Suresh Hukmat Rai Jadhwani Vs Union Of India Through Directorate General Of Gst Intelligence

The applicant in this case has sought pre-arrest bail following a summons issued under Section 70 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017). The legal action stems from an investigation triggered by an intelligence report concerning fraudulent activities related to Input Tax Credit (ITC) by co-accused Shri. Pintu Itkare, the proprietor of M/s S. B. Sales Corporation.

On March 4th and 5th, 2021, a search was conducted and revealed that Pintu Itkare was operating under the applicant’s direction. It was discovered that the applicant had established 18 firms specifically to facilitate the fraudulent passing of ITC. These firms were purportedly involved in generating fake invoices without delivering actual goods, leading to the improper accrual of ITC valued at approximately Rs. 46.50 Crore. Additionally, the firms passed on ITC amounting to around Rs. 41.91 Crore without genuine supply of goods.

The applicant failed to appear in response to the summons issued in connection with these allegations. This failure to comply with the legal summons is a key issue in the consideration of the applicant’s request for pre-arrest bail.

The applicant has sought pre-arrest bail following the issuance of a summons under Section 70 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017). This action stems from an investigation revealing significant fraudulent activities related to Input Tax Credit (ITC). According to an intelligence report, co-accused Pintu Itkare, the proprietor of M/s S. B. Sales Corporation, was implicated in availing and passing fraudulent ITC. A search conducted on March 4th and 5th, 2021, uncovered that Itkare was acting on behalf of the applicant. Further investigations revealed that the applicant had created 18 firms solely for the purpose of passing ITC without actual supply of goods, violating Section 16 of the CGST Act, 2017. These firms were involved in issuing fake bills and availed ITC worth approximately Rs. 46.50 crore, subsequently passing on ITC amounting to approximately Rs. 41.91 crore, without any actual supply of goods. Despite being summoned, the applicant failed to appear, prompting the current bail application.

Earlier, the applicant’s request for pre-arrest bail was denied by the Additional Sessions Judge in Nashik on September 9, 2021. In response, the applicant approached this Court with Anticipatory Bail Application No. 2275 of 2021, related to a State GST case. On November 25, 2021, this Court ruled that should the authorities deem it necessary to arrest the applicant, a 72-hour advance notice must be given. With this order, the applicant again sought pre-arrest bail from the Additional Sessions Judge, Nashik, but the request was denied, citing no change in circumstances.

Subsequently, the applicant moved this Court, which on March 11, 2022, granted interim protection, stipulating that no coercive measures be taken against the applicant, provided he reports to the Senior Intelligence Officer of the Directorate General of Goods and Services Tax, Nashik, on specified dates and as required. Respondent No. 1 filed an affidavit-in-reply opposing the bail application.

During the hearings, the applicant’s counsel, Mr. Joshi, argued that similar protection was granted by this Court in a parallel State GST case and should apply here, given that only a summons under Section 70 of the CGST Act, 2017, has been issued. He contended that the authorities had not yet assessed the tax liability, and no demand notice had been issued, arguing that the applicant’s alleged liability of Rs. 3.5 crore would be a bailable offence. He also stated that the applicant is not legally required to maintain books of accounts.

Conversely, Respondent No. 1’s counsel, Mr. Jitendra Mishra, asserted that the grounds for bail were insufficient, emphasizing that an FIR is not a prerequisite for action under the CGST Act, 2017, nor is a demand notice mandatory. He highlighted the applicant’s lack of cooperation and evasive responses during the investigation. The probe revealed the applicant’s connection to 21 fake entities, necessitating custodial interrogation. These entities, created using fraudulent documents, were involved in significant financial transactions linking back to the applicant.

The Court, after careful consideration of the arguments and evidence, including the detailed findings in the respondent’s affidavit, noted the fraudulent scheme’s complexity and the applicant’s involvement. The investigation identified numerous fake entities, including M/s Prakash Steel, M/s Agarwal Enterprises, and M/s Shivkiran Steel Private Limited, which availed and passed ITC worth crores without any actual supply of goods. Statements from individuals controlling these entities and financial trails further implicated the applicant. The Court deliberated on the necessity and justification of custodial interrogation to further the investigation under the CGST Act, 2017, considering the substantial evidence and the applicant’s non-cooperation.

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