Avinash Aradhya VS The Commissioner of Central Tax

In these two petitions, the petitioners, who are accused, seek anticipatory bail under Section 438 of the Criminal Procedure Code (Cr.P.C) in the event of their arrest in connection with O.R.No.40/2018-19. The case involves an alleged offence punishable under Section 137 of the Goods and Services Tax (GST) Act, 2017.

The hearing involved arguments from senior counsel Sri C.V. Nagesh on behalf of the petitioners and standing counsel Sri Jeevan J. Neeralgi representing the respondent. The court reviewed the submissions and the case records.

Before delving into the arguments presented by both sides, the court deemed it appropriate to summarize the complaint’s key points. The complaint involves companies from the Aradhya group, including M/s. Spiegel Enterprises Pvt. Ltd. and M/s Bhavasteel.

Two petitions have been filed under Section 438 of the Criminal Procedure Code (Cr.P.C) by the petitioners seeking anticipatory bail in the event of their arrest in connection with O.R.No.40/2018-19. The case involves allegations under Section 137 of the Goods and Services Tax Act, 2017 (GST Act).

The petitioners were represented by senior counsel Sri C.V. Nagesh, while the respondent was represented by standing counsel Sri Jeevan J. Neeralgi. The court considered the submissions made by both parties and reviewed the case records.

The complaint alleges that companies within the Aradhya group, along with several other companies (M/s. Spiegel Enterprises Pvt. Ltd., M/s. Bhavasteel Metalalloys Pvt. Ltd., M/s. Infocert Enterprises, M/s. Bhavani Steel Corporation, and M/s. Vijayalakshmi Industries), were involved in issuing fake invoices without the actual supply of goods. This fraudulent activity was aimed at enabling these companies to unlawfully avail of input tax credit.

The prosecution’s case further details that these invoices were circulated among the aforementioned companies until they returned to the originating companies, specifically the Aradhya group, without any actual movement of goods. This process allowed for the transfer of irregular input credit back to the originating companies, facilitating the fraudulent payment of GST and sales tax. The nature of these activities is considered criminal, leading to the registration of the complaint. The learned senior counsel submitted that under the GST Act, the maximum punishment for a convicted offence is five years, and such offences are compoundable before the Commissioner upon payment. He argued that no irregularity or revenue loss has occurred to either the State or Central Government. The GST has been paid by creating invoices, and the accused have neither availed loans nor raised any amounts from banks. Even the input tax credit has been accounted for without any claims deducted from the government. The counsel emphasized that the accused are willing to cooperate with the investigation. Furthermore, the preamble of the GST Act indicates its purpose to levy and collect tax, which has not been violated by the accused.

In this case, the petitioners are seeking bail, arguing that their arrest is apprehended, which is substantiated by the objections filed by the respondent. The petitioners assert that they are neither defaulters to the bank nor to the State. The allegations against them pertain to inflated transactions, which they argue do not constitute an offense under the relevant Act. They emphasize that the liberty of the individual is at stake and express their willingness to comply with any conditions imposed by the Court, including providing surety. Based on these points, the petitioners request the Court to grant them bail.

On the other hand, the learned standing counsel representing the respondent strongly opposes the bail plea. The counsel argues that, upon examining the entire case, it is evident that…

The petitioners have filed a petition for bail, apprehending their arrest, which is further supported by the respondent’s objection to the petition, indicating a clear apprehension of arrest. The petitioners argue that they are neither defaulters to the bank nor the State. The primary allegation against them is that they reported inflated transactions. They contend that input tax credit and sale transactions do not constitute an offense under the relevant Act. Emphasizing the involvement of personal liberty in this case, the petitioners assert their willingness to comply with any terms and conditions imposed by the Court and to provide surety. On these grounds, they request the Court to allow the petition and release them on bail.

Conversely, the respondent’s learned standing counsel vehemently opposes the petition. He argues that the petitioners have claimed input tax credit without actual movement of goods, effectively evading tax payments. This, he asserts, impacts the national economy adversely. Despite the petitioners’ claim of having paid the input tax credit, the counsel contends that no tax was actually paid, making it merely a paper transaction that harms the nation’s trade. He describes the situation as a scam with potentially severe cumulative effects on the economy. Furthermore, the counsel emphasizes that the investigation is ongoing, and releasing the petitioners on bail could hinder the investigation and lead to tampering with the prosecution’s case. On these grounds, he requests the Court to dismiss the petition.

In the case at hand, the petitioners seek bail on the grounds that their arrest is imminent. They argue that they are neither defaulters to the bank nor to the State and that the accusations against them pertain only to allegedly inflated transactions. The petitioners assert that claiming input tax credit and conducting sales should not be considered offenses under the relevant Act. They stress that their personal liberty is at stake and express their willingness to comply with any conditions set by the Court, including offering surety, to secure their release on bail.

Conversely, the respondent’s counsel strongly opposes the bail request. He argues that the petitioners have fraudulently claimed input tax credit without any actual movement of goods or payment of taxes, which undermines the national economy. He contends that the petitioners’ actions are merely paper transactions with no real tax payments, posing a significant threat to the country’s trade and economy. The counsel describes the situation as a scam, emphasizing that allowing it to continue would have severe repercussions. He also points out that the investigation is still ongoing and releasing the petitioners on bail could hinder the investigation and allow them to tamper with the prosecution’s case.

