1. Present bail application has been filed by the applicant, one of the Directors in M/s. Dadhichi Iron and Steel Pvt. Ltd. said to be engaged in trading of Iron and Steel products. The applicant was arrested on 04/02/2020 by the GST Intelligence authorities and the premises were also raided on the allegation that the applicant and his company wrongly availed Input Tax Credit on the basis of fake transaction of sales and supply which never took place. The allegation is that various invoices and e-way bills were uploaded on GST portal to show huge quantity of Iron and Steel purchased from one supplier and then sold to other purchaser, about 25 in numbers, situated in various parts of the country. When, upon receipt of secret information, GST intelligence authorities made enquiries and scrutinized large number of invoices, e-way bills and carried out physical verification with regard to claim, sale, purchase and supply, it was found that such sale and purchase had actually not taken place nor transportation of goods, as claimed by the applicant, ever took place and thus, without there being actual sale and supply of claimed goods, Rs.62 crores were claimed as Input Tax Credit thereby playing fraud and not only benefiting the applicant but the ultimate manufacturer and supplier at his point facilitating availing of Input Tax Credit without there being any transaction.

2. Learned senior counsel for the applicant argued that the allegations against the applicant are based on certain material which were never disclosed nor explanation of the applicant was ever obtained. Learned senior counsel would argue that the applicant's company is a reputed trading company involved in sale and purchase of steel and iron since long and every transaction of purchase, sale and supply is duly recorded and uploaded in GST portal which included sale invoices, eway bills etc. He would further submit that the applicant has been duly submitting returns in appropriate proforma under the GST Act and Rules regularly and at no point of time, any notice was issued to him by the GST authorities having jurisdiction, seeking explanation with regard to any of the transaction of sale and supply in respect of which, offences have been registered. Referring to the scheme of the GST Act and Rules made therein and various provisions contained therein, learned counsel for the applicant would contend that the scheme of the act requires that whenever the authorities are not satisfied with any of the transactions availing credits, submission of returns, information or genuineness of any transaction, they are required to carry out scrutiny under Section 61 of the CGST Act to determine the correctness of the returns filed. If any discrepancy is found, enquiry is called for, an assessee is required to be afforded opportunity of explanation. It is only when such explanations are not found satisfactory, consequential orders may be passed canceling availing of credit and / or passing such other orders including payment of additional tax, interest, penalty etc. The argument is that it is only when the authorities find it to be a case of wrong availing of Input Tax Credit that it may follow registration of offence under the, punishable under Section 132 thereof. According to him, the intelligence authorities straightway raided premises and arrested the applicant without there being any scrutiny, enquiry or any order of assessment against the applicant by the competent assessment authorities and without there being any finding that the applicant has wrongly availed Input Tax Credit. Learned counsel for the applicant would submit that recourse to police power and registration of criminal case has been deprecated in various judicial verdicts passed by the Supreme Court and High Courts.

3. It is next submitted that the applicant, after his arrest, had remained in custody for 30 days and even at the time of his production before the Magistrate, no justification for remand was put forth nor sought for longer period. After his arrest and for a period of 30 days, when he remained in custody, no further interrogation took place from the applicant which shows that his custodial interrogation was never required. It is next submitted that looking to the nature of allegations, further detention of the applicant is no longer necessary because all the informations which were submitted by the applicant, have already been uploaded in the GST portal as also premises of the applicant were raided and all records, documents etc. which were considered to be necessary and relevant, have already been seized.

