Court grants bail to accused in GST fraud case involving fake firms and fraudulent input tax credit claims.

Key Takeaways:

1. The court highlighted the principle that bail is the rule, and jail is the exception, based on the constitutional right to personal liberty under Article 21.

2. Pre-trial detention should not be used as a form of punishment or to change the accused's behavior.

3. The court relied on the Supreme Court's judgments in Sanjay Chandra vs. Central Bureau of Investigation and Gurucharan Singh and others v. State, which emphasized the presumption of innocence and the need for reasonable bail.

4. The court also considered the accused's age, medical condition, and family circumstances as factors in granting bail.

Issue:

Whether Sudhir Gulati, accused of being involved in a GST fraud case involving fake firms and fraudulent input tax credit claims, should be granted bail.

Facts:

Sudhir Gulati, aged about 62 years, was arrested on 21.09.2020 by the Directorate General of GST Intelligence (DGGI) in connection with an alleged GST fraud case. The DGGI alleged that Gulati's company, M/s Anmol Tradex Pvt. Ltd., was involved in fraudulent availment of Input Tax Credit (ITC) worth around Rs. 29 crores, out of which Rs. 25.01 crores was availed from companies owned or controlled by Rakesh Kumar Goyal, who was engaged in circular trading. Gulati's company allegedly utilized this fraudulently availed ITC for payment of IGST on export of goods.

Arguments:

1. Defense: Gulati had joined the investigation on the first summons and had been in custody for over a month. The trial was likely to take a long time, and Gulati was aged 62, had undergone heart bypass surgery, and his wife was suffering from cancer. The evidence was documentary, and there was no risk of tampering. Gulati had deep roots in society and would abide by any conditions imposed by the court.

2. Prosecution: Gulati was the mastermind of the alleged fraud and had played an active role in the evasion of taxes worth Rs. 26 crores. He was not cooperating with the investigation and giving evasive replies. There was a risk of him fleeing or influencing witnesses if granted bail.

Key Legal Precedents:

1. Sanjay Chandra vs. Central Bureau of Investigation: The Supreme Court held that the object of bail is neither punitive nor preventative, and deprivation of liberty before conviction has a substantial punitive content.

2. Gurucharan Singh and others v. State (AIR 1978 SC 179): The Supreme Court held that there is no hard and fast rule governing the exercise of discretion in granting bail, and the facts and circumstances of each case must be considered.

Judgment:

The court granted regular bail to Sudhir Gulati, subject to his furnishing a bail bond of Rs. 1 lakh with one surety of like amount. The court found that Gulati's continued detention was not necessary, as he had already been in custody for over a month, and the trial was likely to take a long time to conclude. The court emphasized the importance of personal liberty and the presumption of innocence, relying on the Supreme Court's judgments in Sanjay Chandra vs. Central Bureau of Investigation and Gurucharan Singh and others v. State. The court also considered Gulati's age, medical condition, and family circumstances as factors in granting bail.

FAQs:

Q1. What was the significance of the court's decision?

A1. The court's decision highlighted the importance of personal liberty and the presumption of innocence, emphasizing that pre-trial detention should not be used as a form of punishment or to change the accused's behavior.

Q2. What legal principles did the court rely on?

A2. The court relied on the principles laid down by the Supreme Court in Sanjay Chandra vs. Central Bureau of Investigation and Gurucharan Singh and others v. State, which emphasized the presumption of innocence and the need for reasonable bail.

Q3. What conditions were imposed on Gulati while granting bail?

A3. Gulati was directed to furnish a bail bond of Rs. 1 lakh with one surety of like amount. He was also warned not to leave the country without the court's permission or attempt to dissuade or influence any witness or tamper with evidence.

Q4. What was the court's reasoning for granting bail?

A4. The court found that Gulati had already been in custody for over a month, and the trial was likely to take a long time to conclude. The court also considered Gulati's age, medical condition, and family circumstances as factors in granting bail, emphasizing the importance of personal liberty and the presumption of innocence.

