Dananjay Singh S/O Shri Hari Sharan ... vs Union Of India on 5 February, 2022

1. Outcome

The Rajasthan High Court allowed the bail application. The petitioner, Dananjay Singh, was ordered to be released on bail, subject to furnishing a personal bond and sureties.

2. Core Issue

The central issue before the Court was whether to grant regular bail under Section 439 Cr.P.C. to the petitioner, who was accused of creating fake firms to fraudulently pass on Input Tax Credit (ITC) amounting to approximately ₹17 crores, an offence under Section 132 of the CGST Act, 2017. A key sub-issue was the petitioner's contention that he was entitled to default bail under Section 167(2) Cr.P.C. due to the filing of an allegedly incomplete complaint.

3. Key Facts

• Accused: Dananjay Singh, Director of M/s Montage Packaging Sales Pvt. Ltd.
• Allegation: The Directorate General of GST Intelligence (DGGI) alleges that the petitioner created seven "fake firms" that issued invoices worth ₹94.43 crores without any actual supply of goods.
• Fraud Amount: This activity allegedly resulted in the fraudulent passing on of Input Tax Credit (ITC) of ₹16.99 crores.
• Arrest & Custody: The petitioner was arrested on 24.10.2021.
• Complaint: A complaint (equivalent to a charge-sheet in criminal law) was filed on 22.12.2021.
• Offences: The petitioner was booked under Sections 132(1)(b), (h), and (i) of the Central Goods and Services Tax Act, 2017.

4. Arguments

A. Petitioner's Arguments (for Bail):

• Default Bail: Argued that the complaint filed was incomplete, which should entitle him to default bail under Section 167(2) Cr.P.C.
• No Tax Evasion: Claimed to have paid all applicable GST and therefore not violated Section 132.
• Firms Not Fake: Contended that the seven firms alleged to be fake are duly registered under the GST Act and cannot be termed as such.
• No ITC Availed: Stated that he had not claimed any Input Tax Credit himself.
• Procedural Lapses: Pointed out the absence of a show-cause notice before arrest and the lack of a valid sanction for prosecution.
• Other Points: Argued that the recipient firms were not made co-accused and that the conclusion of the trial would likely take a long time.

B. Respondent's Arguments (Against Bail):

• Gravity of Offence: Emphasized that this is a serious economic offence involving the creation of fake firms and fraudulent ITC of nearly ₹17 crores.
• Strict Approach: Argued that economic offences should be dealt with strictly, citing various Supreme Court pronouncements.
• Default Bail Not Applicable: Rebutted the default bail claim by stating that the investigation against the petitioner was complete, and a complaint had been duly filed. The pending investigation relates to the other fake firms.
• Non-Cooperation: Alleged that the petitioner and other associated persons were not cooperating with the ongoing investigation.

5. Court’s Reasoning

The Court's reasoning was notably brief and did not engage with the specific merits of the arguments presented by either side. The decision to grant bail was based on a general consideration of the submissions and the overall facts and circumstances.

The Court explicitly stated its decision was made "without expressing any opinion on the merits of the case." It did not provide a specific finding on the default bail claim or weigh the gravity of the offence against the petitioner's liberty in its written order.

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 132(1)(b), (h), (i) - Pertaining to offences and penalties for issuing invoices without supply, availing ITC fraudulently, and abetment.
• Code of Criminal Procedure, 1973 (Cr.P.C.):
  • Section 439 - Special powers of High Court or Court of Session regarding bail.
  • Section 167(2) - Procedure when investigation cannot be completed in twenty-four hours, containing provisions for default bail.

7. Precedents Cited

A. By the Petitioner:
* Rakesh Kumar Paul Vs. State Of Assam (2017) 15 SCC 67
* M. Ravindran Vs. Directorate of Revenue Intelligence (2021) 2 SCC 485
* Ram Kumar Vs. State Of Haryana (1987) 1 SCC 476
* And several other judgments primarily related to default bail, procedural requirements, and regular bail in economic offences.

B. By the Respondent:
* Nimmagadda Prasad Vs. CBI (2013) 7 SCC 466
* Serious Fraud Investigation Office Vs. Nittin Johari and Anr. (Criminal Appeal No.1381/2019)
* State Of Gujarat Vs. Mohanlal Jitamalji Porwal (1987) 2 SCC 364
* And a significant number of other judgments, mostly from the Rajasthan High Court and the Supreme Court, emphasizing a strict stance against granting bail in serious economic offences.