Even after grant of temporary bail to the present applicant, there is no specific allegation against the applicant that the applicant has misused his liberty either by tampering with prosecution witnesses or attempting to flee away from justice or not extending co-operation in the matter of investigation. He would submit that neither before the Supreme Court nor before this Court, any application for cancellation of temporary bail was moved by the respondent authorities seeking cancellation either on the ground of misuse of liberty or non-cooperation during investigation, much less tampering with the witnesses or attempt to flee away. Learned senior counsel would argue that in the present case, triple test, as laid down by the Supreme Court in the case of P. Chidambaram v. Directorate of Enforcement, (2019) SCC OnLine SC 1549, stands fully satisfied. The maximum sentence provided for alleged offence is 5 years and it is not a case where the alleged offence is punishable with life imprisonment or even higher sentence of 7 years or life imprisonment. In such a case, the principle in the matter of grant of bail laid down in various judicial pronouncement, entitles the applicant to be released on bail, particularly when there is no flight risk and the presence of the applicant could be secured by imposing appropriate conditions. It is also submitted that offence cannot be said to be a grave one because it is compoundable even without permission of the Court and this shows that offence cannot be categorised as a grave offence. Therefore, cardinal principle that bail is a rule and rejection of bail is an exception needs to be followed in the present case. Lastly, it is submitted that the applicant was granted temporary bail on his medical condition which continues and during pandemic situation, the applicant, suffering from other ailments, is susceptible to infection, if he is kept in custody. In support of his contention, learned counsel for the applicant mainly relies upon C. Pradeep v. The Commissioner of GST and Central Excise Selam and anr. [SLP (CrL) No.6834/2019 Dt.06/08/2019, Sapna Jain v. Union and ors. BOM HC CR.W.P.1996/2019 Dt.11/04/2019, Sapna Jain v. Union and ors BOM HC W.P.No.1996 of 2019 Dt.08/07/2019, Akhil K Maggu and Anr. v. Dy. Director, Directorate GST Intelligence and ors., Chandigarh HC CWP24195/2019 15/11/2019, Makemytrip (India) Pvt. Ltd. v. Union of India, 2016 SCC Online Del 4951, P.V.Ramana Reddy v. Union of India, HC of Telangana WP 4764/2019, Vimal Y. Goswami v. State of Gujarat, 2019 SCC online Guj 1496, Cleartrip Private Ltd., Mumbai and ors. v. Union of India, 2016 SCC Online Bom 4836, Dr. Rini Johar v. State of MP and ors, WP (Criminal) 30 of 2015, Jayachandra Alloys Pvt. Ltd. v. CGST of M.P. & ors., WP (CRI) 30 of 2015 Dt.03/06/2016, P.V.Ramana Reddy v. Union of India Spl. Leave to Appeal (Crl.) No.4430/2019, Shri Gurbaksh Singh Sibbia and ors. v. State of Punjab, (19080) 2 SCC 565, State of Kerala v. Raneef, (2011) 1 SCC 784 , Sanjay Chandra v. CBI, (2012) 1 SCC 40 , Arnesh Kumar v. State of Bihar, (2014) 8 SCC 273 , Dataram Singh v. State of Uttar Pradesh, (2018) 3 SCC 22 , P. Chidambaram v. Directorate of Enforcement, (2019) SCC OnLine SC 1549, Firoz Khan v. State (NCT of Delhi), Bail Appl. No.945/2020, Amit Chandrakant Shah v. State of Gujarat, R/Criminal Misc. Application No.24151 of 2019, Amit Bothra v. State of MP, MCrC No.21628/2020 and Aditya Gupta v. Union of India and ors., WP (Crl) 184/2020.

4. On the other hand, learned counsel for the respondent would argue that a prima facie case is made out against the applicant because, when upon receipt of secret information, Intelligence authorities enquired into large number of transactions of sale and supply, as claimed by the applicant and on which basis, Input Credit to the tune of crores of rupees was availed, involving scrutiny of about 400 invoices, corresponding E-way bills, various transactions uploaded in the GST portal and when cross checked, the authorities found that transactions actually did not take place and did not involve movement of goods in the course of alleged sale and supply of iron and steel products as claimed in the various returns, E-way bills and invoices by the applicant. He would submit that without there being actual transaction and movement of goods, only paper exercise was done and false, fabricated and forged invoices, E-way bills were generated and on that basis, return was filed, claiming crores of rupees as input tax credit. Learned counsel for the respondent would submit that when the details of actual movement of claimed goods through transportation were cross-checked, it was found that such movements were falsely recorded prima facie showing that no actual transportation of goods had taken place. He would further submit that this fraudulent act of the applicant was only intended to avail Input Tax Credit in the absence of any transaction of sale, supply and transportation of goods corresponding to claimed transactions. Firms, to which supplies were made under the information stated by the applicant and uploaded in the GST portal, were found to be fake firms having only paper registration. In this manner, in the investigation so far concluded, the applicant has been found to have wrongly availed Input Tax Credit to the tune of Rs.62 crores. He would further submit that the investigation is still going on and in course of time, many more information may be revealed involving much more amount of Input Tax Credit through fraudulent transaction of sale, purchase and supply of iron and steel products. He would next submit that the applicant is misusing his liberty as he is not cooperating with the investigation. In order to interrogate him, twice summons were issued to him, first on 15/06/2020 and second on 11/07/2020. The first summons returned with the noting that the applicant refused to accept. Second summons are not yet received back. According to the respondents, the applicant is avoiding to appear before the authorities. He would also submit that the applicant gave statement under Section 70 of the CGST Act and admitted that he had prepared all the invoices which are fake and there are no corresponding transactions of sale and supply of iron and steel goods. It is further submitted that the manner in which the applicant has availed Input Tax Credit of crores of rupees, the offence is grave, irrespective of the maximum sentence which could be awarded under Section 132 of the GST Act. He would further highlight that if the applicant is granted bail, he has the potential of adversely affecting progress of fair investigation as he may not only tamper with the prosecution witnesses but also tamper with various records and documents pertaining to the alleged transaction. He would further submit that various judgments cited by the applicant are not applicable at this stage because it is not a case involving actual transaction of sale and supply of goods where the applicant has wrongly claimed input tax credit. Present is a case where there is no actual sale and supply and the act of the applicant is more in the nature of fraudulent one rather than bonafide claim of the statutory scheme of availing Input Tax Credit. As far as compounding part is concerned, he would submit that it is for the applicant to offer for compounding of offence as per the law and it is only when such offer is made by the applicant that the respondent may consider any such offer of compounding strictly as per the provisions of the but existence of the scheme of compounding of offence could not be taken as basis by the applicant to claim bail in such a serious matter. In support of his submission, he relies upon decisions in the case of P.V. Ramana Reddy v. Union of India, 2019 SCC Online TS 2516, P.V. Ramana Reddy v. Union of India, SLP (Crl.) No.4430/2019, Union of India v. Sapna Jain & ors., SLP (Crl.) No.4322/2019, Amit Beriwal v. State of Odisha, BLAPL No.2217 of 2020, Bharat Raj Punj v. Commissioner, CGST, S.B.Criminal Writ No.76 of 2019, Jatinder Manro v. Directorate General of Goods and Services Tax Intelligence, CRM-M No.36714 of 2018, Pankaj Agrawal v. Union of India, MCRC No.3769/2019 and Nimmagadda Prasad v. Central Bureau of Investigation, (2013) 7 SCC 466 .