Anant Nigam and Sh. Harsh Sethi for the Petitioner Mukul Choudhary and Ashish Gupta for the Respondent Proceedings conducted thru video conferencing on Cisco Webex.

It is certified that the connection during hearing through Cisco Webex was uninterrupted and the voice and video was clear and the Ld. APP for the State and L d. Counsel for the parties appearing through V/C did not raise any objection r ardin the quality of V/C.

1. An application under section 437 CrPC for grant of bail has been moved on behalf of accused/applicant Sudhir Gulati. Reply and additional submission filed on behalf of DGGI are on record.

2. Counsel for the applicant submits that accused is aged about 62 years and had undergone heart bypass surgery as far as back in 2001 and is also suffering from diabetes and high blood pressure. He further submits that and as per test undertaken on 15.06.2020, the applicant’s HblAc is 9.3% which is considered as very high, considering that the normal level is 6.6% and all these medical conditions make the applicant more susceptible to Covid-19 virus. Ld counsel submits that wife of accused has been diagnosed with cancer and is under treatment and since both the daughters of the applicant are married he is the only person to look after his wife. Ld. counsel for accused further submits that co-accused Vikas Choudhary and Vikas Chandan who were earlier arrested on 07.03.2020 are enlarged on regular bail vide order dated 23.03.2020 passed by the Ld. Predecessor of this court. He further submits that the allegations against the co-accused persons were of alleged evasion of Rs.61.02 Crore and on the other hand the allegation evasion against the applicant in the present cares are to the tune of Rs. 26 Crores only. He further submits that ingredients of Section 69 (Power of Arrest) of the CGST Act, 2017 have not been met by the department and the applicant is entitled to be forthwith released on bail. It is further submitted that the applicant has been languishing in custody since 21.09.2020 and has been interrogated by the officers of DGGI and in case there was any immediate investigation required to be conducted, the applicant would have been interrogated/ investigated multiple time by now. He also pointed out that the entire evidence in the present case is based on documents and further, the applicant undertakes to join investigation as and when directed. He further submits that the department in its JC application dated 21.09.2020 at Para 22 stating that Mr. Sudhir Gulati/Applicant is a flight risks wholly misconceived as it is the admitted case of the department that till date no non bailable warrants have been obtained by the department against the applicant nor any “Look Out Circular” (LOC) has been opened by the department. He also submits that despite accused being aware about the investigation by DGGI since 06.03.2020 he has neither absconded nor avoided the investigation and joined the same on the very first summons issued by he officers of the DGGI. He submits that therefore, the stand of the department that the applicant has not cooperated in investigation and/or that he is flight risk is totally misconceived. He further submitted that the applicant undertakes not to temper with any evidence or influence any witness connected to present proceedings. The applicant has deep root in the society and undertakes to abide by all such conditions that may be imposed by this court. He also pointed out despite the allegations of fraudulent availment of ITC, no investigation has been initiated by customs department and accused through his company has done valid exports and claimed due ITC. He also submits that the alleged kingpin of the circular trading Rakesh Kumar Goyal has already been arrested by DGGI. He prays for grant of bail

3. In reply, it is stated by the Ld. Sr. SPP for the department that an intelligence developed by the officers of DGGI that M/s Anmol Tradex Pvt. Ltd. is engaged in fraudulent availment of Input Tax Credit (ITC) on the invoices of such firms which apparently do not have any purchases themselves and utilizing this fraudulently availed ITC for payment of IGST on export of goods (also termed as zero rated supply under IGST Act, 2017). He further submits that M/s Anmol Tradex Pvt. Ltd. has availed ITC of around Rs. 29 Crore, out of which Rs.25.01 Crore was availed from the companies owned or controlled by Rakesh Kumar Goyal, which were engaged in circular trading, and which were passed fraudulent ITC to various other companies also including companies owned or controlled by one Vikas Chowdhary also, in which Vikas Chowdhary and one of his accomplice were arrested on 07.03.2020. He further submits that the companies owned and controlled by Rakesh Kumar Goyal, have availed most of the amount of ITC from companies owned or controlled by said Rakesh Kumar Goyal, himself.

