2025 (6) TMI 2021 - DSC - GST

Seeking grant of anticipatory bail - disputed interpretation of tax liability - evasion of GST - fraud willful misstatement or suppression of facts or not - stay of proceedings by the Hon ble Supreme Court of India - HELD THAT - In the present matter accused was granted interim protection. Though it is a matter of record that department did not summon him yet it is not the contention of accused that he attempted to reach out to the department. Needless to say that there is no legal duty on the accused to reach out to the department/investigating agency however such conduct would have shown the bona fide on behalf of applicant/accused. As per record/reply summons were issued on 17.09.2024 22.09.2024 04.10.2024 17.10.2024 28.10.2024 04.11.2024 13.11.2024 06.12.2024 and 08.01.2025 (09 in number) as well as admittedly NBWs have been issued against accused. Therefore after having the protection of no coercive action had accused approached the investigating agency sou moto it would have been a show of bona fide by accused. Another argument taken by Ld. Defence Counsel was stay of proceedings by the Hon ble Supreme Court of India. The print-out of the order has been placed on record. The Hon ble Supreme Court of India as directed further proceedings of all the impugned Show Cause Notices shall remain stayed till final disposal of the main matter along with all the matters which are tagged . Another aspect needs to be considered is statements of employees to the effect that applicant/accused has asked them not to disclose to anyone. To say the least it amounts to asking to withholding the relevant information and also to manage the witnesses as to what to say. The same is not permissible under law. A person facing such allegations fails to cross the bar of test laid down for admitting an accused in anticipatory bail. The application of applicant/accused seeking anticipatory bail is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether the applicant/accused, who claims to have no managerial or ownership role in the company implicated in GST evasion, is entitled to anticipatory bail under Section 482 of the Code of Criminal Procedure.

- Whether the applicant's alleged non-cooperation with investigation, including failure to respond to multiple summons and issuance of Non-Bailable Warrants (NBWs), affects the grant of anticipatory bail.

- Whether the stay of Show Cause Notices by the Hon'ble Supreme Court impacts the ongoing investigation and the applicant's anticipatory bail application.

- The applicability of the legal principles governing anticipatory bail in cases involving serious economic offences, particularly in the context of alleged GST evasion and the accused's conduct during investigation.

- The evidentiary value of statements implicating the applicant as the real controller and beneficial owner behind the corporate veil, despite the applicant's denial of any such role.

- The legality and propriety of the GST Department's actions, including searches and summons, and whether these actions violate the applicant's fundamental rights or procedural safeguards.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Anticipatory Bail in Light of Applicant's Claimed Non-Involvement

Relevant Legal Framework and Precedents: Anticipatory bail under Section 482 Cr.P.C. is discretionary and depends on the facts of the case, including the nature of the offence and the conduct of the accused. The Court relied on the Supreme Court's decision in Serious Fraud Investigation Office v Aditya Sarda, which underscores the gravity of economic offences and the need to view them seriously.

Court's Interpretation and Reasoning: The Court noted that the applicant denies any role in the management or ownership of the company and claims to be only a software developer. However, the Department's reply contends that the applicant is the beneficial owner and mastermind behind the company's operations, with directors acting as mere fronts. The Court observed that the applicant's denial is contradicted by evidence including statements of employees and possession of incriminating documents.

Application of Law to Facts: The Court found that the applicant's claim of non-involvement was not supported by the investigation's findings. The applicant's failure to cooperate and to respond to summons further undermined his claim of innocence.

Treatment of Competing Arguments: The applicant argued that he was falsely implicated and that the investigation was arbitrary and discriminatory. The Court rejected this, emphasizing that economic offences involving large-scale tax evasion must be treated with seriousness and that the applicant's conduct suggested an attempt to evade investigation.

Conclusion: The Court concluded that the applicant is not entitled to anticipatory bail on the basis of claimed non-involvement.

Issue 2: Impact of Non-Cooperation and Issuance of Non-Bailable Warrants on Bail Application

Relevant Legal Framework and Precedents: The Supreme Court in Serious Fraud Investigation Office v Aditya Sarda held that accused persons who abscond or conceal themselves to avoid investigation should not be granted anticipatory bail, especially in serious economic offences.

