Case Title | Daulat Samirmal Mehta VS Union Of India |
Court | Bombay High Court |
Honourable Judges | Justice Milind N. Jadhav Justice Ujjal Bhuyan |
Citation | 2021 (02) GSTPanacea 168 HC Bombay Writ Petition No.471 Of 2021 |
Judgement Date | 15-February-2021 |
In a recent court proceeding, Mr. Batra, representing the petitioner, and Mr. Pradeep S. Jetly, along with Mr. Mishra for the respondents, presented arguments primarily focused on a bail petition. The petitioner has filed a writ petition under Article 226 of the Indian Constitution challenging the constitutionality of section 132(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act). The crux of the challenge is centered on the contention that powers under section 69 of the CGST Act should only be exercised after liability has been conclusively determined.
Furthermore, the petition seeks a declaration that the respondent No. 4 should be restrained from filing any criminal complaints against the petitioner for alleged violations of the CGST Act, particularly for offenses that are compoundable. Additionally, the petitioner has requested the court to direct respondent Nos. 2 and 3 to render a decision by issuing a detailed order on the compounding applications submitted on 28th January 2021 by the petitioner and two companies where he holds a directorial position.
An interim relief sought in the petition is for the petitioner to be released on bail, as he has been in judicial custody since 21st January 2021.
The arguments from both sides revolve around the interpretation of statutory provisions under the CGST Act, the scope of executive powers, and the fundamental rights of the petitioner. The court is expected to deliberate on these complex legal issues before making a determination on the bail plea and the broader constitutional challenge presented in the writ petition.
availed and utilized input tax credit (ITC) based on bogus invoices without actual receipt of goods or services. The case revolves around the constitutional challenge to Section 132(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act), which the petitioner argues should only be invoked after determining liability under Section 69 of the CGST Act. The petitioner, Mr. Batra, represented by counsel, seeks a declaration of the section’s validity and demands a restraint on respondent No.4 from filing criminal complaints for compoundable offenses under the CGST Act.
The petitioner, a 65-year-old senior citizen and director of Twinstar Industries Limited and Originet Technologies Limited, became a subject of investigation by respondent No.4 in 2018. This investigation stemmed from intelligence suggesting fraudulent utilization of input tax credit by another entity, M/s. Al Fara’s Infraprojects Private Limited, through bogus invoices. During this probe, the petitioner was summoned multiple times under Section 70 of the CGST Act. He cooperated, appearing before investigators and providing statements on several dates from December 2018 to January 2021.
The situation escalated when, after his statement on January 21, 2021, the petitioner was arrested by respondent No.4 officials. He was subsequently presented before the Additional Chief Metropolitan Magistrate in Mumbai, where a remand application disclosed allegations against him and his companies. Specifically, they were accused of fraudulently availing and utilizing ineligible ITC amounting to approximately Rs. 122.59 crores based on bogus invoices, constituting offenses under Section 132(1)(c) and Section 132(1)(b) of the CGST Act.
In response to these charges, the petitioner filed a writ petition under Article 226 of the Constitution of India challenging the constitutional validity of Section 132(1)(b) of the CGST Act. He seeks a declaration that the power under Section 69 of the CGST Act can only be exercised post-determination of liability. Additionally, he requests a direction for respondent Nos. 2 and 3 to decide on the compounding applications submitted by him and his companies. An interim prayer for bail pending the outcome of the writ petition has also been made, given his judicial custody since January 21, 2021.
Thus, the case involves complex legal arguments surrounding the interpretation of tax laws, procedural fairness in investigations, and fundamental rights under the Constitution, highlighting significant implications for tax enforcement and individual rights in the country’s legal framework.
prayer for bail.
2. The case before the court involves a petition filed under Article 226 of the Constitution of India challenging the constitutional validity of section 132(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act), and seeking a declaration that the power under section 69 of the CGST Act can only be exercised upon determination of liability. The petitioner also seeks to restrain respondent No. 4 from filing criminal complaints for alleged violations of compoundable offenses under the CGST Act, and demands a decision from respondent Nos. 2 and 3 on compounding applications filed earlier. Additionally, an interim prayer seeks the petitioner’s release on bail, given his judicial custody since January 21, 2021.