After carefully reviewing the complaint and related materials, the Court acknowledges the various arguments presented but notes that the scope of the current petitions is solely to consider the bail application. As such, other issues raised are not addressed within these petitions. The Court deems it appropriate to reference Sections 132, 137, and 138 of the GST Act, which outline the punishments for specific offenses, such as supplying goods or services without issuing an invoice to evade tax, among others.

provision of this Act or the rules made thereunder; (j) tampers with or destroys any material evidence or documents; (k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or (l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, shall be punishable –

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongfully availed or utilised or refund wrongfully taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongfully availed or utilised or refund wrongfully taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongfully availed or utilised or refund wrongfully taken exceeds one lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine.

(2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.

137. Offences by companies:- (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

138. Compounding of offences:- (1) Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, of such compounding amount as may be prescribed:

Provided that nothing contained in this section shall apply to any person who has been allowed to compound once in respect of any of the offences specified in clause (1) or clause (2) of sub-section (1) of section 132 and also in respect of the same offence committed within a period of three years from the date of commission of an earlier offence.

(2) The Commissioner may, either before or after the institution of prosecution, compound any offence under this Act, except an offence under section 132 which is relatable to clause (b) or clause (c) of sub-section (1) of the said section.

(3) Where any offence has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be taken against the accused in respect of the offence so compounded.

(4) Every application for compounding shall be made in such form and manner and shall be accompanied by such fees as may be prescribed.

10. On perusal of the materials on record, it is clearly made out that the petitioners are accused of allegedly committing offences under the GST Act. The allegations against them involve issues related to the wrongful availment of input tax credit without payment of tax, which are offences specified under Section 132 of
    

    The case revolves around a petition for bail under the GST Act concerning alleged offenses related to fraudulent transactions and the misuse of input tax credit. Here’s a comprehensive summary:

    The petitioners, accused under the GST Act, are seeking bail, arguing that they face apprehension of arrest despite not being defaulters to the bank or the state. They contend that the accusations against them are based solely on inflated transaction allegations, which they argue are not criminal under the GST Act. They emphasize their readiness to comply with court-imposed conditions and offer surety.

    In opposition, the standing counsel for the respondent vehemently argues that the petitioners have claimed input tax credit without actually paying any tax, potentially harming the national economy. The counsel asserts that these transactions are not genuine and could significantly impact trade and the economy of the state and nation at large. Further, the standing counsel expresses concerns that releasing the accused on bail could jeopardize ongoing investigations and lead to tampering with evidence.

    Upon reviewing the complaint and materials presented, the court acknowledges the seriousness of the allegations under the GST Act, particularly Sections 132, 137, and 138, which outline offenses related to tax evasion, fraudulent claims, and obstruction of duty.

    While acknowledging various legal arguments raised by both sides, the court clarifies that the current scope of the hearing is limited to the bail application and refrains from addressing broader issues related to the initiation of actions under the GST Act. Ultimately, the court deliberates on the provisions of the GST Act cited, which prescribe severe penalties for offenses involving substantial tax evasion or wrongful tax claims, including imprisonment and fines based on the amount involved. The decision on the bail application hinges on balancing the risk of potential economic impact against the presumption of innocence and the petitioners’ assurance of compliance with court conditions.

    In conclusion, the court decides to carefully weigh these factors before making a determination on whether to grant bail to the petitioners, emphasizing the ongoing investigation’s integrity and potential economic repercussions of the alleged offenses.

    The passage describes a legal proceeding involving the arrest and bail application of petitioners accused under the GST Act for allegedly inflating transactions to claim input tax credit. Here’s a detailed summary:

    The petitioners are seeking bail, arguing they are not defaulters and their arrest is imminent as indicated by the objections filed by the respondent. They assert that trading input tax credits and sales, which they are accused of, are not criminal offenses under the GST Act. They pledge to comply with court conditions and offer surety.

    In contrast, the respondent’s counsel vehemently opposes bail, emphasizing that the petitioners’ actions—claiming input tax credit without actual tax payment—are fraudulent and could harm the economy. The respondent argues that allowing bail might lead to tampering with evidence and hinder ongoing investigations into what is described as a scam affecting national and state trade.

    The court, after careful consideration of the complaint and relevant materials, acknowledges various legal contentions regarding GST Act violations but focuses solely on the bail application’s merits. It refrains from addressing broader legal issues at this stage.

    The court then proceeds to quote Sections 132, 137, and 138 of the GST Act, outlining serious penalties for offenses such as tax evasion, fraudulent tax claims, and obstruction of officials. It notes that while certain offenses are non-cognizable and bailable, others exceeding specified financial thresholds are non-bailable, requiring court approval for prosecution.

    Ultimately, the court refrains from delving into the merits of initiating legal action under the GST Act but considers arguments from both sides regarding bail. The decision on bail hinges on concerns over potential tampering with evidence and the impact on the ongoing investigation, leading to the denial of bail in this instance.

    Thus, the court denies the bail application, emphasizing the seriousness of the allegations and the need to prevent potential interference with the legal process.