Case Title | Jadish Arora VS Union of India |
Court | Madhya Pradesh High Court |
Honourable Judges | Justice Ajay Kumar Mittal Justice Vijay Kumar Shukla |
Citation | 2020 (08) GSTPanacea 120 HC Madhya pradesh M.Cr.C. No.24219/2020 |
Judgement Date | 18-August-2020 |
In the case at hand, Jagdish Arora and Ajay Kumar Arora have filed their first bail application under Section 439 of the Code of Criminal Procedure (CrPC). They are currently in judicial custody following their arrest in connection with Crime No. DGGI/BhZU/1204/03/2020-21/SDPL. This case was registered at the Central Goods and Service Tax office in Bhopal. The charges against them pertain to offences under Section 132(1)(a) read with Section 132(1)(i) of the Central Goods and Service Tax Act.
Section 132(1)(a) of the Act deals with the offence of committing or causing others to commit any offence specified under clauses (i) to (xiv) of subsection (1) of Section 132, with imprisonment for a term which may extend to five years, and with fine, whereas section had
Som Distilleries Pvt. Ltd. (SDPL), the company under investigation for alleged GST evasion related to the production and sale of sanitizers. The applicants, Jagdish Arora and Ajay Kumar Arora, were taken into judicial custody following their arrest by the Central Goods and Service Tax (CGST) Department on July 7, 2020, with formal charges under Section 69 of the CGST Act made on July 8, 2020. They have remained incarcerated since July 9, 2020.
This case marks their first bail application under Section 439 of the Code of Criminal Procedure (CrPC). Initially, their bail application under Section 437 of the CrPC was rejected by the Judicial Magistrate First Class, Bhopal, on July 14, 2020. Subsequently, their application under Section 439 before the Court of Sessions met a similar fate with the order dated July 16, 2020, dismissing it.
The charges against the applicants stem from alleged violations of Section 132(1)(a) read with Section 132(1)(i) of the Central Goods and Service Tax Act, 2017 (CGST Act), pertaining to offenses related to evasion of GST liabilities by SDPL. The CGST Department’s investigation alleges that SDPL had evaded taxes on its sanitizer production and sales.
The applicants, through their legal representation, assert that neither Jagdish Arora nor Ajay Kumar Arora hold positions such as Directors, Managers, Officers, Employees, or Authorized Representatives of SDPL. They contend that they are wrongfully implicated in this case, emphasizing their lack of direct involvement or responsibility in the purported offenses attributed to SDPL.
The bail application under Section 439 of the CrPC is their latest legal recourse seeking release from judicial custody pending trial, citing their non-involvement in the alleged offenses and their willingness to abide by any conditions imposed by the court. The case is pivotal as it tests the grounds for bail under stringent financial laws like the CGST Act, amidst assertions of innocence and lack of direct culpability by the applicants in the GST evasion charges against SDPL.
This case revolves around the first bail application filed under Section 439 of the Code of Criminal Procedure (CrPC) on behalf of Jagdish Arora and Ajay Kumar Arora. They are currently in judicial custody due to their involvement in a case registered under Crime No. DGGI/BhZU/1204/03/2020-21/SDPL at the Central Goods and Service Tax (CGST) office in Bhopal. The charges pertain to offenses under Section 132(1)(a) read with Section 132(1)(i) of the Central Goods and Service Tax Act, 2017 (CGST Act).
Initially, the applicants’ bail application under Section 437 of the CrPC was rejected by the Judicial Magistrate First Class in Bhopal on July 14, 2020. Subsequently, their application under Section 439 before the Sessions Court was also dismissed on July 16, 2020.
The applicants assert that they are not directly involved in the management or operations of Som Distilleries Pvt. Ltd. (SDPL), the company accused of GST evasion related to the production and sale of sanitizers. They resigned from their directorship at SDPL nearly 11 years ago, on April 1, 2009, as evidenced by Form-32 submitted with their bail application (Annexure-P/3). They argue that the CGST Department has failed to produce any documentary evidence linking them to the alleged offenses, which they claim is crucial for their bail eligibility.
Regarding the financial aspect of the case, SDPL initially deposited ₹8 crores under protest in response to a GST liability demand of ₹7.96 crores. However, the CGST Department subsequently revised the alleged liability to ₹33 crores, which the applicants describe as an arbitrary escalation.
The applicants argue that their arrest was premature since assessment proceedings have not been initiated, and therefore, no specific liability has been determined against SDPL. They cite legal precedents, such as decisions from the Madras High Court, to support their contention that bail should be granted under such circumstances.