5. I have heard learned counsel for both the parties and perused the records of case diary submitted before this Court in a sealed cover by an officer of the respondent.

6. In order to convince this Court that the very initiation of criminal case and launching prosecution is without authority of law, irrespective of availability of incriminating material, reliance has been placed on various orders / interim orders passed by different High Courts in the country. Those decisions / orders are C. Pradeep (supra), Sapna Jain (supra), Akhil K Maggu (supra), Makemy Trip (India) Pvt. Ltd. (supra), Vimal Y. Goswami (supra), Cleartrip Pvt. Ltd. (supra) and Jayachandra Alloys Pvt. Ltd. (supra). These decisions have been relied upon to buttress submission that unless assessment proceedings are drawn and orders are passed to the effect that Input Tax Credit has been wrongly availed, no prosecution could be launched. Therefore, it is argued that statutory raid of premises and institution of criminal case followed by arrest by registering offence under Section 132 of CGST Act itself is misuse of police power granted to the respondent authorities. On the other hand, learned counsel for the respondent has heavily relied upon orders passed by the High Court of Telangana in the case of P.V. Ramana Reddy (supra) wherein, it has been held that launching of prosecution need not wait till passing of assessment order and law does not preclude institution of criminal case by registering offence once it is found that Input Tax Credit has been availed by an assessee when he was not entitled for the same. This issue has not been finally settled as the parties could not bring to the notice of this Court any judgment of the Apex Court in this regard. This Court has also not taken view on this aspect as to whether very initiation of prosecution by registering offence under Section 132 of CGST Act on the allegation of having wrongly availed Input Tax Credit would be maintainable under the law. The decisions which have been cited before this Court by both the parties are mostly those where institution of criminal case was assailed and prayer was made for a restraint order against arrest. Therefore, at this stage, when this Court is considering matter relating to post arrest bail application, it is not necessary to go into detail of those contentions advanced before this Court.

7. The allegation against the present applicant, as have been detailed in the written submissions and as borne out from the records in hand are that the applicant has availed Input Tax Credit on the basis of fake invoices, E-way bills and fabricated entries without there being actual sale / supply of goods and this involves the applicant and many other fake firms, traders who have helped the applicant in getting those false documents and records prepared. In sum and substance, the allegation is that only in order to avail Input Tax Credit, fabricated documents were prepared without there being actual sale, supply or movement of goods in the course of trade involving the present applicant. About Rs.60 crores is said to be involved. As according to the investigating authorities, till now, during investigation, it has been found that the applicant has wrongly availed Input Tax Credit to the tune of around Rs.60 crores.

8. The main thrust of objection to grant of bail by the respondent is based on the premise that present is a case which should be treated as grave in nature as it is an economic offence causing huge loss to the public exchequer and in such case of economic offence of such proportion, the Court is required to take into consideration this as one of the most important consideration while deciding whether or not to grant bail.