Court's Interpretation and Reasoning: The Court noted that despite multiple summons issued over several months, the applicant did not join the investigation. NBWs had been issued against him, indicating his evasive conduct. The Court held that such conduct negates the bona fide required for anticipatory bail.

Application of Law to Facts: The applicant's failure to appear despite protection from coercive action was considered a significant factor against bail. The Court emphasized that the law aids only those who abide by it, not those who resist investigation.

Treatment of Competing Arguments: The applicant argued that he was willing to join investigation and that no summons were served properly. The Court found no merit in this argument given the record of summons and NBWs issued.

Conclusion: The Court held that the applicant's non-cooperation and evasive conduct justified dismissal of anticipatory bail.

Issue 3: Effect of Supreme Court Stay on Show Cause Notices on Ongoing Investigation and Bail

Relevant Legal Framework: The Hon'ble Supreme Court had stayed all Show Cause Notices issued in the related matter until final disposal of the main case. However, the stay was limited to the notices and did not cover ongoing inquiries or investigations.

Court's Interpretation and Reasoning: The Court distinguished between the stage of inquiry/investigation and the issuance of Show Cause Notices. It held that while the notices are stayed, the investigation itself is not stayed and can continue. Therefore, the stay does not preclude the investigation or the Court from considering the bail application.

Application of Law to Facts: The applicant's reliance on the stay order was held to be misplaced as the investigation was ongoing and the applicant's anticipatory bail application was independent of the stay on notices.

Conclusion: The stay on Show Cause Notices does not bar the investigation or the Court's consideration of anticipatory bail.

Issue 4: Allegations of Attempt to Influence Witnesses and Withhold Information

Relevant Legal Framework: Interference with witnesses and withholding relevant information are serious offences and indicate a risk of tampering with evidence, which weighs against bail.

Court's Interpretation and Reasoning: The Court noted statements from company employees that the applicant had instructed them not to disclose information to the GST authorities. The Court held that such conduct amounts to managing witnesses and is impermissible under law.

Application of Law to Facts: The Court found that this conduct further disqualified the applicant from the grant of anticipatory bail.

Conclusion: The applicant's attempts to influence witnesses and withhold information militated against bail.

Issue 5: Legality and Procedural Validity of Department's Actions

Relevant Legal Framework: Searches and seizures must be conducted following due process and prescribed procedures. The applicant alleged arbitrary and high-handed conduct violating fundamental rights.

Court's Interpretation and Reasoning: The Court observed that the applicant had not challenged the legality of the searches or seizures on procedural grounds. The Court also noted that the applicant had not taken steps to cooperate or clarify his position.

Application of Law to Facts: The Court did not find sufficient grounds to hold that the Department's actions were arbitrary or violative of fundamental rights.

Conclusion: No procedural irregularity was found sufficient to warrant bail on this ground.

3. SIGNIFICANT HOLDINGS

"Economic offences constitute a class apart, as they have deep rooted conspiracies involving huge loss of public funds, and therefore such offences need to be viewed seriously. They are considered as grave and serious offences affecting the economy of the country as a whole and thereby posing serious threats to the financial health of the country."

"The law aids only the abiding and certainly not its resistants. When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail."

"The stay of Show Cause Notices by the Hon'ble Supreme Court does not extend to ongoing inquiries or investigations, and therefore does not bar the continuation of investigation or consideration of anticipatory bail applications."

"Attempts by an accused to influence witnesses or to withhold relevant information from investigating authorities constitute valid grounds for denying anticipatory bail."

Final Determinations:

- The applicant is not entitled to anticipatory bail given the serious nature of the economic offence, his alleged role as the real controller of the company, and his non-cooperation with the investigation.

- The issuance of NBWs and failure to respond to multiple summons weigh heavily against bail.

- The stay of Show Cause Notices does not impede ongoing investigation or the Court's jurisdiction to decide bail.

- Allegations of witness tampering and withholding information further justify denial of bail.

- No procedural irregularities in the Department's actions were found sufficient to grant bail.