Tarun Jain vs Directorate General Of Gst ... on 26 November, 2021

1. Outcome

The Delhi High Court allowed the petitioner's application for anticipatory bail under Section 438 of the CrPC. In the event of arrest, the petitioner is to be released on bail upon furnishing a personal bond of ₹5,00,000 with two solvent sureties of the like amount, subject to stringent conditions, including surrendering his passport, cooperating with the investigation, and not leaving the country without permission.

2. Core Issue

The central issue before the court was whether to grant anticipatory bail to the petitioner, accused of fraudulently availing and passing on ineligible Input Tax Credit (ITC) of a significant amount (₹72 Crores), an offence under Section 132 of the CGST Act, 2017. The court had to balance the petitioner's fundamental right to liberty against the State's interest in conducting a thorough investigation into a grave economic offence, especially considering the petitioner's repeated non-appearance before the investigating authorities.

3. Key Facts

• Petitioner: Tarun Jain, a director in M/S Jetibai Grandsons Services India Pvt. Ltd.
• Allegation: The Directorate General of GST Intelligence (DGGI) alleged that the petitioner's company was part of a network that fraudulently availed and passed on ineligible ITC amounting to ₹72 Crores between November 2020 and March 2021.
• Modus Operandi: The petitioner's company allegedly made purchases from three firms which, in turn, received goods from various other firms that were found to be non-existent and had no inward supplies.
• Non-Cooperation: The petitioner was issued multiple summons by the DGGI between July and September 2021. He failed to appear on most occasions, citing his mother's illness, his own medical condition, and later, an apprehension of arrest.
• Prior Rejection: An earlier anticipatory bail application filed by the petitioner was rejected by the Additional Sessions Judge, Patiala House Court, on 9th October 2021, who noted that the investigation was at a nascent stage and the petitioner's role seemed apparent.
• Current Application: Aggrieved by the Sessions Court's order, the petitioner approached the Delhi High Court seeking anticipatory bail.

4. Arguments

Petitioner's Arguments (Dr. G. K. Sarkar):
* The allegations of fraudulent ITC availment are false and frivolous.
* The petitioner has clean antecedents, deep roots in society, and is not a flight risk.
* Non-appearance before the DGGI was due to genuine medical reasons and a reasonable apprehension of arrest, as others associated with the case had been arrested.
* The entire case is based on documentary evidence, making custodial interrogation unnecessary.
* Offences under the CGST Act are compoundable (Section 138) and the maximum punishment is five years, indicating they are not heinous in nature.
* A co-accused in a related matter has already been granted bail.
* The petitioner undertook to cooperate with the investigation and abide by any conditions imposed by the court.

Respondent's Arguments (Mr. Harpreet Singh for DGGI):
* The case involves a massive tax evasion of ₹72 Crores, a serious economic offence.
* The petitioner deliberately evaded the investigation by not complying with seven summons, which demonstrates his non-cooperative conduct.
* Custodial interrogation is imperative to unearth the larger conspiracy, including potential aspects of money laundering, hawala, and circular trading.
* Finalization of a tax assessment is not a prerequisite for arrest under Section 69 of the CGST Act.
* Granting bail would set a wrong precedent and hamper the investigation.

5. Court’s Reasoning

The Court conducted a detailed analysis of the statutory framework and legal principles governing bail.
* Nature of Offence: The Court acknowledged that economic offences are grave. However, it reasoned that the gravity must be assessed in the context of the punishment prescribed. Under Section 132 of the CGST Act, the maximum punishment for the alleged offence is five years. This, coupled with the fact that the offence is compoundable under Section 138, dilutes its overall heinousness. The Court concluded that the offence is not so grave as to make pre-trial custody a sine qua non.
* Bail Jurisprudence: The Court strongly reiterated the fundamental principle of "bail, not jail" and the presumption of innocence. It emphasized that the power to grant anticipatory bail emanates from the right to life and personal liberty under Article 21 of the Constitution and should be interpreted liberally.
* Custodial Interrogation: The Court found that custodial interrogation was not warranted in this case. It noted that the investigation is primarily based on documents, and detaining the petitioner would serve no useful purpose and would adversely affect his business and livelihood (a facet of Article 21).
* Balancing of Interests: The Court sought to balance the petitioner's liberty with the need for a fair investigation. It observed that the petitioner's apprehension of arrest, which led to his non-cooperation, could be alleviated by granting bail. This would, in turn, encourage him to cooperate with the authorities.
* Prior Conduct: While taking note of the petitioner's previous non-compliance with summons, the Court decided that this could be addressed by imposing stringent bail conditions rather than by denying bail outright.

6. Statutory References

• Criminal Procedure Code, 1973 (CrPC): Section 438 (Anticipatory Bail), Section 437(3), Section 482.
• Central Goods and Services Act, 2017 (CGST Act):
  • Section 69: Power to Arrest.
  • Section 70: Power to summon persons.
  • Section 132: Punishment for certain offences, particularly subsections 1(b), 1(c), and 5 (making certain offences cognizable and non-bailable).
  • Section 135: Presumption of culpable mental state.
  • Section 138: Compounding of offences.
• Constitution of India: Article 21 (Right to Life and Personal Liberty), Article 226.

7. Precedents Cited

• P. Chidambaram v. Directorate of Enforcement (2020) 13 SCC 791: Relied upon by the Court to hold that even in grave economic offences, bail is not an absolute rule to be denied in every case.
• Sushila Aggarwal v. State (NCT of Delhi) (2020) 5 SCC 1: Cited for the principles and factors to be considered by courts while deciding anticipatory bail applications.
• Arnab Manoranjan Goswami v. State of Maharashtra (2021) 2 SCC 427: Emphasized for reiterating the "bail, not jail" principle.
• Gurubaksh Singh Sibbia v. State of Punjab (1980) 2 SCC 565: The foundational Constitution Bench judgment on the liberal interpretation and scope of anticipatory bail.
• Shravan. A Mehra v. Superintendent of Central Tax (Manu/KA/0875/2019): Noted by the Court as a case that squarely applied, where bail was granted in a similar GST matter because the punishment did not exceed five years.
• Sapna Jain v. Union of India (2020 SCC Online 13064) & Union of India v. Sapna Jain (2021) 2 SCC 782: Cited to highlight that the legal question regarding bail under the CGST Act is still pending before a larger bench of the Supreme Court, making the issue unsettled.
• P.V. Ramana Reddy v. Union of India (2019 SCC Online TS 3332): Distinguished by the Court as it arose from a writ petition under Article 226, which has different considerations than a bail application under Section 438 CrPC.