified the petitioner as the 'king-pin' and stated that other concerns are under his control. The allegations are serious, involving a fraud of Rs. 127 crores, and arrest and prosecution are permissible under Section 69 of the Act even without a prior notice under Section 74.