4. Ld Sr, SPP further submits that M/s Anmol Tradex Pvt. Ltd. had availed ITC from M/s Compact Logistic Private Limited, Village Jitwal Khurd, Kup Kalan, Tehsil-Malerkotla, Punjab-148019 (a company of Rakesh Kumar Goyal), M/s Compact Logistic Private Limited had taken ITC on the bills of M/s Kwality Overseas Private Limited, 863, Industrial Area-A, Ludhiana, Punjab-141003 (a company of Rakesh Kumar Goyal). This M/s Kwality Overseas Private Limited, 863, Industrial Area-A, Ludhiana, Punjab-141003 had availed ITC on the bills of M/s Cannon Industries Private Limited (a company of Rakesh Kumar Goyal) and ITC on the of bills of M/s Candex Filament Pvt. Ltd., Industrial Area, Raja Ka Bagh, Nurpur, Himachal Pradesh- 176201 (a company of Rakesh Kumar Goyal). M/s Cannon Industries Private Limited, 851, Industrial Area- A, Ludhiana, Punjab-141003 had taken ITC from M/s Opes Chem Corp Private Limited, HB No.211, Village Katha, Tehsil Baddi, Himachal Pradesh- 174103 (a company of Rakesh Kumar Goyal). M/s Opes Chem Corp Pvt. Ltd., Baddi took ITC from M/s Candex Filament Pvt. Ltd. Nurpur (again a company of Rakesh Kumar Goyal). Further, M/s Opes, Baddi has passed on ITC to M/s SVC Textiles Pvt. Ltd. (another company of Rakesh Kuamr Goyal), which passed on ITC to M/s Anmol Tradex Pvt. Ltd. Ld. Sr. SPP pointed that the ITC was passed on from one company of Rakesh Kumar Goyal to his another company and finally to Anmol Tradex Pvt. Ltd., i.e company of Sudhir Gulati.

5. Ld. Sr. SPP further submits that summons was issued to accused for his presence on 21.09.2020 at 10 AM in the office of DGGI but appeared only at 3.00 PM, instead on 10 AM. His statement was recorded on 21.09.2020, in which he was confronted with various data and documents related to enquiry and since he evaded the replies in respect of questions put to him, and even refused to see the documents being shown to him Further, he failed to explain the reason as to how export of goods were shown in the records, without corresponding purchase of goods or the goods were shown to be purchased on a date after the date when exports were made. Sudhir Gulati in his statement dated 21.09.2020 stated that the control and day to day management of M/s Anmol Tradex Pvt. Ltd. lies with him only.

6. Ld. SPP for the department further submits that the case requires further investigation which includes the enquiry from various stakeholders and recovery of documents/ evidences. Sudhir Gulati, was not cooperating with the investigation, giving evasive replies and lying before the officers. It also appears that he in connivance with Rakesh Kumar Goyal planned the entire fraud in which not only fake ITC was availed and utlised for payment of IGST on export of goods, when there is an option for export of goods without IGST, but also took refund of IGST paid on exports, which was otherwise not admissible to them. He submits that Sudhir Gulati has masterminded and played active role in the evasion of taxes and he is the main beneficiary of entire evasion of GST. The amount of GRT evasion in this case is quantified to the tune of Rs.26 Crore. No recent medical record has been submitted, which suggest normal health condition of the Applicant. As regards health condition of wife of the Applicant, various test reports have been submitted (Annexure-2 of the bail application), but no certificate of her health condition from the Hospital or Doctor is submitted and thus, the same cannot be relied upon.

