10 June 2024


High Court of Bombay

Yogesh Jagdish Kanodia Vs. The State of Maharashtra and Ors.



Goods and Services Tax

Wrong availing of input tax credit exceeding Rs. 5 crores is a cognizable and non-bailable offence

The Petitioner has approached present Court claiming that, his arrest under the provisions of the Central Goods and Services Tax Act, 2017 ("the CGST Act"), is illegal as he has been kept in custody in a bailable offence. On this basis, the Petitioner seeks a direction for his release forthwith. The question that arises for consideration is, as to whether in the peculiar facts of the present case, it could be said that under Section 69 of the CGST Act, the Commissioner had reasons to believe that a person had committed the offences specified in Section 132 thereof, thereby justifying authorization of an officer to arrest such a person.

The Petitioner was arrested and was produced before the Additional Chief Metropolitan Magistrate. Respondent No. 2 proceeded against the Petitioner on the basis that, he had committed offence under Section 132 (1) (b) (c) of the CGST Act and that since the input tax credit wrongly availed by the Petitioner exceeded Rs.500 lakh (Rs.5 crores) and the offence was punishable with imprisonment for a term, which could extend to five years and with fine under section 132 (1) (i) of the CGST Act, it was a cognizable and non-bailable offence under sub-section (5) thereof. The power to arrest the Petitioner was exercised by Respondent No.2 under Section 69 of the CGST Act.

Section 132 (1) (i) of the CGST Act specifies that in cases where the input tax credit wrongly availed exceeds Rs.5 crores, such an offence would be punishable with imprisonment which may extend to five years and with fine, the offence being cognizable and non-bailable. The material presently available on record prima facie indicates that, not only was the Petitioner alone responsible for the activities of the four firms and that the entire KYC details and other information for registration of the said four firms pertained only to the Petitioner, but the Petitioner had indulged in prima facie fake claims regarding addresses of the said four firms. This is evident from the fact that, Respondent No. 2 has affidavits in its possession during the course of investigation from landlords and owners of premises from where the said four firms were purportedly conducting business, stating that no lease deeds were ever signed by such landlords and owners, thereby indicating that such wrongful and illegal activities of claiming input tax credit were undertaken by creating fake entities stated to be carrying out business activities from fake addresses. At the present moment, the material on record prima facie indicates that, the Petitioner alone indulged in all such activities. In tax frauds, the modus operandi of creating fictitious entities to get around the rigours of law is not unknown.

The affidavit filed on behalf of Respondent No. 2 also refers to material indicating that, even the vehicles used for transport of goods as claimed by the Petitioner never actually transported such goods and surprisingly the material indicates that, such volumes of goods were transported on two wheelers. Such material available on record with Respondent No. 2, certainly prima facie, indicates that there were sufficient reasons to believe that, the Petitioner was the person who committed the offences thereby, justifying the action of authorizing an officer to arrest the Petitioner. The Petitioner has not been able to make out a case for exercising jurisdiction of present Court under Article 226 of the Constitution of India, 1950. Therefore, the prayers made in the present writ petition cannot be granted. Accordingly, the writ petition is dismissed.

Tags : Arrest Authorization Legality

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