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IN THE HIGH COURT OF BOMBAY AT AURANGABAD
T.V. NALAWADE, M.G. SEWLIKAR, JJ.
Tejas Pravin Dugad and Others – Petitioners
Versus
Union of India, through the Ministry of Finance, Department of Revenue – Respondent
Criminal Writ Petition Nos. 1715, 1716, 1717, 1718 of 2020
Decided On : 15-01-2021
GST Laws - Central Goods and Services Tax Act, 2017 - Sections 132, 154, 157, 172, 135, 136, 67, 69, 132, 134, 138 - The court discussed the provisions of the Central Goods and Services Tax Act, 2017, including the power of arrest, search and seizure, and the procedure for investigation and prosecution. The court emphasized the special nature of the Act and its provisions, highlighting that the special provisions prevail over the provisions of the Code of Criminal Procedure. The court also considered the presumption of culpable mental state, the power of officers to effect arrest, and the compounding of offences under the Act.
Fact of the Case:
The petitioners, directors of a company registered under the Central Goods and Services Tax Act, 2017, challenged the initiation of illegal proceedings against them by the GST department. The department alleged fraudulent activities involving fake invoices and wrongful availment of input tax credit by the company.
Finding of the Court:
The court dismissed all the petitions, holding that the allegations made out a prima facie case of fraud against the petitioners. The court emphasized that both adjudication and prosecution can be started simultaneously under the Act, and the special provisions of the Act prevail over the provisions of the Code of Criminal Procedure. The court also imposed costs on the petitioners for defending the matters.
Issues: The issues involved the challenge to the legality of the proceedings initiated by the GST department against the petitioners, the applicability of the Code of Criminal Procedure in the investigation and prosecution under the Act, and the timing of filing the petitions before the court.
Ratio Decidendi: The court held that the special provisions of the Central Goods and Services Tax Act, 2017 prevail over the provisions of the Code of Criminal Procedure, emphasizing that both adjudication and prosecution can be started simultaneously. The court also emphasized the seriousness of white-collar offences and the need to prevent interference with the investigation.
Final Decision: All the petitions were dismissed, and the petitioners were directed to deposit costs of Rs. 25,000 in each petition within four weeks.
JUDGMENT :
T.V. NALAWADE, J.
1. All the proceedings are filed for the following reliefs:
(b) pending hearing and final disposal of the present Criminal Writ Petition, the alleged illegal proceedings which are initiated against the Petitioner by the Respondents may kindly be stayed.
(c) Ad-Interim and Interim stay pending the final disposal of this Petition, the Respondents may be restrained from taking any coercive steps of interfering with the liberty of the Petitioner in any manner.”
2. Heard both the sides.
3. The Petitioners are directors of M/s. Ganraj Ispat Private Limited company and the company is registered under the provisions of the Central Goods and Services Tax Act, 2017 (GST Laws) (hereinafter referred as “the Act”). It has registered office at Supa, District Nagar, Maharashtra. One Tushar Munot, sole proprietor of M/s. Rutu Enterprises was arrested by the Respondents, officers of GST intelligence in the month of October 2020. In the month of November 2020, search of the premises of the company of Petitioners was conducted and some documents came to be seized. It is the contention of the Petitioners that as there was allegations of commission of offence under Section 132 of the Act and it was informed to them that there was GST liabilities of Rs. 84,00,046/- (Rupees Eighty-Four Lakh and Forty-Six Only), the Petitioner deposited this amount with Respondent No. 2, but under protest. It is the contentions of the Petitioners that they want to contest the liability levied against them.
4. In the petitions, it is mentioned that the Petitioners want to challenge the prosecution as it is on wrong conceptions and as the provisions of Sections 154, 157 and 172 of the Code of Criminal Procedure are not followed by the Respondents. It is the contentions of the Petitioners that all the provisions of the Code of Criminal Procedure need to be applied for registration of crime, investigation and for taking cognizance of the offence and as the procedure is not followed, action taken against them is illegal.
5. As against the aforesaid contentions of the Petitioners, the Respondent department has contended that no summons as such is issued against the Petitioners and the petitions are based on misconceptions. It is contended that the department is following the procedure given under the Act and the officers are acting as per the powers vested in them by the Act. It is the contentions of the Respondent that the investigation into the business of M/s Rutu Enterprises revealed that fake invoices without receipt or supply of goods or services were prepared for availing input tax credit and that is the fraud played by M/s. Rutu Enterprises. It is contended that many invoices were issued to M/s. Ganraj Ispat Private Limited, company of the Petitioners involving the amount of Rs. 5,50,66,962/- for which GST of Rs. 84,00,046/- is recoverable. It is contended that after gathering such information, search was taken of the premises of M/s. Ganraj Ispat Private Limited on 24th November, 2020 and the documents collected revealed that there were such fake invoices issued by M/s. Rutu Enterprises to M/s. Ganraj Ispat Private Limited. It is contended that statement of Shri Tushar Munot was confronted to the Petitioners and the statement of Gaurav Dugad, a director of M/s. Ganraj Ispat Private Limited came to be recorded on 24th November, 2020 under Section 70 of the Act (Petitioner of Criminal Writ Petition No. 1716 of 2020). It is contended that this Petitioner agreed to reverse the inadmissible ITC availed by them on the invoices issued by M/s. Rutu Enterprises and then the amount of Rs. 84,00,046/- was deposited voluntarily by filling Form DRC-03 under the Act. It is contended that on 7th December, 2020, another director K
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