9. Prayer for grant of bail is mainly based on the submission that merely because there are allegations of wrongfully availing Input Tax Credit, the applicant cannot be denied bail, particularly when he had remained in custody for one month before grant of interim bail. Whatever information was required to be gathered and interrogation done, has already been done. The applicant has not misused his liberty during the period he remained on interim bail. It is also one of the main grounds taken that in order to judge the gravity of offence, the maximum punishment which could be awarded is also required to be taken into consideration which in the present case is five years. One of the main insistence on which prayer for grant of bail is made is that the offence itself is compoundable one and even during the course of argument on behalf of the respondent, it was stated that if any offer is made, it will considered in accordance with law as the offence is compoundable one.

10. In the backdrop of nature of allegations against the applicant, it is found that in the present case, the applicant was kept in custody for about a month. Thereafter, he was granted interim bail by this Court and till date, there is no serious allegation leveled against the applicant that while on interim bail, he was either repeatedly involved in tampering with the prosecution witnesses or in any manner, adversely affecting the investigation. Learned counsel for respondent, during the course of argument, has stated that when one summons was issued to the applicant to appear before the investigating authority, notice was returned with the endorsement of refusal. To this, learned senior counsel for the applicant argued that this has been disclosed for the first time during the argument and despite repeated statement made before the Court that the respondent should come out with the written objection stating the grounds, this fact was not disclosed. Learned senior counsel for the applicant argued that the applicant never refused any summons. He has stated that the applicant undertakes to appear before the authorities as and when summons are received by him within the shortest possible time.

11. After going through the records and diary placed before this Court, it is found that after initial arrest of the applicant, there is not enough material on record to show that the applicant was put to interrogation time and again. The records do not show as to what purpose is going to be served to get the applicant in custody any more at this stage when he has remained in custody for about a month before grant of ad-interim bail.

12. It is also revealed that after arrest of the applicant and during the period he remained in custody for about 30 days, no further interrogation had taken place. There is hardly any cogent material placed before the Court to show that the applicant misused his liberty either by tampering with prosecution witnesses or attempting to flee away from justice except one solitary incident of refusing the summons which he has denied and which is disclosed for the first time during argument. Learned senior counsel for the applicant is correct in submitting that had there been any misuse of liberty by the applicant during the period he remained on interim bail for the last several months, the respondent would have definitely moved an application for cancellation of interim bail on such grounds either before this Court or before the Supreme Court.

13. This Court further finds that the maximum sentence that could be awarded for the alleged offence is five years which is relevant consideration to determine the gravity of offence as held by the Supreme Court in the case of Sanjay Chandra (supra) followed in P. Chidambaram (supra). In the case of P. Chidambaram (supra), the fundamental principles with regard to grant of bail allowed by the Supreme Court in the Constitution Bench judgment in the case of Shri Gurbaksh Singh Sibbia (supra) were re-iterated as below -

“19. On the consideration as made in the above noted cases and the enunciation in that regard having been noted, the decisions relied upon by the learned senior counsel for the appellant and the principles laid down for consideration of application for bail will require our consideration. The learned senior counsel for the appellant has relied upon the decision of the Constitution Bench of this Court in the case of Shri Gurbaksh Singh Sibbia (supra) with reference to paragraph 27 which reads as hereunder:

“ It is not necessary to refer to decisions which deal with the right to ordinary bail because that right does not furnish an exact parallel to the right to anticipatory bail. It is, however, interesting that as long back as in 1924 it was held by the High Court of Calcutta in Nagendra v. King-Emperor [AIR 1924 Cal 476 , 479, 480 : 25 Cri LJ 732] that the object of bail is to secure the attendance of the accused at the trial, that the proper test to be applied in the solution of the question whether bail should be granted or refused is whether it is probable that the party will appear to take his trial and that it is indisputable that bail is not to be withheld as a punishment. In two other cases which, significantly, are the ‘Meerut Conspiracy cases’ observations are to be found regarding the right to bail which deserve a special mention. In K.N. Joglekar v. Emperor [AIR 1931 All 504 : 33 Cri LJ 94] it was observed, while dealing with Section 498 which corresponds to the present Section 439 of the Code, that it conferred upon the Sessions Judge or the High Court wide powers to grant bail which were not handicapped by the restrictions in the preceding Section 497 which corresponds to the present Section 437. It was observed by the court that there was no hard and fast rule and no inflexible principle governing the exercise of the discretion conferred by Section 498 and that the only principle which was established was that the discretion should be exercised judiciously. In Emperor v. Hutchinson [AIR 1931 All 356 , 358 : 32 Cri LJ 1271] it was said that it was very unwise to make an attempt to lay down any particular rules which will bind the High Court, having regard to the fact that the legislature itself left the discretion of the court unfettered. According to the High Court, the variety of cases that may arise from time to time cannot be safely classified and it is dangerous to make an attempt to classify the cases and to say that in particular classes a bail may be granted but not in other classes. It was observed that the principle to be deduced from the various sections in the Criminal Procedure Code was that grant of bail is the rule and refusal is the exception. An accused person who enjoys freedom is in a much better position to look after his case and to properly defend himself than if he were in custody. As a presumably innocent person he is therefore entitled to freedom and every opportunity look after his own case. A presumably innocent person must have his freedom to enable him to establish his innocence.”

