Economic Offences: No Embargo Under CGST Act Restraining Pre-Arrest Bail, Says Delhi High Court

The Delhi High Court has held that there is no embargo under the Central Goods and Services Act, 2017 restraining a person apprehending arrest from seeking anticipatory bail.

Justice Chandra Dhari Singh observed that though economic offences are grave in nature, the same does not mean that bail needs to be denied in every case. 

The Bench added,

"Economic offences such as tax evasion, money laundering, etc. affect the economy of the country and thus are considered grave in nature. To deter persons from indulging in such economic offences, criminal sanctions are required to be imposed. One of the most prominent criminal sanctions imposed with regard to economic offences is that of arrest. It is widely acknowledged that arrests result in deprivation of liberty of a person. Thus, while it is imperative to maintain law and order in society, the power to arrest must also always be subject to necessary safeguards."

Reliance was placed on Gurubaksh Singh Sibbia v. State of Punjab, where the Supreme Court had held that Section 438 (anticipatory bail) of CrPC is a procedural provision which is concerned with the personal liberty of the individual, who is entitled to the benefit of the presumption of innocence since he is not, on the date of his application for anticipatory bail, convicted of the offence in respect of which he seeks bail.

Background

The petitioner had approached the High Court under Section 438 of CrPC seeking anticipatory bail in a matter pertaining to allegedly availing and passing on ineligible/ fake Input Tax Credit, punishable under Section 132 of the CGST Act.

Special Public Prosecutor for the State, Harpreet Singh, opposed the application on the ground that the amount of tax evasion in the instant matter is of 72,00,00,000 and the petitioner till now has been evading investigation by avoiding summons.

It was also argued that the petitioner is involved in an economic offence of serious nature, and he is trying to influence investigation by planting fake witnesses.

Advocate GK Sarkar appearing for the petitioner argued that the allegations leveled against the petitioner are false and that the petitioner has not at all availed and utilized the input tax credit as being alleged fraudulently. In any case, offences under the CGST Act are compoundable and thus not serious in nature. "Power of arrest is an extreme provision and should be exercised with utmost care and not arbitrarily," it was submitted.

Further, since the entire evidence present in the case is based on documents, therefore, his custodial interrogation is not required. 

While countering the allegations as to non-compliance with the summons issued by the respondent, it was submitted that the petitioner could not attend the same due to his personal medical condition and the ill health of his mother.

He placed on record several documents in the petition in order to corroborate the fact of his and his mother‟s ill health the document supporting the factum of his ill health has also been supported via proper documents in the respective replies to summons. 

Findings

The maximum penalty that can be imposed for committing offences under clauses (c) and (b) of sub-section (1) of section 132 is imprisonment for a term which may extend to five years and with fine.

Section 138 of the CGST Act further dilutes the heinousness of offences under the Act. The said section makes every offence under the Act compoundable except for certain circumstances which have been specified under different clauses to the proviso of Section 138.

In this backdrop, the Court observed,

"In the present case, there cannot be any conflict with the fact that petitioner has been charged with economic offence. However, it is to be reiterated that the offence does not contemplate punishment for more than five years or commission of any serious offence along with the economic offence as it is usually the case in offences under other special statutes dealing with economic offences like Prevention of Money Laundering Act, 2003. Thus, as per the scheme of the CGST Act, though the offence is of economic nature yet the punishment prescribed cannot be ignored to determine the heinousness of the offence. To conclude, in my view the offences under the Act are not grave to an extent where the custody of the accused can be held to be sine qua non."

Reliance was placed on P. Chidambaram v. Directorate of Enforcement, where the Supreme Court had held that even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case.

Reference was also made to Nathu Singh v. State of U.P., wherein the Supreme Court called for liberal interpretation in the cases relating to grant of anticipatory bail.

The Court proceeded to observe that deciding a plea for anticipatory bail, it has to deal with two competing interests: first being to ensure that no unwarranted abuse of process is allowed to impinge upon life and liberty of the petitioner, and second to ensure that the investigation is not hampered, procedure of administration of justice is not adversely impacted and ultimately the guilty is prosecuted.

"Custodial interrogation in the instant matter is neither warranted nor provided for by the statute. Detaining the petitioner in Judicial Custody would serve no purpose rather would adversely impact the business of the petitioner," the Court observed with respect to the first aspect.

On the second aspect of fruitful investigation, the Court added,

"It is without an iota of doubt that the Petitioner needs to be more cooperative in investigation, joining the same as and when required for, by the Respondent."

Finally, keeping in view (i) the fact that the Petitioner had placed on record the material to justify his absence on issue of summons, (ii) the basic principles of criminal law jurisprudence like "innocent until proven guilty", "bail is the rule while jail is an exception"; and (iii) custodial interrogation is not provided for by the statute, the Court allowed the plea for anticipatory bail, with some stringent conditions.

Case Title: Tarun Jain v. DG, GST Intelligence

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