7. Heard. Perused.

8. The object of pre trial detention of an accused is threefold. Firstly, accused could be detained in custody if some recovery of weapon/equipments/ documents used in the alleged crime are to be recovered and there is apprehension if released on bail, accused may hamper the investigation and recovery thereof. The other consideration is that some co-accused are to be arrested who are absconding and if accused is allowed to be released on bail, he may forewarn them. Another object is that accused has previous criminal antecedents and he/she is a habitual offender which increases chances of committing similar offences which endangers life and property of the public at large.

9. In economic offences the abject of keeping an accused in pre trial detention is to ensure that the accused has no opportunity to tamper with the documentary/ electronic evidence which may reveal the commission of any offence. Furthermore, it can be done to track the money trail which might be disturbed by the accused, if released on bail. The accused also be kept in pre trial detention if there is likelihood that he has the opportunity and wherewithal to influence and won over the witnesses of the crime by allurement or threat and commit similar crime again. Furthermore, the object of enactment of CGST Act is simpler tax system, reduction in prices of goods and services due to cascading effect of taxes, more efficient neutralization of taxes and simpler tax regime with development of common national market.

10. The personal liberty is a priceless treasure for a human being. It is founded on the bed rock of constitutional right and accentuated further on human rights principle. The sanctity of liberty is the fulcrum of any civilized society. Deprivation of liberty of a person has enormous impact on his mind as well as body. Further, article 21 Of the Constitution mandates that no person shall be deprived of his life or personal liberty except according to procedure established by law, Further India is a signatory to the International Covenant On Civil And Political Rights, 1966 and, therefore, Article 21 of the Constitution has to be understood in the light of the International Covenant On Civil And Political Rights, 1966. Further Presumption of innocence is a human right. Article 21 in view of its expansive meaning not only protects life and liberty, but also envisages a fair procedure. Liberty of a person should not ordinarily be interfered with unless there exist cogent grounds therefor. The fundamental principle of our system of justice is that a person should not be deprived of his liberty except for a distinct breach of law. If there is no substantial risk of the accused fleeing the course of justice, there is no reason why he should be imprisoned during the period of his trial. The basic rule is to release him on bail unless there are circumstances suggesting the possibility of his fleeing from justice or thwarting the course of justice. When bail is refused, it is a restriction on personal liberty of the individual guaranteed by Article 21 of the Constitution.

11. Further it has been laid down from the earliest time that the object of Bail is to secure the appearance of the accused person at his trial by reasonable amount of Bail. The object of Bail is neither punitive nor preventive. Deprivation of liberty must be considered a punishment unless it can be required to ensure that an accused person will stand his trial when called upon. The courts owe more than verbal respect to the principle that punishment begins after convictions, and that every man is deemed to be innocent until duly tried and duly found guilty. From the earlier times, it was appreciated that detention in custody pending completion of trial could be a cause of great hardship. From time to necessity demands that accused persons should be held in custody pending trial to secure their attendance at the trial, but in such case ‘necessity is the operative test. In this country, it would be quite contrary to the concept of personal liberty enshrined in the constitution that any persons should be punished in respect of any matter, upon which, he has not been convicted or that in any circumstances, he should be deprived of his liberty under Article 21 of the Constitution upon only the belief that he will tamper with the witnesses if left at liberty, save in the most extraordinary circumstances. Apart from the question of prevention being the object of a refusal of bail, one must not lose sight of the fact that any imprisonment before conviction has a substantial punitive content and it would be improper for any court to refuse bail as mark of disapproval of former conduct whether the accused has been convicted for it or not or to refuse bail to an accused person for the purpose of giving him a taste of imprisonment as a lesson. While considering an application for bail either under Section 437 Cr PC, it must be kept in mind that the principle that grant of bail is the rule and committal to jail an exception. Refusal of bail is a restriction on personal liberty of the individual guaranteed by Article 21 of the Constitution. Seriousness of the offence not to be treated as the only consideration in refusing bail : Seriousness of the offence should not to be treated as the only ground for refusal of bail. (Judgment of Sanjay Chandra Vs. Central Bureau of Investigation, AIR 2012 SC 830 relied).

