Govind Agarwal VS State Of U.P

The court session commenced with Sri Anil Prakash representing the applicant and Sri B.A. Khan representing the State. The applicant sought anticipatory bail under Section 438 of the Criminal Procedure Code (Cr.P.C.) in relation to Case Crime No.0864 of 2018, which involved charges under sections 420, 467, 468, 471, 34, 120B of the Indian Penal Code (IPC), and Section 122 of the Goods and Services Tax (GST) Act. The case originated from Kosi Kalan Police Station in Mathura District.

According to the First Information Report (FIR) lodged by Assistant Commissioner Sri Gulab Chand, Govind Agarwal, the proprietor of Govind Enterprises and son of Sri Ajay Agrawal, allegedly obtained GST registration for his business of packing material on March 9, 2018. He provided [email protected] as his ID email and 8533952295 as his mobile number during the registration. The business address declared was on the first floor of a property rented from Mahavir Singh in Kosi Kalan, Mathura. However, during an investigation conducted on September 27, 2018, it was revealed that the registered address lacked any signage of the firm, and the space was limited to a single room of dimensions 18 ft. x 20 ft. Further inquiries found minimal documentation related to Govind Enterprises, with only a computer, laptop, and printer present. The actual business activities were claimed to be conducted at a branch in Kanpur, and all relevant accounting records were maintained there.

Simultaneously, a raid was conducted at the Kanpur branch, where Mukesh Sharma, a labor contractor, was found present. The property was rented through Dharmendra Gurjar, who claimed ignorance about Govind Agarwal and stated he was sent by Ram Niwas Gurjar. The Kanpur branch was found to have minimal activity, with old locks indicating infrequent use. The absence of accounting records further raised suspicions regarding the legitimacy of Govind Enterprises’ operations.

During the registration process, Govind Agarwal provided his bank account details from Oriental Bank of Commerce in Auragabad, Mathura. The discrepancies uncovered during the investigations painted a picture of questionable business practices, with significant doubts regarding the authenticity of Govind Enterprises’ operations at the declared addresses in both Mathura and Kanpur.

In light of these findings, the court deliberated on the applicant’s plea for anticipatory bail, weighing the presented evidence against the seriousness of the charges leveled against him. The intricate details revealed during the proceedings highlighted the complexity of the case and the thoroughness of the investigative efforts undertaken by the authorities.

The investigation into the case uncovered a series of complex transactions and discrepancies surrounding Govind Enterprises, implicating its proprietor, Govind Agarwal, in alleged fraudulent activities related to tax evasion. The FIR highlighted several instances where Govind Enterprises purportedly engaged in large-scale transactions without adhering to legal requirements, raising suspicions of conspiracy and financial irregularities.

One significant revelation was the vast difference between the inward and outward supplies recorded by Govind Enterprises. Despite purchasing goods worth Rs. 35,02,28,642.00, the company generated only two e-way bills for outward supply, totaling a mere Rs. 1,64,334.00. This discrepancy raised red flags, especially considering the absence of e-way bills for the substantial inward supplies. Further investigations revealed that Govind Enterprises conducted its transactions through multiple e-way bills, purportedly issued by supplier companies like Motaz Enterprises Pvt. Ltd., based in Uttar Pradesh and Madhya Pradesh.

Scrutiny of Govind Agarwal’s bank accounts further deepened suspicions. While the firm’s savings account at Oriental Bank of Commerce in Mathura reflected a meager balance of Rs. 6,448.00, a separate account opened at HDFC Bank in Gwalior, Madhya Pradesh, showed deposits amounting to Rs. 9,39,07,715.00 within a short period. The utilization of multiple bank accounts, along with transactions conducted across state borders, suggested a deliberate attempt to evade taxes.

Moreover, investigations into the physical premises associated with Govind Enterprises revealed discrepancies. The declared business locations lacked evidence of operational activities, with no signage, account books, or substantial business operations observed during inspections. Testimonies from property owners discredited the existence of Govind Enterprises at the specified addresses, casting doubt on the legitimacy of its operations.

