Yogesh Jagdish Kanodia VS State of Maharashtra

In this case, the petitioner has approached the Court seeking his immediate release, claiming that his arrest under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) is illegal. The petitioner argues that the offence he has been arrested for is bailable, and yet he continues to be held in custody, which he asserts is unlawful.

The petitioner was arrested on December 30, 2020, and was subsequently presented before the Additional Chief Metropolitan Magistrate in Mumbai, where he was remanded to magisterial custody. The arrest was made by Respondent No. 2, who accused the petitioner of committing offences under sections 132(1)(b) and 132(1)(c) of the CGST Act. These sections relate to the wrongful availing of input tax credit (ITC), and the amount in question exceeded ₹5 crore (₹500 lakh). Under section 132(1)(i) of the CGST Act, such an offence is punishable by imprisonment for a term that may extend up to five years, along with a fine. Additionally, as per sub-section (5) of section 132, it is classified as a cognizable and non-bailable offence. The arrest was carried out under section 69 of the CGST Act, which grants the power to arrest in such situations.

Respondent No. 2 alleges that the petitioner was operating four business entities that were involved in issuing fake purchase and sale invoices. This fraudulent activity enabled the petitioner to wrongfully claim an input tax credit amounting to ₹11.54 crore. Additionally, it was alleged that the fake sale invoices issued by the petitioner passed on wrongful input tax credit worth at least ₹9.29 crore. Based on these findings from the investigation, the petitioner was arrested on December 30, 2020.

The petitioner has approached the court contesting the legality of his arrest under the Central Goods and Services Tax Act, 2017 (CGST Act). He argues that his detention relates to a bailable offense and requests his immediate release.

The petitioner was arrested on December 30, 2020, and produced before the Additional Chief Metropolitan Magistrate, Mumbai, who remanded him to judicial custody. The arrest was made by Respondent No. 2 under Section 69 of the CGST Act. It was based on allegations that the petitioner had violated Section 132(1)(b) and (c) of the CGST Act by availing of fraudulent input tax credits (ITC) exceeding Rs. 500 lakh (Rs. 5 crores), which constitutes a cognizable and non-bailable offense punishable by imprisonment up to five years and a fine under Section 132(1)(i) of the CGST Act.

According to Respondent No. 2, the petitioner operated four business establishments that engaged in issuing fake purchase and sales invoices to fraudulently claim ITC amounting to Rs. 11.54 crores, while wrongful ITC passed through bogus sales invoices totaled Rs. 9.29 crores. Based on these findings from the ongoing investigation, the petitioner was arrested.

In his writ petition, the petitioner contends that his arrest and subsequent judicial custody were illegal. He argues that the four distinct business entities involved were improperly consolidated as one by Respondent No. 2, leading to an inflated figure of over Rs. 5 crores in wrongly availed ITC. The petitioner asserts that, had these entities been treated individually, none would have exceeded Rs. 5 crores in wrongful ITC, making the alleged offenses non-cognizable and bailable under the CGST Act.

The petitioner’s counsel, Mr. Ponda, reiterated this argument, focusing on the definition of “person” under Section 2(84) of the CGST Act. He emphasized that the CGST Act treats individuals, companies, firms, and Hindu undivided families (HUFs) as distinct legal entities. Thus, Respondent No. 2 erroneously considered the four establishments as being under the petitioner’s control without properly distinguishing between them. Mr. Ponda argued that a review of the documents used by Respondent No. 2 in its investigation would show that the petitioner only held specific roles, such as being the proprietor of ‘M/s Shree Ganesh Textiles’ and Karta of an HUF, rather than controlling all four entities.

Therefore, the petitioner claims that his arrest and continued detention are unlawful and without merit.

The petitioner filed a writ petition before the court, challenging the legality of his arrest under the Central Goods and Services Tax Act, 2017 (CGST Act). He argued that his arrest for a bailable offense was unlawful, and thus sought an order for immediate release.

The petitioner was arrested on December 30, 2020, and produced before the Additional Chief Metropolitan Magistrate, Mumbai, who ordered his remand to judicial custody. The arrest was based on allegations that the petitioner violated Sections 132(1)(b) and (c) of the CGST Act by fraudulently availing input tax credits exceeding ₹5 crores, which made the offense cognizable and non-bailable under Section 132(1)(i) and Section 69 of the CGST Act.

The respondent authorities claimed the petitioner managed four business establishments that engaged in issuing fake purchase and sale invoices, which resulted in wrongful input tax credit claims amounting to ₹11.54 crores and fake sale invoices passing on wrongful credits worth ₹9.29 crores. Based on this, the petitioner was arrested.