12. But, the liberty of an individual is not absolute. The Society by its collective wisdom through process of law can withdraw the liberty that it has sanctioned to an individual when an individual becomes a danger to the societal order. A society expects responsibility and accountability from the member, and it desires that the citizens should obey the law, respecting it as a cherished social norm. Therefore, when an individual behaves in a disharmonious manner ushering in disorderly thing which the society disapproves, the legal consequences are bound to follow.

13. It can be noted that interpreting the provisions of bail, the Hon’ble Supreme Court in its various judgments has laid down various considerations for grant or refusal of bail to an accused in a non-bailable offence like:

• Whether there as any prima facie or reasonable ground to believe that

• the accused had committed the offence;

• Nature of accusation and evidence therefor,

• Gravity of the offence and punishment which the conviction will entail,

• Reasonable possibility of securing presence of the accused at trial and danger of his absconding or fleeing if released on bail,

• Character and behavior of the accused,

• Means, position and standing of the accused in the Society,

• Likelihood of the offence being repeated,

• Reasonable apprehension of the witnesses being tampered with,

• Danger, of course, of justice being thwarted by grant of bail,

• Balance between the rights of the accused and the larger interest of the Society/State,

• Any other factor relevant and peculiar to the accused.

1. While a vague allegation that the accused may tamper with the evidence or witnesses may not be a ground to refuse bail, but if the accused is of such character that his mere presence at large would intimidate the witnesses or if there is material to show that he will use his liberty to subvert justice or tamper with the evidence, then bail will be refused.

2. Furthermore, in the landmark judgment of Gurucharan Singh and others v. State (AIR 1978 SC 179), it was held that there is no hard and fast rule and no inflexible principle governing the exercise of such discretion by the courts. It was further held that there cannot be any inexorable formula in the matter of granting bail. It was further held that facts and circumstances of each case will govern the exercise of judicial discretion in granting or refusing bail. It was further held that such question depends upon a variety of circumstances, cumulative effect of which must enter into the judicial verdict. Such judgment itself mentioned the nature and seriousness of nature, and circumstances in which offences are committed apart from character of evidence as some of the relevant factors in deciding whether to grant bail or not.

3. It is now well settled by a catena of decisions of the Supreme Court that the power to grant bail is not to be exercised as if the punishment before trial is being imposed. The only material considerations in such a situation are whether the accused would be readily available for his trial and whether he is likely to abuse the discretion granted in his favour by tampering with evidences. If there is no prima facie case there s no question of considering other circumstances.

4. In the criminal jurisprudence prevailing in all common law countries, every person is presumed to be innocent until proved to the contrary. The consequence that logically follows is that an accused ought not to be detained or imprisoned, that the personal liberty even of an accused should not be interfered with, until he is convicted by due process of law. Several offences are notified as being bailable and even in the remainder, that is non-bailable offences, the accused can be enlarged on bail by orders of the Court. Bail is the rule; Jail is the exception. This is what Sections 437/439 of the Cr.PC in terms postulate, viz. that when any person accused of or suspected of the commission of any non-bailable offence is arrested or detained he may be released on bail. However, an exception has simultaneously been prescribed, namely, that such a person shall not be so released unless it appears to the Court, on reasonable grounds, that he has been guilty of an offence punishable with death or imprisonment for life.

5. The presumption of the innocence of an accused can easily be defeated if the investigation is not constrained by time, is open-ended and protracted. It is for this reason that the legislature has wisely provided that the investigation of an accused should reach its culmination by the filing of a Chargesheet/complaint within sixty days, or ninety days where the investigation relates to an offence punishable with death, imprisonment for life or imprisonment for a term of not less than ten years.

6. The factum of bail order and consequent challenge of such order of other accused Vikas Chaudhary and Vikas Chandan has not been disputed by either parties. Each application is to be decided on its own merits and bail of co-accused simpliciter doesn’t entitle another person to seek bail. However, it is not disputed that till date bail of those two accused is not cancelled by Hon’ble High Court of Delhi.