The nature of goods purchased by Govind Enterprises also raised suspicions. The company acquired high-quality printing packaging materials from suppliers like Motaz Enterprises Pvt. Ltd., which were primarily intended for use by production companies rather than general sale. This discrepancy suggested that Govind Enterprises may have been involved in diverting goods for unlawful purposes, further implicating Govind Agarwal in fraudulent activities.

In light of these findings, the investigating authorities concluded that Govind Agarwal, along with unidentified accomplices, conspired to commit offenses under various sections of the Indian Penal Code and the SGST/CGST Act. The intricate web of transactions, falsified documents, and misrepresentation of business operations painted a picture of systematic tax evasion orchestrated by Govind Enterprises and its associates.

The learned counsel representing the applicant argued against the lodging of the FIR, asserting that no case has been established under the U.P. Goods and Services Tax Act, Central Goods and Services Tax Act, or IGST Act despite allegations of tax evasion. The FIR, filed on November 30, 2018, was deemed improper and belated, considering the alleged contraventions dated back to September 27, 2018. The applicant claimed innocence, suggesting false implication, and expressed fear of arrest. He pledged cooperation with the investigation if granted anticipatory bail.

In a supplementary affidavit, the counsel highlighted various documents supporting the applicant’s innocence, including rental agreements for business premises, GST-related papers, and tax returns. Despite the absence of evidence indicating tax evasion, the FIR was filed, leading the counsel to seek anticipatory bail on behalf of the applicant.

The Additional Sessions Court 11 had previously dismissed the applicant’s anticipatory bail application, prompting an appeal to set aside the decision. The counsel cited the judgment in Radheshyam Kejriwal vs. State of West Bengal, emphasizing that exoneration in adjudication proceedings should halt criminal prosecution if based on merits. Citing legal precedents, the counsel argued that when the adjudicating authority finds no contravention of the law, criminal prosecution on the same set of facts becomes unjust. The principle, as elucidated in judicial decisions, mandates discontinuation of criminal proceedings when departmental authorities exonerate the accused based on merit.

The counsel’s argument relied on the distinction between exoneration on technical grounds versus exoneration based on merits in departmental adjudication proceedings. If exoneration occurs on merits, criminal prosecution cannot proceed, as evidenced by the legal standards upheld by the judiciary. The counsel emphasized the need for alignment between charges in departmental proceedings and criminal complaints, suggesting that continuation of criminal prosecution post-exoneration would be unjust and contrary to legal principles.

In summary, the applicant’s counsel presented a robust defense, arguing for anticipatory bail based on the lack of evidence supporting the allegations of tax evasion and the principles established in legal precedents concerning exoneration in adjudication proceedings.

The applicant’s counsel relied on legal precedents to bolster their argument for anticipatory bail. First, they cited the judgment in Chitira Builders P. Ltd. Vs. Addl. Commr. Of C, C.E. & S.T. Coimbatore, highlighting that tax collection without proper assessment and legal procedures is invalid. In this case, despite the Department claiming that the petitioner-company voluntarily paid Rs. 2.00 crores in service tax liability, the absence of an appropriate assessment order rendered the collection invalid. The court directed the Department to return the sum collected from the petitioner.

Furthermore, the counsel referenced the judgment in Metal Forgings vs. Union of India, underscoring the necessity of issuing a show cause notice as required by law. The absence of a formal show cause notice, despite providing information through letters and orders, was deemed insufficient. The tribunal and judicial members concluded that documents and orders could not substitute a formal show cause notice, as mandated by Rule 10 of the Rules or Section 11A of the Act. The court emphasized that a show cause notice must be issued under a specific provision of law, indicating the amount demanded and allowing the assessee to respond within the prescribed period.

The counsel’s reliance on these judgments underscored the importance of adherence to legal procedures and due process in matters of taxation and legal proceedings. By demonstrating instances where tax collection and demand notices were deemed invalid due to procedural lapses, the counsel sought to reinforce the argument for anticipatory bail, highlighting potential flaws in the prosecution’s case. These legal precedents served to strengthen the applicant’s plea for bail by emphasizing the necessity of procedural integrity and the rights of the accused to a fair legal process.

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