TMI Blog2020 (8) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... present applicants were in charge and responsible for the functions of the Company. It is directed that the applicants be released from custody on their furnishing a personal bond in the sum of ₹5,00,000/- each, with separate sureties of the like sum to the satisfaction of the trial Court, for their appearance before it, as and when required, further subject to the conditions imposed. - M.Cr.C. No.24219/2020 - - - Dated:- 18-8-2020 - HON'BLE SHRI JUSTICE AJAY KUMAR MITTAL, CHIEF JUSTICE AND HON BLE SHRI JUSTICE VIJAY KUMAR SHUKLA, JUDGE. Shri Mukul Rohatgi, Senior Advocate with Shri Ajay Gupta, Shri Rahul Diwaker, Shri Kapil Wadhwa and Shri Ravi Kant Patidar, Advocates for the applicants. Shri Vikram Jeet Banerjee, Additional Solicitor General and Shri Siddharth Seth, Advocates for the respondent/Union of India. O R D E R Per : Vijay Kumar Shukla, J.- Hearing convened through video conferencing. 2. This is the first bail application filed under Section 439 of the Code of Criminal Procedure [for short the CrPC ] on behalf of the applicants, namely, Jagdish Arora and Ajay Kumar Arora, who have been taken into judicial custody in connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 33 crores as an afterthought. 7. It is argued that the instant arrest proceedings are completely premature, as till date the assessment proceedings have not commenced and, therefore, there is no concretized liability that the GST Department can fasten on the SDPL. To bolster the submission, reliance is placed on the decisions of the High Court of Madras in the case of M. Jayachandran Alloys Pvt. Ltd. vs. Superintendent of GST and Central Excise W.P. No.5501/2019 and the Delhi High Court in Make My Trip (MMT) vs. Union of India, 2016 (44) STR 481 (Delhi), confirmed by the Supreme Court in the judgment rendered in the case of Akhil Krishan Maggu and another vs. Deputy Director, DGGI and Ors C.W.P. No.24195/2019 (OM). 8. It is stated on behalf of the applicants that the SDPL is a private limited company which was incorporated in the year 1986 under the provisions of the Companies Act, 1956. The SDPL is engaged in the business of manufacture and sale of alcohol based products and has made its mark across the country, primarily on account of consistently and uniformly manufacturing high quality products. It is a significant and honest contributor towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asseverated that the SDPL has filed its GST returns for March and April, 2020, wherein the GST Tax has been paid at ₹1,72,03,623/-. The due date for GSTR 3B return for the month of May, 2020 was 27th June 2020 and GSTR-1 due date is 28th July 2020, which are yet to be filed. The Central Board of Indirect Taxes has extended the limitation for filing of GST returns, vide Notifications dated 03-4-2020 and 24-6-2020, therefore, the Company is not in breach of any statutory or regulatory deadlines and it has fully complied with the GST regime. 14. The GST Department carried out search and seizure proceedings at the premises of the SDPL on 26-6-2020 which continued till 28-6-2020 and thereafter, on 30-6-2020. It is the case of the applicants that the search proceedings were carried out in complete derogation of the procedure envisaged in law and in violation of COVID-19 Guidelines. The search warrants have not been provided/served/shown to responsible persons; documents have been seized without proper inventory and without providing copies thereof, stock is being taken randomly without the aid of SDPL s Store Manager; and proper panchnamas are not being prepared and served by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows : Sr.No. Particulars as alleged by the GST Authorities GST Payable 1. Clandestine production and supply of alleged 5,35,000 litres Genius Sanitizer. (Communicated orally on 11-7-2020) ₹80 lacs 2. Qty. of Genius sanitizer to the tune of 3,47,000 litres seized at Biscuit and Basket Warehouse of Som Distilleries Pvt. Ltd. (which in fact, have not been sold and were stored for buffer purposes). ₹52 lacs 3. Genius Sanitizer seized at job work site of Som Distilleries and Breweries Ltd. (unsold stock). ₹23.50 lacs 4. Genius sanitizer seized at various warehouses in various cities of around 38,000 litres (unsold stock). ₹04.45 lacs 5. Stock Transfer of Genius Sanitizer ₹09.80 lacs TOTAL ₹169.75 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides for an assessment to be made after notice to be issued to the assessee xx xx xx 36. Though the discussions and conclusions therein have been rendered in the context of Chapter V of the finance Act, 1994, levying service tax, I am of the view that they are equally applicable to the provisions of the CGST as well. Section 132 of the Act as extracted earlier, imposes a punishment upon the assessee that commits an offence. There is no dispute whatsoever that the offences set out under (a) to (l) of the provision refer to those items that constitute matters of assessment and would form part of an order of assessment to be passed after the process of adjudication is complete and taking into account the submissions of the assessee and careful weighing of evidence found and explanations offered by the assessee in regard to the same. Thus, it is submitted that the procedure adopted in the instant case, where arrest has been made without completion of assessment proceedings, runs counter to the established provisions of law. It is trite law that the power of arrest is to be used with great circumspection and not casually. 23. Support was drawn from the pronouncement i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of 2 of the said section, he may, by order, authorise any officer of central tax to arrest such person. (2) Where a person is arrested under sub-section(1) for an offence specified under subsection (5) of section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours. (3) Subject to the provisions of the Code of Criminal Procedure, 1973 (2 of 1974), (a) where a person is arrested under sub-section(1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate; (b) in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station. 