7. As per record, the accused was arrested on 21.09.2020 when he appeared before the officers of DGGI pursuant to the summons issued. Thereafter, he was examined by the investigation officers in judicial custody after seeking prior permission from this Court. However despite claiming that accused remained non-cooperative during such examination, neither any report has been filed nor the proceedings conducted in jail are produced before this Court. It is also need that invariably it has been stand of the Officers of DGGI that accused remained non-cooperative and gave evasive replies during inquiry/investigation, but no videography of such non-cooperation or evasive replies is done to enable this Court to see merit in such contentions as the stand of the accused always remain that they fully cooperated in the inquiry/ investigation and officers of DGGI attempts illegal confessions from the accused. Hence, the piece of evidence cited by the investigating agency i.e the statement of accused recorded u/s 70 CGST Act which has been duly retracted by the accused cannot be the sole basis to deny bail to an accused.

8. The accused is aged about 62 years as said factum has not been disputed. Even previous history of accused being operated for heart bypass surgery has also not disputed. However, Ld. Sr. SPP has objected such medical condition of accused and his wife on the ground that no recent prescription/treatment papers has been filed along with the bail application. It is common knowledge that when a person once undergone heart bypass surgery he/she is required to take precautions for the remainder of their life and remain on medications. Whether, accused has suffered any recent complications is immaterial as such person still grouped as vulnerable for suffering heart diseases as new arteries may get clogged and accused being aged 62 years is also susceptible to contracting covid-19 infection. The wife of accused being suffering from cancer is also not disputed and again it is noted that cancer patients apart from medical interventions requires psychological to fight such deadly disease. DGGI has failed to point out whether wife of accused is having support of any family member as both daughters of accused are married.

9. The accused has already remained in judicial custody for 28 days since 21.09.2020. No further custodial interrogation is required. Ld Sr SPP has stressed upon that the applicant/accused is the mastermind of the alleged evasion. However, it is noted that accused was previously searched on 06.03.2020 and despite lapse of more than 07 months there are no allegations that accused has attempted to flee the country to thwart the course of justice. On the contrary, it has been admitted that he joined the investigation on the very first summons issued by the DGGI even though no showcause notice has been issued to him and consequently arrested. it is noted that DGGI is yet to file a single complaint for offences under section 132 of CGST Act in Delhi. The offence u/s 132(1)(b) and (c) CGST Act entails punishment upto five years and fine. Accused is having fixed place of abobe in Delhi and also works in Delhi, No previous history of any criminal activity against him. Alf the evidences are either documentary or electronic which has been duly seized by the investigating agency. The quantum of alleged fraudulent claim by accused is yet to be adjudicated. It is also noted that no inquiry/investigation has been cited against accused Sudhir Gulati by Customs Department in respect of exports on which he has claimed ITC.

10. The judgments cited by the parties were not having any specific relevance to the present case and therefore they were not discussed separately. The controversy of insertion of sections in the remand application which were not mentioned in the arrest memo has been sufficiently explained by the Ld. Sr. SPP.

11. In view of the above discussion, I am satisfied that accused Sudhir Gulati is entitled to bail as not only he has joined the investigation at the first summons but has further been examined while in judicial custody since 21.09.2020. The investigation of DGGI will take considerable time and it is highly unlikely that complaint will be filed soon as the adjudication proceedings are yet to commence.

12. Accordingly, accused Sudhir Gulati, S/o late. Sh. Ram Narian Gulati is admitted to bail on furnishing bail bond in the sum of Rs.1 Lac with one surety of like amount subject to the conditions that he shall join the investigation/inquiry on summons/intimation issued by the investigating officer and shall not leave the country without permission of the court. Furthermore, he shall not make any attempt to either dissuade or influence any witness or temper with evidence in any manner whatsoever.

13. Copy of this order be also sent to all the parties through email/ Whatsapp.

14. Copy of this order be sent to Jail Superintendent for information and compliance.