3. Although the facts are limited, it is pertinent to briefly outline them for context. The petitioner, aged about 65 years, serves as a director for Twinstar Industries Limited and Originet Technologies Limited.
4. The investigation began in 2018 when respondent No. 4 initiated inquiries into alleged fraudulent availment and utilization of input tax credit (ITC) by M/s. Al Fara’s Infraprojects Private Limited, based on bogus invoices without actual receipt of goods or services. During this investigation, the petitioner was summoned multiple times under section 70 of the CGST Act. He appeared before the investigating officer on various dates, and his statements were recorded between December 2018 and January 2021.
5. Subsequently, on January 21, 2021, after the petitioner’s last statement was recorded, he was arrested by officials from respondent No. 4’s office. He was then presented before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai, along with a remand application. The application alleged that the petitioner’s companies had fraudulently availed and utilized ineligible ITC amounting to approximately Rs. 122.59 crores, and had also issued bogus invoices resulting in wrongful ITC claims of around Rs. 191.66 crores to recipient companies. The remand application sought judicial custody for 14 days to facilitate further interrogation.
6. Since his arrest, the petitioner has remained in judicial custody.
7. Meanwhile, the petitioner and the two companies where he serves as director filed three compounding applications under section 138 of the CGST Act on January 28, 2021, with respondent Nos. 2 and 3, aiming to compound the offenses and mitigate further impact on the petitioner’s personal liberty.
8. The petitioner, while denying the allegations against him, submitted these applications to streamline proceedings and prevent prejudice to his personal liberty.
9. With these issues at hand, the current writ petition was filed seeking the aforementioned reliefs.
10. On February 2, 2021, the court initially adjourned the matter to February 5, 2021, at the request of Mr. Jetly, learned senior counsel for the respondents. On February 5, 2021, notice was issued, and given the petitioner’s continued custody since January 21, 2021, the court scheduled the matter for February 10, 2021, specifically to consider the petitioner’s bail application.
petition for anticipatory bail in similar circumstances. Learned counsel further relied on the decisions of the Punjab and Haryana High Court in the case of Gurvinder Singh v. Union of India, 2020 (35) GSTL 300 and the Rajasthan High Court in the case of Amit Jain v. Union of India, 2019 (23) GSTL 169. Reference has also been made to the decision of the Delhi High Court in the case of Vijay Kumar v. Union of India, 2021 (46) GSTL 36 in which the Delhi High Court has dismissed the writ petition filed under Article 226 of the Constitution of India for quashing of the criminal complaint under the CGST Act holding that the appropriate remedy lies under section 482 of the Cr.P.C. Learned counsel further submitted that the principles of judicial discipline require that the present writ petition should also be dismissed as the petitioner has the alternative remedy of applying for regular bail under section 437 of the Cr.P.C.
12.2. It is also contended that even in the absence of the provisions contained in section 132(1)(b) of the CGST Act, section 69 of the said Act authorizes arrest if there is credible evidence against the person accused of committing offences under the CGST Act. Reliance in this regard has been placed on a decision of the Bombay High Court in the case of Nikul G. Mehta v. Union of India, 2019 (21) GSTL 280 and the decision of the Gujarat High Court in the case of Chintan Harshad Mehta v. Union of India, 2019 (22) GSTL 328.
12.3. Stand is also taken that there is no reason to interfere with the remedy of bail available under the Cr.P.C. by invoking the jurisdiction under Article 226 of the Constitution of India, especially when the remedies under the CGST Act are still available to the petitioner.
12.4. In the circumstances, the stand taken is that the present writ petition filed under Article 226 of the Constitution of India is not maintainable and the petitioner should be relegated to avail the remedy under the provisions of the CGST Act and the Cr.P.C.
the 15th of February 2021, a significant legal proceeding was held concerning a writ petition under Article 226 of the Indian Constitution, wherein Mr. Batra, representing the petitioner, and Mr. Pradeep S. Jetly, along with Mr. Mishra for the respondents, presented arguments primarily focused on the petitioner’s bail request.