In his petition, the petitioner contended that the arrest and remand were illegal as the four business entities were distinct legal entities and should not have been treated as a single unit. He argued that when considered separately, none of the entities had availed input tax credit exceeding ₹5 crores, which would make the offenses under Section 132 non-cognizable and bailable.

The petitioner’s counsel highlighted the definition of “person” under Section 2(84) of the CGST Act, which treats distinct legal entities, such as individuals, companies, or Hindu Undivided Families (HUFs), separately. The petitioner’s involvement was limited to being the proprietor of ‘M/s. Shree Ganesh Textiles’ and ‘M/s. Yash Fabrics,’ while his father and other family members ran separate businesses. Therefore, the input tax credit allegedly availed by each business should be calculated individually, not cumulatively, and none exceeded ₹5 crores. As a result, the offenses should be classified as non-cognizable and bailable.

Furthermore, the counsel argued that the power to arrest under Section 69 of the CGST Act was misused, as the petitioner’s offenses were bailable and non-cognizable. The Magistrate’s order remanding the petitioner to custody was improper since the offenses, under Section 69(3) of the CGST Act, warranted immediate bail instead of arrest and detention. The counsel criticized the authorities and the Magistrate for failing to properly apply the provisions of the CGST Act.

Thus, the petitioner sought relief from continued illegal custody and requested immediate release.

In this case, the petitioner has approached the Court claiming that his arrest under the Central Goods and Services Tax (CGST) Act, 2017, was illegal. The petitioner argues that he has been detained for a bailable offense and seeks his immediate release. The petitioner was arrested on December 30, 2020, and produced before the Additional Chief Metropolitan Magistrate, Mumbai, who remanded him to magisterial custody. Respondent No. 2, acting under Section 69 of the CGST Act, arrested the petitioner, alleging that he committed offenses under Section 132(1)(b) and (c) of the Act, as the input tax credit (ITC) wrongly availed exceeded Rs. 5 crores. The offense is punishable with imprisonment up to five years, making it cognizable and non-bailable under Section 132(1)(i) of the CGST Act.

Respondent No. 2 contended that the petitioner operated four business establishments involved in issuing fake purchase and sale invoices, falsely claiming ITC worth Rs. 11.54 crores, while passing on fake ITC worth Rs. 9.29 crores. Based on this, the petitioner was arrested.

The petitioner argued that his arrest and custody were illegal, claiming that the four distinct legal entities were wrongfully treated as one, inflating the ITC claim beyond Rs. 5 crores. The petitioner emphasized that each entity’s wrongful ITC claim was less than Rs. 5 crores, meaning that any offense under Section 132 of the CGST Act would be non-cognizable and bailable. The petitioner cited Section 2(84) of the CGST Act, which defines “person” to include various entities, such as individuals, companies, and firms, asserting that each of his four establishments should be treated as separate persons. Therefore, the ITC claims must be assessed individually, and none of the entities surpassed the Rs. 5 crore threshold.

The petitioner’s counsel argued that arresting and remanding the petitioner violated Section 69(3) of the CGST Act, which requires that the accused be granted bail if the offense is bailable. The counsel further contended that the Magistrate failed to appreciate these provisions when remanding the petitioner to custody. As a result, the petitioner’s rights under Article 21 of the Constitution of India were violated, making the arrest and continued detention illegal.

Additionally, the petitioner’s counsel emphasized that the CGST Act contains no provision for clubbing the alleged tax violations of separate entities, unlike Section 64 of the Income Tax Act. Thus, the petitioner argued that the tax liabilities of the four distinct entities could not be combined to exceed Rs. 5 crores and classify the offenses as cognizable and non-bailable. The petitioner relied on the Supreme Court’s ruling in *Arnab Manoranjan Goswami v. State of Maharashtra* and other High Court judgments to support the argument that the arrest and continued detention were illegal.

Ultimately, the petitioner seeks the Court’s intervention under Article 226 of the Constitution of India, asking for immediate release on the grounds that his arrest and custody were unlawful.

In this case, the petitioner has challenged his arrest under the Central Goods and Services Tax Act, 2017 (CGST Act), arguing that it was illegal because he was detained for a bailable offense. He was arrested on December 30, 2020, and subsequently remanded to magisterial custody. The authorities alleged that the petitioner had committed offenses under Section 132(1)(b) and (c) of the CGST Act, claiming that he had wrongfully availed input tax credit (ITC) exceeding Rs. 500 lakh (Rs. 5 crores), which made the offense cognizable and non-bailable under Section 132(5).

According to the respondents, the petitioner controlled four business establishments involved in fake purchase and sale invoices, leading to wrongful claims of ITC amounting to Rs. 11.54 crores, and the fraudulent ITC passed on through fake invoices was valued at Rs. 9.29 crores. Based on this, the petitioner was arrested.

