Prakash Bihari Lal Dadhichi vs. Union Of INDIA

Held

The Court allowed the bail application. It noted that the applicant had been in custody for 30 days and that there was no specific material placed before the Court to suggest that the applicant had tampered with prosecution witnesses, adversely affected the investigation, or was a flight risk. The Court also observed that the applicant had not misused his liberty while on interim bail and that the maximum punishment for the alleged offence is five years. The Court took notice that interim bail was initially granted on health grounds and later continued by the Supreme Court. Citing the principle that bail is a rule and rejection is an exception, and considering the overall facts and circumstances, the Court found it inclined to grant bail. The Court directed the applicant to furnish a personal bond of Rs. 10 lakhs and two local sureties of Rs. 10 lakhs each within 30 days, deposit his passport, and appear regularly before the Trial Court. The Court explicitly stated that it was not deciding on the merits of the allegations concerning the wrong availment of Input Tax Credit.

Facts

The applicant, Prakash Bihari Lal Dadhichi, a Director of M/s. Dadhichi Iron and Steel Pvt. Ltd., was arrested on February 4, 2020, by GST Intelligence authorities. The arrest followed allegations that the company wrongly availed Input Tax Credit (ITC) of Rs. 62 crores based on fake transactions of sales and supply. The company allegedly uploaded invoices and e-way bills on the GST portal to show purchases and sales of iron and steel products, but investigations revealed these transactions and the transportation of goods did not actually occur. The applicant contends that the allegations are based on undisclosed material and that his company is a reputed trading firm with all transactions duly recorded and uploaded. He argues that the authorities bypassed the scrutiny process under Section 61 of the CGST Act and proceeded directly to registration of an offence.

Key Issues

1. Whether the arrest and registration of an offence under the CGST Act are justified without first conducting scrutiny under Section 61 and affording the assessee an opportunity for explanation, as contended by the applicant? 2. Whether the applicant is entitled to bail, considering the triple test laid down by the Supreme Court, the nature of the alleged offence, the maximum punishment, and the applicant's period of custody, as argued by the applicant? Petitioner's arguments: The applicant's counsel argued that the GST authorities failed to follow the prescribed procedure under the CGST Act by not conducting scrutiny under Section 61 and not providing an opportunity for explanation before arresting the applicant and registering an offence. They contended that the arrest and registration of a criminal case were premature and deprecated by judicial pronouncements. Regarding bail, it was argued that the applicant had already been in custody for 30 days, custodial interrogation was not required, and all relevant information and documents had been seized. The applicant satisfied the triple test for bail, the offence is compoundable, and the maximum sentence is five years, making bail a rule. Reliance was placed on various Supreme Court and High Court judgments concerning bail and procedural compliance. Respondent's arguments: The judgment does not record specific arguments made by the respondent (Union of India through Director General of GST, Intelligence) regarding the procedural issues or the merits of the bail application.