The case revolves around the constitutional validity challenge of Section 132(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner seeks a declaration that powers under Section 69 of the CGST Act can only be exercised post liability determination. Additionally, they request to restrain respondent No. 4 from filing criminal complaints for compoundable offenses under the CGST Act, urging a decision on compounding applications dated 28th January 2021. The petitioner, a 65-year-old senior citizen and director of Twinstar Industries Limited and Originet Technologies Limited, was arrested on 21st January 2021 following investigations into alleged fraudulent availment and utilization of input tax credit (ITC) by associated companies.
The petitioner’s companies allegedly availed and passed on ineligible ITC based on bogus invoices, amounting to significant sums. Despite denial of the allegations, the petitioner filed compounding applications to prevent prosecution and safeguard personal liberty.
During the proceedings, respondent No. 4 argued against the writ petition’s maintainability for bail under Article 226, citing Section 437 of the Code of Criminal Procedure, 1973 (CrPC) as the appropriate remedy. They highlighted ongoing investigations and substantial evidence collected against the petitioner and other entities involved in circular transactions without actual supply of goods or services.
Mr. Batra countered, asserting the petitioner’s cooperation with investigations and challenging the legality and justification of his arrest. He referenced judicial precedent, including the Delhi High Court’s ruling in Makemytrip (India) Private Limited Vs. Union of India, to support his argument against arbitrary and punitive arrests in similar cases.
The hearing concluded with Mr. Jetly emphasizing the absence of a substantive bail prayer in the writ petition, thus questioning the interim relief sought. The Court’s decision on the bail request remained pending as arguments from both sides highlighted constitutional issues, statutory interpretation, and procedural considerations under the CGST Act and CrPC.
In essence, the proceedings underscored the complex interplay between tax laws, constitutional rights, and criminal procedure, with implications for corporate governance and individual liberties under Indian legal framework.
The matter at hand revolves around a writ petition filed under Article 226 of the Constitution of India challenging the constitutional validity of Section 132(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner, Mr. Batra, represented by counsel, seeks multiple reliefs including a declaration that powers under Section 69 of the CGST Act can only be exercised post liability determination, a restraint on criminal complaints under compoundable offenses, and decisions on pending compounding applications. Additionally, Mr. Batra seeks bail for his client, who has been in judicial custody since January 21, 2021.
The petitioner, a 65-year-old senior citizen and director of Twinstar Industries Limited and Originet Technologies Limited, was implicated in an investigation initiated by respondent No.4 regarding fraudulent input tax credit (ITC) claims by another company. Allegations include fraudulent ITC availed and passed on by petitioner’s companies via bogus invoices, amounting to significant sums.
After multiple summons and recorded statements, the petitioner was arrested on January 21, 2021, accused under Section 132(1)(c) and (b) of the CGST Act for fraudulently availing ITC and issuing bogus invoices, leading to wrongful financial gains. The respondent has argued that the arrest was lawful under the provisions of the CGST Act, citing procedural safeguards and past judicial precedents upholding similar arrests.
In response, the petitioner denies all allegations but has cooperated with investigations and filed compounding applications to mitigate legal repercussions. Despite this, the respondent argues that the petitioner’s culpability is established, justifying custodial arrest pending investigation.
During court proceedings, arguments centered on the appropriateness of seeking bail via a writ petition versus the regular course under Section 437 of the Code of Criminal Procedure (Cr.P.C.). Respondent counsel, Mr. Jetly, contends that the petitioner has a viable alternative under Cr.P.C. and challenges the writ’s suitability for securing bail. He referenced legal precedents where courts upheld arrests under similar circumstances, emphasizing the statutory provisions’ intent and safeguards.
Mr. Batra countered, citing judicial decisions highlighting the arbitrary nature of custodial arrests under tax laws and advocating for immediate bail based on procedural irregularities and personal circumstances of the petitioner.
The court deliberated on these arguments, considering the petitioner’s age, his role in the alleged offenses, and the legal precedents cited by both sides. The matter underscores broader issues of statutory interpretation and the judiciary’s role in safeguarding individual liberties amidst stringent tax enforcement measures.
Ultimately, the court’s decision will impact not only the immediate relief sought by the petitioner but also potentially set precedents for future cases involving arrests under the CGST Act, balancing legal enforcement with individual rights.
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