Nitin Verma vs State Of U.P. And Another on 5 January, 2021

Summary of Judgment: Nitin Verma vs State Of U.P.

1. Outcome

The High Court granted anticipatory bail to the applicant, Nitin Verma, for a limited period of six weeks or until the conclusion of the inquiry under Section 70 of the CGST Act, whichever is earlier. This was subject to the execution of a personal bond of ₹5,00,000 with two sureties and several conditions, including cooperation with the inquiry, not leaving the country, and depositing his passport.

2. Core Issue

The central legal question was whether a person summoned for inquiry under Section 70 of the Central Goods and Services Tax (CGST) Act, 2017, can be granted anticipatory bail under Section 438 of the Cr.P.C. due to the apprehension of arrest during the inquiry, especially before any tax liability has been formally adjudicated.

3. Key Facts

• The applicant, Nitin Verma, was issued a summons under Section 70 of the CGST Act by the Superintendent (A.E.), CGST & Central Excise, Agra.
• The department alleged that the applicant was the mastermind behind a massive GST fraud involving over 111 fake firms and bogus invoices, leading to a tax evasion of more than ₹100 crores.
• A search of the applicant's premises allegedly yielded incriminating documents.
• The applicant claimed he was ready to cooperate with the inquiry but feared he would be arrested upon appearance, as the alleged offence is cognizable and non-bailable under the CGST Act.
• He did not appear for the summons initially but did so after receiving an interim order from the court. The department alleged his statement could not be recorded due to his threatening behaviour.

4. Arguments

Applicant's Arguments (Nitin Verma):
* An inquiry under Section 70 of the CGST Act is deemed a "judicial proceeding," and he is apprehensive of being arrested upon appearance.
* The maximum punishment for the alleged offence under Section 132(1)(b) is 5 years.
* He is willing to cooperate with the inquiry and furnish reliable sureties if granted anticipatory bail.
* He cited judgments from the Punjab & Haryana High Court (Akhil Krishan Maggu) and the Gujarat High Court (Vimal Yashwantgiri Goswami), where courts have held that arrest should not be a pre-adjudication measure and have granted protection from arrest.

Department's Arguments (Opposite Party):
* The case involves a massive GST evasion of over ₹100 crores, which is a cognizable and non-bailable offence under Section 132(5) of the CGST Act.
* The applicant is the mastermind of the entire fraud, involving the creation of 111 fake firms.
* The applicant has been non-cooperative and has avoided summons. If granted bail, he may manipulate evidence.
* The power of arrest under the CGST Act can be exercised before adjudication, especially in cases of large-scale fraud.
* An application under Section 438 Cr.P.C. is not maintainable as the inquiry is a "judicial proceeding," not a "criminal proceeding."
* They cited the Allahabad High Court's judgment in Saurabh Kumar Pandey, where a prayer to prohibit arrest was denied.

5. Court’s Reasoning

• Primacy of Personal Liberty: The Court emphasized that personal liberty under Article 21 of the Constitution is a precious fundamental right and that arrest should be the last resort, not a routine measure.
• Reliance on Akhil Krishan Maggu: The Court extensively relied on the Punjab & Haryana High Court's judgment, which in turn relied on the Delhi High Court's decision in Make My Trip. The core principle adopted was that coercive measures like arrest should generally follow the adjudication of tax liability, not precede it. The power to punish under Section 132 is triggered only after it is established that an assessee has "committed" an offence, which requires a determination process.
• Exceptions to Pre-Adjudication Arrest: The Court noted that an exception could be made for habitual offenders with a history of tax evasion, penalties, and prosecutions. However, in the present case, there was no record of prior criminal antecedents or any history of the applicant being a habitual offender.
• Distinguishing Department's Precedents: The Court distinguished the Saurabh Kumar Pandey case cited by the department, noting that in that case, the petitioner had a proven record of tax evasion. It also distinguished the Telangana High Court case, as it pertained to regular bail after arrest, not anticipatory bail.
• Balancing Investigation Needs and Individual Rights: The Court concluded that granting limited protection would allow the applicant to cooperate with the inquiry without the fear of immediate arrest, thereby balancing the department's need for investigation with the applicant's fundamental right to liberty.

6. Statutory References

• Central Goods and Services Tax (CGST) Act, 2017: Sections 70, 70(1), 70(2), 132, 132(1)(b), 132(1)(i), 132(5), 174.
• Code of Criminal Procedure, 1973 (Cr.P.C.): Sections 41(A), 438.
• Indian Penal Code, 1860 (IPC): Sections 193, 228.
• Code of Civil Procedure, 1908.
• Finance Act, 1994: Sections 89, 89(1)(ii), 90, 91.
• Central Excise Act, 1944: Section 14.
• Constitution of India: Article 21.

7. Precedents Cited

• Akhil Krishan Maggu & Anr. vs. Deputy Director, Directorate General of GST Intelligence & Ors. (Punjab & Haryana High Court)
• Vimal Yashwantgiri Goswami vs. State of Gujarat (Gujarat High Court)
• D.K. Basu vs. State of West Bengal (Supreme Court)
• Make My Trip vs. Union of India (Delhi High Court)
• Jayachandran Alloys (P) Ltd. vs. Superintendent of GST & C. Ex., Salem (Madras High Court)
• C. Pradeep vs. The Commissioner of GST and Central Excise, Salem & Anr. (Supreme Court)
• Saurabh Kumar Pandey vs. State of U.P. and 3 Ors. (Allahabad High Court)
• High Court of Telangana, Hyderabad, in Criminal Petition No. 5967 of 2020.
• Joginder Kumar's case (Supreme Court)