Bombay HC granted bail to the petitioner stating that arrest should be made on circumstantial evidence rather then on suspicion, gossip or rumor

Issue

Before the Bombay HC petition has been filed under Article 226 of the Constitution of India challenges constitutional validity of section 132(1) (b) of the Central Goods and Services Tax Act, 2017 and seeks a declaration that the power under section 69 of the CGST Act can only be exercised upon determination of the liability.

A further prayer has been made to restrain respondent No.4 from filing any criminal complaint against the petitioner for alleged violation of the provisions of the CGST Act which are compoundable offences.

Facts

• Petitioner is a senior citizen aged about 65 years. He is the Director of two companies by the name of Twinstar Industries Limited and Originet Technologies Limited.
• In the year 2018, respondent No.4 initiated an investigation on the basis of intelligence inputs regarding alleged fraudulent availment and utilization of input tax credit (ITC) by one M/s. Al Fara’s Infraprojects Private Limited on the basis of bogus invoices without actual receipt of goods or services.
• During the course of the investigation, statements of various persons including certain officials of M/s. Al Fara’s Infraprojects Private Limited were recorded. In so far petitioner is concerned, on several occasions, summons were issued to him by the office of respondent No.4 under section 70 of the CGST Act and in response to the summons, petitioner had appeared before the investigating officer in the office of respondent No.4 whereafter his statements were recorded on 05.12.2018, 12.12.2018, 04.01.2019, 15.02.2019 and 21.01.2021.
• After recording his last statement on 21.01.2021, petitioner was arrested by officials working in the office of respondent No.4 whereafter he was produced before the Additional Chief Metropolitan Magistrate, 8 th Court, Esplanade, Mumbai along with remand application.
• Remand application disclosed that petitioner is accused of committing offence under section 132(1)(c) of the CGST Act as his companies had fraudulently availed and utilized ineligible input tax credit (ITC) amounting to Rs.122.59 crores approximately on the strength of bogus invoices without actual receipt of goods or services as mentioned in the respective invoices; besides committing an offence under section 132(1) (b) as it was alleged that companies of the petitioner had fraudulently issued bogus invoices and passed on ineligible ITC to various companies without actual supply of goods or services mentioned in the respective invoices thereby leading to wrongful passing on of ITC amounting to approximately Rs.191.66 crores to the recipient companies. By the said remand application, the arresting authority sought for judicial custody of the petitioner for a period of 14 days seeking liberty to interrogate the petitioner in jail custody.

Findings

In the recent case of Arnab Manoranjan Goswami Vs. State of Maharashtra, AIR 2021 SC 1, Supreme Court culled out the various factors which should be considered by the High Court while considering an application for grant of bail under Article 226 of the Constitution of India. It was held as under:-

“57. While considering an application for the grant of bail under Article 226 in a suitable case, the High Court must consider the settled factors which emerge from the precedents of this Court. These factors can be summarized as follows:

(i) The nature of the alleged offence, the nature of the accusation and the severity of the punishment in the case of a conviction;

(ii) Whether there exists a reasonable apprehension of the accused tampering with the witnesses or being a threat to the complainant or the witnesses;

(iii) The possibility of securing the presence of the accused at the trial or the likelihood of the accused fleeing from justice;

(iv) The antecedents of and circumstances which are peculiar to the accused;

(v) Whether prima facie the ingredients of the offence are made out, on the basis of the allegations as they stand, in the FIR; and

(vi) The significant interests of the public or the State and other similar considerations.”

Judgement

Bombay HC directs the petitioner Mr. Daulat Samirmal Mehta shall be enlarged on bail subject to the following conditions: –

1) petitioner shall be released on bail on furnishing cash surety of Rs.5,00,000.00 before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai and within two weeks of his release, to furnish two solvent sureties of the like amount before the said authority;

2) petitioner shall co-operate in the investigation and shall not make any attempt to interfere with the ongoing investigation;

3) petitioner shall not tamper with any evidence or try to influence or intimidate any witness;

4) petitioner shall also deposit his passport before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai.

5) within 15 days of his release, petitioner or any of the companies in which he has a substantial interest and which are under investigation, shall deposit a sum of Rs.10 crores with respondent Nos.2 and 3 which shall be without prejudice to his rights and contentions;

6) after the said amount is deposited, the petitioner or any of the companies in which he has a substantial interest and which are under investigation shall deposit a further amount of Rs.15 crores before respondent Nos.2 and 3 within 30 days of the first deposit which again shall be without prejudice to his rights and contentions;

However, the last two conditions shall be executed by the petitioner upon his release which shall not be a ground for delaying his release.

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