In summary, the bail application is based on the premise that the applicants are not directly responsible for the alleged offenses and that the case against them lacks substantial evidence. They seek bail pending the outcome of the case and emphasize their compliance with legal procedures and willingness to cooperate with authorities.
diversify into the production of hand sanitizers. Responding to this call, SDPL began manufacturing sanitizers in April 2020. However, their compliance with regulatory requirements, particularly concerning GST, became a subject of scrutiny by the CGST Department.
The bail application, filed under Section 439 of the Code of Criminal Procedure (CrPC), pertains to Jagdish Arora and Ajay Kumar Arora, who were arrested in connection with a case registered under the Central Goods and Service Tax Act, 2017 (CGST Act). The applicants had earlier applied for bail under Section 437 CrPC before a Judicial Magistrate First Class in Bhopal, which was denied. Subsequently, their application under Section 439 CrPC before the Sessions Court was also dismissed.
The applicants assert they are not current directors, managers, officers, employees, or authorized representatives of SDPL, having resigned from their directorships in 2009. They argue that the CGST Department has failed to provide any documentary evidence linking them to the alleged GST evasion by SDPL, emphasizing their lack of involvement in the company’s day-to-day affairs.
Furthermore, it is claimed that SDPL initially deposited ₹8 crores under protest when the GST liability was communicated to be ₹7.96 crores. The applicants contend that the CGST Department subsequently inflated this liability to ₹33 crores without commencing formal assessment proceedings, which they argue is premature and unjustified.
The defense cites legal precedents, such as decisions from the High Courts of Madras and Delhi, supporting their position that arrests in tax matters should not precede concrete liability determinations through assessment proceedings.
Additionally, SDPL, a significant taxpayer, has been operational since 1986, primarily in the manufacture and sale of alcohol-based products. It employs 800-1000 individuals and annually contributes approximately ₹38 crores to the government’s revenue through various taxes. The company diversified into sanitizer production in response to a government directive amid the COVID-19 pandemic, leveraging its existing infrastructure and capabilities.
In summary, the bail application argues that the arrest of Jagdish Arora and Ajay Kumar Arora is unwarranted, given their lack of involvement in SDPL’s current operations and the absence of substantiated liability under GST laws. They seek release from judicial custody pending the formal assessment of GST liabilities related to SDPL’s sanitizer production activities.
is responsible for ensuring that no irregularity or evasion takes place in the production of alcohol-based products, including sanitizers. Therefore, the assertion is made that any alleged evasion of GST by SDPL would have been immediately detected and acted upon by the Excise Department officials, who are present on-site continuously.
13. In view of the above, it is contended that the allegations levelled by the CGST Department against the SDPL are nothing but figments of their imagination, and the very initiation of criminal proceedings against the applicants is an abuse of the process of law. To bolster this plea, reliance is placed on the decision of the Supreme Court in Pooja Ravinder Devidasani vs. State of Maharashtra – 2014 (14) SCC 637.
14. On the aforesaid backdrop, it is prayed that the application be allowed and the applicants be released on bail, on such terms and conditions, as this Hon’ble Court may deem fit and proper.
violation of their fundamental rights. The applicants argue that they were not present during these proceedings and were not informed of the reasons or grounds for the search. They further allege that the search was conducted arbitrarily without following the due process laid down under the GST laws and other relevant statutes.
15. The applicants contend that the CGST Department, without any substantiation, has alleged tax evasion by the SDPL to the tune of ₹33 crores. They assert that this claim lacks any factual basis or supporting evidence. Moreover, they highlight that the SDPL promptly paid ₹8 crores under protest initially when the demand was communicated as ₹7.96 crores, demonstrating their bona fides in compliance with tax obligations.
16. In defense against their arrest, the applicants emphasize that they resigned from their directorship roles in the SDPL over a decade ago, on 1st April 2009, and hence cannot be held liable for the company’s current activities or alleged wrongdoings. They argue that their association with SDPL ceased long before the company ventured into sanitizer production in response to government directives during the COVID-19 pandemic.
17. The applicants rely on legal precedents and decisions to support their claim for bail. They cite instances where courts have granted relief to individuals in similar circumstances where no concrete liability had been established, pending assessment proceedings and conclusive evidence.
18. Additionally, the applicants provide detailed documentation to substantiate their claims, including resignation certificates from their directorship roles, production and supply certificates of sanitizers issued by government authorities, and compliance with GST return filings.
19. In conclusion, the applicants plead that their continued detention is unjustified and premature, given the lack of evidence linking them to any wrongdoing or tax evasion by the SDPL. They seek the court’s intervention to grant them bail, asserting their innocence and compliance with legal obligations throughout the proceedings initiated by the CGST Department.
20. The case underscores broader legal issues surrounding corporate liability, due process in tax enforcement, and individual rights against arbitrary arrest and detention. The applicants await a fair and just decision from the court on their bail application, confident in their innocence and adherence to legal norms.
GST Case Law: