Mahendrakumar Singhi VS The Commissioner of Commercial Tax

In proceedings numbered ADCOM/ENF/SZ/ACCT.03/INS./2018-19, dated January 9, 2019, a matter was heard concerning anticipatory bail for the petitioners. Sri Ravi B. Naik, the Senior Counsel representing the petitioners, and Sri Nitin Ramesh, the Additional Advocate General for respondents 1 to 4, along with Sri Jeevan J. Neeralgi, representing respondent No. 5, presented their arguments.

The petitioners, identified as a married couple and Directors of M/s. Steel Hypermart India Private Limited and M/s. Singhi Buildtech Private Limited, were implicated in allegations related to circular bill trading in Tamil Nadu and Karnataka. According to the complaint summarized during the proceedings, the companies were accused of engaging in circular bill trading activities based on data analyzed using the respondent department’s Analytics Software.

The court considered the submissions from both parties before deciding on the petitioners’ request for anticipatory bail, emphasizing the importance of examining the merits of the complaint and ensuring justice in the process. The case reflects the complexities involved in corporate governance and financial transactions, requiring thorough legal scrutiny to determine the appropriate legal course for the petitioners in light of the allegations against them.

The case revolves around anticipatory bail sought by the petitioners, who are directors of two companies, M/s. Steel Hypermart India Private Limited and M/s. Singhi Buildtech Private Limited. The proceedings stem from a complaint, referenced as ADCOM/ENF/SZ/ACCT.03/INS./2018-19, dated 9th January 2019. The complaint alleges involvement of these companies in circular bill trading across Tamil Nadu and Karnataka.

According to the complaint, as analyzed through the Department’s Analytics Software, M/s. Singhi Buildtech Private Limited purportedly recorded sales amounting to Rs. 300,64,44,966/- for the financial years 2017-18 and 2018-19, with Rs. 195,78 Crores of these sales involving circular trading. Similarly, M/s. Steel Hypermart India Private Limited recorded outward supplies of Rs. 2,34,29,84,387/- during the same period, with Rs. 195.78 Crores of these involving circular trading.

The petitioners, represented by Senior Counsel Sri Ravi B. Naik, have applied for anticipatory bail. This application was heard alongside arguments from Sri Nitin Ramesh, Additional Advocate General for respondents 1 to 4, and Sri Jeevan J. Neeralgi, Standing Counsel for respondent No. 5.

The allegations against the petitioners include fraud in circular bill trading, based on which proceedings have been initiated. The Court is tasked with considering these submissions and determining whether anticipatory bail should be granted to the petitioners in light of the allegations and the arguments presented.

In proceedings under ADCOM/ENF/SZ/ACCT.03/INS./2018-19 dated January 9, 2019, the petitioners, Mr. and Mrs. [Petitioners’ Names], who are directors of M/s. Steel Hypermart India Private Limited and M/s. Singhi Buildtech Private Limited, sought anticipatory bail. The case involves allegations of their involvement in circular bill trading across Tamil Nadu and Karnataka.

The complaint asserts that the companies engaged in circular trading, with substantial sums involved. Specifically, M/s. Singhi Buildtech Private Limited reported total supplies amounting to Rs. 300,64,44,966/- for the financial years 2017-18 and 2018-19, with a significant portion sourced from registered taxable entities engaged in circular trading. Similarly, M/s. Steel Hypermart India Private Limited recorded outward supplies totaling Rs. 2,34,29,84,387/- during the same period, with Rs. 195.78 crores implicated in circular trading transactions.

In response to the submissions made during the hearing, Senior Counsel Sri Ravi B. Naik argued that under the provisions of the Goods and Services Tax Act, 2017 (GST Act), the maximum penalty for any offense committed is five years, and offenses are compoundable under Section 138 of the Act upon payment before the Commissioner. He contended that there was no illegality or revenue loss to the government, as GST payments were duly made through invoices without claiming input tax credit or availing loans from banks. The counsel asserted the petitioners’ readiness to cooperate with the investigation and comply with any conditions set by the court.

Based on these arguments, Senior Counsel Sri Ravi B. Naik petitioned for the grant of anticipatory bail to the petitioners. The court heard the additional submissions from the learned Additional Advocate General representing respondents 1 to 4 and the Standing Counsel for respondent No. 5, and now deliberates on whether to grant anticipatory bail to the petitioners in light of the facts and arguments presented during the proceedings.

The case revolves around a petition seeking anticipatory bail in connection with proceedings numbered ADCOM/ENF/SZ/ACCT.03/INS./2018-19, dated January 9, 2019. The petitioners, who are husband and wife, are directors of two companies: M/s.Steel Hypermart India Private Limited and M/s.Singhi Buildtech Private Limited. They are accused of involvement in circular bill trading across Tamil Nadu and Karnataka.

The complaint alleges that these companies engaged in circular trading to inflate their sales figures artificially. Specifically, M/s.Singhi Buildtech Private Limited purportedly recorded total sales of Rs.300,64,44,966/- for the fiscal years 2017-18 and 2018-19, out of which Rs.195,78 Crores were transactions involving circular trading with registered taxable persons. Similarly, M/s.Steel Hypermart India Private Limited reported total sales of Rs.2,34,29,84,3870 during the same period, with Rs.195.78 Crores attributed to circular trading.

In response to the allegations, the petitioners’ senior counsel argued several points under the Goods and Services Tax Act, 2017 (GST Act). He emphasized that the maximum punishment under the act is five years, and offenses are compoundable before the Commissioner on payment. He claimed that no revenue loss occurred as GST was paid and no input tax credit was claimed. Additionally, he stated that the companies did not secure loans based on these transactions nor did they claim deductions from the government.

Conversely, the Additional Advocate General argued that the petitioners engaged in inter-state circular bill trading without actual movement of goods. He alleged that the companies claimed input tax credit without paying taxes, potentially impacting the country’s economy. Moreover, he asserted that the companies could have secured loans amounting to Rs.160 Crores based on fraudulent transactions.

In consideration of these arguments, the court reviewed the submissions from both sides and contemplated the seriousness of the allegations, particularly regarding financial fraud and potential economic impact. The decision whether to grant anticipatory bail to the petitioners hinged on their cooperation with the investigation and adherence to court-imposed conditions.

In conclusion, the court heard arguments from both parties regarding the petition for anticipatory bail amidst allegations of circular bill trading. The decision on granting bail would depend on ensuring compliance with legal requirements and addressing the seriousness of the accusations leveled against the petitioners.

In the matter of anticipatory bail sought by the petitioners in proceedings No. ADCOM/ENF/SZ/ACCT.03/INS./2018-19, dated 9.1.2019, several key arguments and allegations have surfaced. The petitioners, who are husband and wife directors of M/s. Steel Hypermart India Private Limited and M/s. Singhi Buildtech Private Limited, are accused of involvement in circular bill trading across Tamil Nadu and Karnataka. The complaint alleges substantial irregularities where large sums of money were transacted through circular trading, implicating the petitioners in fraudulent activities under the Goods and Services Tax Act, 2017.

During the hearing, Senior Counsel Sri Ravi B. Naik argued for anticipatory bail, emphasizing that the alleged offenses carry a maximum punishment of five years as per the GST Act. He contended that there was no loss of revenue to the government as GST was paid and no fraudulent loans were secured from banks. Furthermore, he asserted that the petitioners are willing to cooperate with the investigation and abide by court-imposed conditions.

Contrarily, Additional Advocate General Sri Nitin Ramesh vehemently opposed bail, alleging that the petitioners engaged in inter-State circular trading without actual movement of goods, thereby fraudulently claiming input tax credit and potentially impacting the economy. He highlighted that the accused had already secured significant loans based on allegedly fraudulent transactions, indicating a broader financial impact. Citing legal precedent, he argued that economic offenses of this magnitude threaten the nation’s financial stability and must be treated with utmost severity in bail considerations.

In response to these submissions, the court must now weigh the gravity of the accusations, the evidence presented, and the potential impact on public funds and economic stability. The decision on whether to grant anticipatory bail will hinge on these factors, balancing the petitioners’ rights against the seriousness of the alleged offenses and their potential consequences for the economy at large. petitioners, vehemently argued and submitted that the petitioners have been involved in inter-State circular bill trading. They are not co-operating for the purpose of investigation or interrogation. If the entire case is looked into without there being any movement of goods, the petitioners have claimed input tax credit and thereby without payment of any tax by them, they have claimed input tax credit. In that event, the economy of the country is going to be affected. He further submitted that only with an intention to deprive their income to the Government the said transactions have been created by the Companies without there being any actual movement of the goods. He further submitted that on creating such documents, they may raise huge loan from the banks by playing fraud. He further submitted that the petitioners have already raised loan of Rs.160 Crores from the bank. By referring to the statement of objections filed, he further submitted that if the entire records are looked into the fraud played is in Crores of rupees. He further submitted that it is a big scam and if it is allowed to be continued, then it will be having its own cumulative effect on the economy and financial aspect of the State. By referring to the decision in the case of Y.S.Jagan Mohan Reddy Vs. Central Bureau of Investigation, reported in 2013(7)SCC 439, he further submitted that in the case of economic offences they constitute a class apart and need to be visited with a different approach in the matter of bail. Economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing a serious threat to the financial health of the country. He further submitted that the Court must keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail and thereafter the bail application has to be considered. He further submitted that the petitioners have not co-operated for the purpose of investigation since three months though several notices have been issued. If the petitioners are granted anticipatory bail, there is every likelihood that they would abscond and they do not cooperate with the investigation. He further submitted that the custodial interrogation of the petitioners is very much necessary to know the transactions and the hidden websites. However, he further submitted that as the proceedings have been initiated in respect of two Companies, namely, M/s.Steel Hypermart India Private Limited and M/s.Singhi Buildtech Private Limited, there is no question of apprehension of accused in so far as it relates to same transactions in respect of the two Companies namely, M/s.Metal Craft and M/s.Ferrum Merchant.

learned Additional Advocate General has also prayed to
dismiss the petitions.

7. I have carefully and cautiously gone through the
submissions made by the learned counsel for the parties
and perused the records, so also the decision quoted by
the learned Additional Advocate General.

8. Though several contentions have been raised
with reference to initiation of the action under the GST
Act and CST Act, since the scope of these petitions is
limited only to consider the bail applications, the other
points which have been raised are not dealt with in detail
to dispose of these petitions. This Court while
considering the similar aspect in Criminal Petition
No.497/2019 c/w. Criminal Petition No.498/2019,
disposed of on 18.2.2019 has discussed elaborately all
the points and thereafter it has come to the conclusion
that the accused-petitioners therein are entitled to be
released on bail. In the instant case also, similar 

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