137. Offences by companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short the IPC ]. As such, reasonable belief must be cogent and recorded in writing. In the instant case, the applicants have been kept in the dark and the investigation leading upto their arrest has been bereft of any reason being provided for the same. 29. It is pleaded that in complete disregard to Section 69 of the CGST Act, the GST authorities have failed to provide the reasons to believe and grounds of arrest in respect of the alleged offence punishable under Section 132(1)(a) to (d) of the CGST Act. 30. It is strenuously urged that in the present case, there is no rationale and intelligible nexus between the reasons to believe for the applicants committing the alleged offence. The reasons to believe, cannot be equated with the reasons to suspect. To bolster the submissions, reliance is placed on the judgment rendered in the case of N. Nagendra Rao and Co. vs. State of A.P., AIR 1994 SC 2663, wherein the Supreme Court has observed that the expression reason to believe means that even though formation of opinion may be subjective, but it must be based on material on the record. It cannot be arbitrary, capricious or whimsical. It is, thus, a check on exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany for the conduct of the business of the company and also fulfil the 'factual requirement' of being a person in charge of the business of the company. 31. In the present case, the GST authorities have not placed on record any material whatsoever, to support such reason to believe against the applicants. Such reason to believe must be recorded by the Commissioner of CGST himself with application of mind. 32. That all the offences under the CGST Act are compoundable under Section 138 of the CGST Act and hence, the arrest is wholly unnecessary. The object and purpose of the CGST Act is not penal in nature, but it is economic for the purpose of legislation being to recover any amount, that may be due to the Government exchequer. To substantiate the submission, it is urged that the Calcutta High Court in Sanjay Kumar Bhuwalka (supra) while deciding a bail application in case of similar nature observed thus : . I do agree with such contention of Mr. Basu that the GST Act of 2017 is essentially a fiscal statute and the statement of object and reason has to be read together, which is aimed at realization of revenue. Revenue is the monetary payment due to the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7-7-2020 from 05:30 p.m. till 3 p.m. on the next day 8.7.2020. As there was severe chest pain during course of the interrogation, he was immediately admitted to the I.C.U. of the J.P. Hospital, Bhopal. Medical reports have been appended to the application. 36. The submissions made on behalf of the applicants on the anvil of the aforementioned facts and grounds, can be summarised as follows : (a) The applicants are not the Directors of the SDPL, therefore, they are not responsible for the affairs of the Company. In this regard a reference has been made to the provisions envisaged in clause (1) of Section 137 of the CGST Act and some pronouncements of the High Courts and the Supreme Court. (b) The power to arrest has to be exercised only upon completion of assessment. Various High Courts viz. Delhi, Karnataka and Gujarat have taken the view that the power to arrest under Section 132 of the CGST Act can only be invoked once the assessment is complete. The judgment of the Madras High Court rendered in the case of M/s Jayachandran Alloys (supra) has been referred, wherein it is held that the power to punish set out in Section 132 of the CGST Act, 2017 would stand trigger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid conclusion was affirmed as the Supreme Court did not see any reason to deviate from it. (e) The applicants have been arrested without any reason to believe . No such reasons as required under Section 69(1) have been provided by the respondent. No supporting documents existed at the time of the arrest and even in the proposal to arrest. The power to arrest under Section 69 can only be exercised for offences falling under clauses (a) to (d) of Section 132(1) of the CGST Act. (f) Sanitizer contains 80% spirit/alcohol, a substance sourced, controlled and heavily regulated by the Excise Department. An Excise Officer is present at the premises of the Company 24 hrs. a day, 365 days a year and maintains the record of production of hand sanitizer. (g) The Excise Department Certificate issued in favour of the SDPL evidences that it manufactured only 20 lacs litres of sanitizer and supplied only 9 lacs litres till 30-6-2020 from the factory premises. The said figures were also affirmed by an independent report of the flying squad of the Excise Department. (h) The respondent has taken the value at MPR of ₹500/- per litre without any basis, and by reverse c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n have been searched in the premises. During search, the statements of employees of the Company were recorded. They informed that the actual control of the Company is at the hands of the applicants. The statement of one Binay Kumar Singh, an employee of the Company was heavily relied upon by the respondent. The framing of assessment is not a sine-qua-non for making the arrest as held by the Telangana High Court in P.V. Ramana Reddy Vs. Union of India {W.P. No. 4764/2019 (para 56)} which view was affirmed by the Apex Court in Special Leave to Appeal (Criminal) No. 4430/2019 (P.V. Ramana Reddy Vs. Union of India). 38. We have heard the learned counsels appearing for the parties at length and bestowed our anxious consideration on their respective arguments advanced. The record was also produced by the respondent in a sealed cover. We have gone through the record in order to ascertain the existence of reasons to believe for the proceedings being initiated against the applicants. We do not perceive any material, except the statement of the employee Binay Kumar Singh. There is no documentary material produced on record to show that the present applicants were legally in ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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