The Calcutta High Court on Tuesday granted a conditional bail to the persons arrested for GST evasion using fake invoices in the name of dummy companies. The persons were asked to furnish a bond of the sum of Rs. 50,00,000/- each on condition to deposit of Rs. 39 crore to the Government Exchequer.
They were also directed to appear before the I.O./Authority holding investigation to assist the investigating machinery as and when called upon to appear before the authority concerned till final investigation or till the offence is compounded under the provision subject to satisfaction of the learned Additional Chief Judicial Magistrate, Sealdah.
The petitioners, Sanjay Kumar Bhuwalka and Neeraj Jain were arrested on 12.05.2018 due to their involvement in the business of generating and selling of fake tax invoices to various entities without supplying the underlying goods or services, thereby facilitating irregular availment and utilization of input tax credit by such entities to whom such fake invoices were issued.
During the investigation, it was revealed that all the above fake companies were being controlled and run by a group of persons including Shri Sanjay Kumar Bhuwalka and Shri Neeraj Jain. GST evasion was carried out by creating 10-15 “dummy companies” with the same registered in Kolkata. The Company availed input tax credit through fake transactions and thus defraud the government exchequer.
Challenging the legality of the arrest, the petitioners argued that a reasonable believe has not been properly dealt with by the Additional Director rather he has simply endorsed on the Memo of Arrest with the sentence “proposal at A approved”. It was contended that the Additional Director General Goods and Service Tax Intelligence has merely exercised his authority and was completely oblivious of and irresponsible in the duty to be discharged by him.
Justifying the arrest, the department argued that Additional Director General, Directorate General of Goods and Services Tax Intelligence, has been empowered under section 69 of the Act to exercise all the powers invested in the Commissioner of Central Tax. Therefore, he was well within his jurisdiction while directing the concerned officers to arrest the said persons.
Rejecting the arguments of the petitioners on the legality of arrest, the Court observed that ‘reasonable belief’ or reason to believe as a standard to arrest requires that arresting officer subjectively believe that the suspect has committed the offence and that objectively reasonable person would reach the same conclusion. “Reasonable grounds do not require as much evidence as a prima facie case but do require that thing believed to be more likely than not.”
While granting a conditional bail to the accused persons, the Court added that “the economic offence having deep rooted conspiracy and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing a serious threat to the financial health of the country. While granting bail, the Court has to keep in mind the nature of the accusations, the nature of evidence in support thereof the severity of the punishment which conviction will entail, the character of the accused, reasonable apprehension of the witnesses being tampered with, the larger interest of the public/ State and others similar consideration are required to be taken into consideration.”
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