Jagdish Arora vs. Union Of INDIA

Held

The Court allowed the bail application, holding that there was insufficient material to establish the applicants' responsibility for the company's day-to-day working. The Court noted that the applicants had legally resigned from the Directorship of the company over 11 years prior to the alleged offence. The Court found no documentary evidence to support the respondent's claim that the applicants were in charge and responsible for the company's functions, relying solely on the statement of an employee. The Court also considered the nature and gravity of the allegations, the specific evidence collected, and the applicants' submissions, including their medical conditions. The Court granted bail without commenting on the merits of the case, directing the applicants to furnish personal bonds and sureties, cooperate with the trial, not tamper with witnesses, not commit further offences, and submit their passports. The Court explicitly stated that its observations would not be taken as an expression of opinion in any ancillary or incidental proceedings.

Facts

The applicants, Jagdish Arora and Ajay Kumar Arora, were arrested on July 7, 2020, in connection with alleged Goods and Service Tax (GST) evasion by Som Distilleries Pvt. Ltd. (SDPL) concerning the production and sale of sanitizers. The applicants claim they resigned as Directors of SDPL in 2009 and are not responsible for its day-to-day affairs. The GST Department initially communicated a demand of ₹7,96,00,000, which SDPL deposited under protest, later increased to ₹33 crores. The applicants argue their arrest is premature as assessment proceedings have not commenced. They also highlight SDPL's compliance with licensing and production standards for sanitizers during the COVID-19 pandemic and the timely filing of GST returns. The applicants allege irregularities during search and seizure proceedings and mistreatment of employees. Their bail applications were rejected by the Judicial Magistrate and the Court of Sessions.

Key Issues

1. Whether the applicants, having resigned as Directors of SDPL over a decade ago, can be held responsible for alleged GST evasion by the company, particularly when the respondent has not produced documentary evidence to establish their current role or responsibility for the company's day-to-day business affairs (Section 69 of the CGST Act)? 2. Whether the arrest of the applicants is premature and unjustified in the absence of concluded assessment proceedings and a concretized GST liability, especially when the offence under Section 132 of the CGST Act is compoundable and the applicants have cooperated with the investigation (Section 132 of the CGST Act)? Petitioner's Arguments: - The applicants are not Directors/Managers/Officers/employees of SDPL and resigned in 2009. No documentary evidence links them to the company's current operations. - The arrest is premature as assessment proceedings have not commenced, and no concrete liability is established. - SDPL has deposited ₹8 crores under protest and is compliant with licensing and GST return filings. - Reliance is placed on M. Jayachandran Alloys Pvt. Ltd. vs. Superintendent of GST and Central Excise and Make My Trip (MMT) vs. Union of India, confirmed by Akhil Krishan Maggu and another vs. Deputy Director, DGGI. - The offence is compoundable, and the applicants have cooperated. - Both applicants have serious medical conditions. Respondent's Arguments: - The actions are in accordance with Sections 67 and 69 of the CGST Act. - There is sufficient material, including the statement of an employee (Binay Kumar Singh), to establish the applicants' direct involvement and control over the company. - Framing of assessment is not a prerequisite for arrest, as held in P.V. Ramana Reddy Vs. Union of India, affirmed by the Apex Court.