The main legal point established is the importance of procedural compliance in arrest procedures and the need for substantiated allegations in cases of wrongful input tax credit availing.

ORDER :

1. This application has been filed under section 439 of the Code of Criminal Procedure for regular bail in connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/Varun Bansal/2022-23/B.61, dated 28.07.2022 issued under section 69(1) read with section 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017 (for short ‘GST Act’) and Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).

2. The present applicant is the erstwhile director of the company namely Active Metals Pvt. Ltd. till October, 2019, who subsequently by resolution dated 15.11.2021, was appointed as an authorized representative to look into the matters of CGST/SGST of the company.

2.1 It is stated that, under section 67(2) of the CGST and GST Act, a search was conducted on 20.06.2022 at the company and residential premises of the Directors, and on 22.07.2022, a letter along with order was issued under section 83 of the Act for provisional attachment of the plant, machinery, vehicles and stock of the company on the ground that input tax credit was availed by the company by showing fake purchases from bogus/suspicious entities.

2.2 The search was conducted during the period from 20.07.2022 to 28.07.2022, and on 28.07.2022, the applicant came to be arrested by issuing arrest memorandum by the State Tax Officer, Enforcement Division, Rajkot, for the offence punishable under section 132(1)(c) of the CGST and GST Act, alleging that input tax credit of Rs.10.71 crores in respect of fictitious transactions amounting to Rs.59.55 crores was availed by him.

3. Ms. Megha Jani along with Mr. Dilip T.Mamtora and Mr. Meet D.Pansuria, learned advocates for the applicant submitted that, the allegations against the present applicant are of entering fake invoices into the data provided to the department; however, the alleged invoices provides transportation detail whereby the goods were supplied and delivered to the accused purchaser. Ms. Jani states that the entire case of the department is based on documentary evidence, which have been either uploaded by the applicant or seized by the department.

3.1 Ms. Jani submits that while arresting the applicant, the mandatory procedure of section 69 of the CGST Act, 2017 has not been followed, which envisages that if the commissioner has reasons to believe that a person committed offence under clause (a) to (d) of section 132(1), he shall by order authorized any officer of central tax to arrest such person; however, in the case of the applicant, such authorization of the Commissioner has not been made available to the applicant and thus, the entire exercise carried out is in blatant violation of the procedure contemplated in section 69 of the CGST Act, 2017.

3.2 Ms. Jani further submits that the allegation of availing wrongful input tax credit is without any basis and contrary to the evidence; thus, states that the documentary evidence for the purchase of goods including transportation details had been provided by the applicant, which itself suggests that there was a movement of goods and therefore section 132(1)(c) is not applicable in the present case. It is stated by Ms. Jani that the goods were purchased from the entities mentioned in the arrest memorandum against payments made through RTGS, which was admitted by the department in part-3 of the remand application dated 06.08.2022, which was not taken into consideration.

3.3 Ms. Jani stated that transactions with 10 firms, whose registrations were cancelled by the department, was based on some intelligence and system analysis and as shown in the arrest memo, the purchase shown by the company from 10 firms, were before the order of cancellation of registration and thus, she submits that section 132(1)(c) would not be applicable.

3.4 Ms. Jani submitted that 138 transactions, which is alleged by the department, are against regular bills, purchase number with party name, date of E-way bill number, bill amount, CGST taxable amount, truck number, lorry number and the transport compa