20. We have taken note of the said decision since even though the consideration therein was made in the situation where an application for anticipatory bail under Section 438 was considered, the entire conspectus of the matter relating to bail has been noted by the Constitution Bench.

14. Further, observation made in the case of Sanjay Chandra (supra) which was also a case of financial irregularities was also considered as below -

“21. The learned senior counsel for the appellant has also placed reliance on the decision on the decision in the case of Sanjay Chandra (supra) with specific reference to paragraph 39 which reads as hereunder:

“Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds: the primary ground is that the offence alleged against the accused persons is very serious involving deeprooted planning in which, huge financial loss is caused to the State exchequer; the secondary ground is that of the possibility of the accused persons tampering with the witnesses. In the present case, the charge is that of cheating and dishonestly inducing delivery of property and forgery for the purpose of cheating using as genuine a forged document. The punishment for the offence is imprisonment for a term which may extend to seven years. It is, no doubt, true that the nature of the charge may be relevant, but at the same time, the punishment to which the party may be liable, if convicted, also bears upon the issue. Therefore, in determining whether to grant bail, both the seriousness of the charge and the severity of the punishment should be taken into consideration.”

22. The said case was a case of financial irregularities and in the said circumstance this Court in addition to taking note of the deeprooted planning in causing huge financial loss, the scope of consideration relating to bail has been taken into consideration in the background of the term of sentence being seven years if convicted and in that regard it has been held that in determining the grant or otherwise of bail, the seriousness of the charge and severity of the punishment should be taken into consideration.”

The Supreme Court, thereafter, proceeded to hold -

“23. Thus, from cumulative perusal of the judgments cited on either side including the one rendered by the Constitution Bench of this Court, it could be deduced that the basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial. However, while considering the same the gravity of the offence is an aspect which is required to be kept in view by the Court. The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case. Keeping in view the consequences that would befall on the society in cases of financial irregularities, it has been held that even economic offences would fall under the category of “grave offence” and in such circumstance while considering the application for bail in such matters, the Court will have to deal with the same, being sensitive to the nature of allegation made against the accused. One of the circumstances to consider the gravity of the offence is also the term of sentence that is prescribed for the offence the accused is alleged to have committed. Such consideration with regard to the gravity of offence is a factor which is in addition to the triple test or the tripod test that would be normally applied. In that regard what is also to be kept in perspective is that even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so. Therefore, the underlining conclusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for either grant or refusal of bail though it may have a bearing on principle. But ultimately the consideration will have to be on case to case basis on the facts involved therein and securing the presence of the accused to stand trial.”

15. In the absence of there being specific material placed before this Court, at this stage that the applicant had made any attempt to tamper with the prosecution witnesses or in any manner indulged in adversely affecting investigation or that he is at flight risk or that keeping him in jail would serve any purpose and last but not the least, there are no serious allegations of he misusing liberty while on interim bail and that the maximum punishment which could be awarded is five years, this Court is inclined to allow this application. This Court also takes notice that the interim bail was granted to the applicant on health conditions and when later on, interim bail was not continued, the said interim protection was continued by the Supreme Court till final hearing of the bail application. The applicant is already on temporary bail. Bail application is allowed on following conditions -

i) The applicant will have to furnish personal bond of Rs.10 lakhs and two local sureties in the sum of Rs.10 lakhs each to the satisfaction of the concerned Court within 30 days from today. Temporary bail shall remain operative for 30 days or till furnishing bail bonds / sureties, whichever is earlier.

ii) The applicant shall appear before the Trial Court regularly on each and every date, unless exempted from appearance.

iii) The applicant shall not make any attempt to tamper with the prosecution witnesses.

iv) Passport shall be deposited before the Trial Court.

As the applicant is on temporary bail, upon furnishing bond and local sureties as above, bond and surety for temporary bail shall stand discharged.

The records of the case, as submitted before this Court, be re-sealed and handed over to the counsel for the respondent / authorised officer of the respondent through the Registrar (Judicial).

Certified copy as per rules.