The petitioner contended that his arrest and custody were illegal because the four distinct business entities involved were wrongly treated as one. He argued that the ITC wrongly availed by each entity did not exceed Rs. 5 crores individually, meaning that the offenses were non-cognizable and bailable. He also pointed to the definition of “person” under Section 2(84) of the CGST Act, which treats different legal entities, such as individuals, Hindu Undivided Families (HUFs), and companies, as distinct persons. The petitioner claimed that he was the proprietor of Shree Ganesh Textiles, Karta of Yash Fabrics (an HUF), while his father was the proprietor of J.K. Fabrics and Karta of Krishnansh Enterprises (another HUF). Therefore, the ITC for each firm should be treated separately.

The petitioner’s counsel argued that, as per Section 69(3) of the CGST Act, he should have been granted bail since the offenses were non-cognizable and bailable. The counsel further emphasized that the CGST Act does not have a provision for clubbing tax violations of distinct legal entities, unlike the Income Tax Act. Therefore, the ITC of the four firms could not be combined to cross the Rs. 5 crore threshold under Section 132(1)(i), making the arrest and custody improper.

On the other hand, the respondent, represented by a Special Public Prosecutor, argued that the petitioner effectively controlled all four firms. They pointed out that the petitioner’s KYC details were linked to all firms, and his email and phone number were used for their operations, indicating that he controlled the entities. The respondents also referred to statements made by the petitioner, his father, and their tax consultant under Section 70 of the CGST Act, claiming these demonstrated that the petitioner had committed the alleged offenses, making them cognizable and non-bailable.

In conclusion, the petitioner claimed that his arrest was unlawful and his continued custody violated his rights under Article 21 of the Constitution of India, as the procedures of the CGST Act were not followed. The petitioner sought his immediate release from custody. The court was asked to consider whether the CGST Act allowed for clubbing the tax liabilities of distinct legal entities, whether the offenses were cognizable and non-bailable, and whether the petitioner’s arrest and custody were lawful.

In this case, the petitioner approached the court challenging the legality of his arrest under the Central Goods and Services Tax Act, 2017 (CGST Act). He argued that his detention pertained to a bailable offense, thus seeking an order for his immediate release.

The petitioner was arrested on December 30, 2020, and produced before the Additional Chief Metropolitan Magistrate in Mumbai, who remanded him to custody. The arrest was based on allegations under sections 132(1)(b) and 132(1)(c) of the CGST Act. Respondent No. 2 claimed that the petitioner had illegally availed input tax credit exceeding ₹5 crores, making the offense cognizable and non-bailable under section 132(1)(i) and sub-section (5). Consequently, the petitioner was arrested under the powers granted by section 69 of the CGST Act.

The case against the petitioner involved four business entities allegedly controlled by him, which were accused of claiming bogus input tax credit worth ₹11.54 crores and issuing fake sale invoices involving a further ₹9.29 crores. Based on this, the petitioner was arrested.

The petitioner argued that these four businesses were distinct legal entities under section 2(84) of the CGST Act, and the input tax credit for each should be treated separately. None of the individual entities exceeded the ₹5 crore threshold for a non-bailable offense. The petitioner claimed that the arrest was illegal, as the clubbing of credits from different entities to surpass the ₹5 crore threshold was improper. Therefore, the offenses were non-cognizable and bailable.

The petitioner’s counsel argued that section 69 of the CGST Act was misapplied, as the offenses should have been treated as bailable. He contended that the petitioner’s fundamental rights under Article 21 of the Constitution were violated due to his unlawful arrest and detention.

Moreover, the counsel argued that there was no provision in the CGST Act allowing the clubbing of separate entities’ tax credits, unlike the Income Tax Act, and cited judgments, including Arnab Goswami’s case, to argue for the petitioner’s release.

In response, the learned Special Public Prosecutor for respondent No. 2 countered that the petitioner effectively controlled all four businesses. It was asserted that the petitioner had committed the offenses under section 132(1)(b)(c) of the CGST Act, as he operated and controlled all four firms and used the same bank and registration details across them. Evidence, such as KYC details, email addresses, and e-Way Bill registrations, supported this claim. It was also alleged that the businesses’ premises were falsely claimed as leased, as the property owners had denied knowledge of the petitioner or his father.

Respondent No. 2 concluded that the petitioner’s arrest was lawful, as he had clearly committed cognizable and non-bailable offenses under section 132(5) of the CGST Act. Additionally, prior judgments from the Telangana High Court and other cases were cited to support their position.

The court, after hearing both sides, examined the relevant provisions of the CGST Act to assess the legality of the petitioner’s arrest and detention.

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