Rakesh Kumar Khandelwal S/O Shri Ramesh Kumar Khandelwal B/C Khandelwal vs. Union Of INDIA

Held

The Court allowed the bail application. The primary reasoning was based on the petitioner's contentions that after the deposit of Rs. 3.33 Crores, the total disputed amount of wrongly claimed Input Tax Credit (ITC) was less than Rs. 5 Crores. The Court also took into consideration that the partners of the firm had been granted protection by the Apex Court and that the petitioner had been in custody since August 28, 2019. The Court noted that the petitioner had placed before it tax invoices and e-Way bills for purchases, and departmental records indicated the existence of the firms. The Court found it incumbent upon the Department to verify the existence of registered firms as per Rule 25 of the GST Rules. The ratio decidendi is that when the disputed tax credit amount falls below a certain threshold (Rs. 5 Crores in this context, implying a potential bailable offense) and other factors like protection granted to partners and cooperation with the investigation are present, bail may be granted. The operative direction was to release the petitioner on bail upon furnishing a personal bond of Rs. 10,00,000/- and two sureties of Rs. 5,00,000/- each, with a direction to deposit his passport and not leave the country without prior permission.

Facts

The petitioner, Rakesh Kumar Khandelwal, is seeking bail in connection with an offense under Section 132(1)(e) of the Central Goods & Service Tax Act, 2017. He was the Manager and Authorized Signatory of Padmavati Industries. The Department investigated and concluded that the firm wrongly claimed Rs. 7.12 Crore in Input Tax Credit (ITC). The petitioner contends that all transactions were through banks, the suppliers were active, and Rs. 3.33 Crore has been deposited, reducing the disputed amount to below Rs. 5 Crore, which he argues makes the offense bailable. He also notes that the owners of Padmavati Industries have obtained a stay on their arrest from the Apex Court, and he has cooperated with the investigation, being in custody since August 28, 2019. The Union of India opposes bail, stating the firm's turnover increased drastically, a refund of Rs. 18 Crore was granted out of Rs. 23 Crore claimed, seven supplier entities were non-existent, and the petitioner holds a 40% profit share, acting as a partner.

Key Issues

1. Whether the offense under Section 132(1)(e) of the Central Goods & Service Tax Act, 2017, is bailable given the disputed ITC amount after deposit is less than Rs. 5 Crore? (Question of law) 2. Whether the petitioner, as Manager and Authorized Signatory, can be held liable for the alleged wrongful claim of Input Tax Credit, considering the Apex Court's orders protecting the partners? (Question of mixed law and fact) Petitioner's Arguments: - The disputed ITC amount, after a deposit of Rs. 3.33 Crore, is below Rs. 5 Crore, making the offense bailable. - All transactions were through bank transfers, and supplier firms were active. - The owners of Padmavati Industries have obtained a stay on their arrest from the Apex Court. - The petitioner has cooperated with the investigation and is in custody since August 28, 2019. - No determination of fake invoices has been made by the authorities. - Reliance placed on C. Pradeep vs. The Commissioner of GST & Central Excise Selam & Anr. (Apex Court). Revenue/State's Arguments: - The firm's turnover increased abnormally, and significant refunds were granted. - Seven supplier entities were non-existent, and Rs. 7.12 Crore ITC was wrongly claimed. - The petitioner is not just a Manager but a partner with a 40% profit share. - The deposit of Rs. 3.33 Crore does not render the offense bailable. - Reliance placed on P.V. Ramana Reddy vs. Union of India & Ors. (Apex Court) and various High Court judgments where bail was rejected.