Ronak Soni vs. The State Of Maharashtra And Anr.

Held

The Court held that while the applicant might be justified in claiming that the companies he dealt with were granted GST registration and that transaction documents are available with the department, physical verification revealed that five firms with whom the applicant dealt and availed input tax credit are not physically in existence. The Court found substance in the revenue's contention that custodial interrogation is necessary to ascertain who was operating these fake companies and to further investigate their operations. Therefore, the Court concluded that no case for grant of anticipatory bail was made out. The application for anticipatory bail was rejected.

Facts

The applicant, Ronak Soni, sought anticipatory bail after his application was rejected by the learned Sessions Judge. The revenue's case is that the applicant passed illegal tax credit from companies that exist only on paper. The applicant argued that registration under GST is based on KYC documents and that if the illegal tax credit availed is below Rs. 5 Crores, the offense is bailable. He also contended that the companies he dealt with hold GST registration certificates and their dealings were operated on the portal, making custodial interrogation unnecessary in the absence of a final assessment of liability. The revenue countered that custodial interrogation is justified because the transactions were solely for generating tax credit, and the firms involved are not in existence, necessitating an investigation into who is behind these fake companies.

Key Issues

1. Whether the applicant is entitled to anticipatory bail, considering the allegations of passing illegal tax credit from non-existent companies, under Section 438 of the Code of Criminal Procedure, 1973, in light of the provisions of the Goods and Services Tax Act, 2017? Petitioner's Arguments: - Registration under Section 25 of the GST Act is granted based on KYC documents, and the applicant dealt with these registered companies from 2017-2020. - If the alleged illegal tax credit availed is below Rs. 5 Crores, the offense is bailable and subject to assessment, for which a show-cause notice is contemplated. - Custodial interrogation is not warranted in the absence of an assessment of the liability. - The companies held GST registration certificates, and the department has not proceeded against them for cancellation. - All dealings were operated on the GST portal and are available with the revenue. Revenue's Arguments: - Custodial interrogation is justified as the transactions were solely for generating illegal input tax credit. - Even if GST transaction documents are available, the firms involved are not in existence, making custodial interrogation necessary to identify the operators of these fake companies.