GST Fraud Director Gets Bail: ₹138 Cr ITC Scam Case, Trial Delay Tips the Scale

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Case Name

Nileshbhai Natubhai Patel v. State of Gujarat

Court Name: High Court of Gujarat at Ahmedabad

Case No.: R/Criminal Misc. Application No. 11390 of 2022

Before: Honourable Ms. Justice Gita Gopi

Date of Order: 05th August 2022

Key Takeaways

1. Bail Granted Despite Large-Scale Fraud Allegations: Even though the alleged GST fraud was massive (₹138.71 Crores), the Court exercised its discretion to grant bail, showing that the magnitude of fraud alone is not always sufficient to deny bail indefinitely.

2. Trial Delay is a Critical Factor: The Court specifically noted that the trial would take its own time to conclude, and keeping the accused in jail for an indefinite period before the trial concludes would be unjust.

3. Maximum Punishment Matters: The offence under Section 132(1)© of the CGST/GGST Act carries a maximum imprisonment of 5 years — not life imprisonment. This was a significant factor in the bail decision.

4. Compounding of Offences is Possible: The Court noted that Section 138 of the Act allows for compounding (settling) of offences even after prosecution begins, which further supported the case for bail.

5. Arrest Powers Must Be Used Carefully: The applicant argued that powers under Section 69 of the GGST Act should not be used indiscriminately and require proper application of mind, including “reasons to believe” that an offence was committed.

6. Charge-sheet Already Filed: Since the complaint/charge-sheet was already filed on 22.04.2022, the need for continued custody for investigation purposes was reduced.

Issue

The central legal question was:

Should Nileshbhai Natubhai Patel, a Director of M/s. Madhav Copper Limited accused of fraudulently availing ITC of ₹138.71 Crores through fictitious firms, be granted regular bail under Section 439 of the Code of Criminal Procedure?

In simpler terms — does someone accused of a large GST fraud deserve to be released on bail while the trial is pending?

Facts

Who is involved?

• Applicant: Nileshbhai Natubhai Patel — Director of M/s. Madhav Copper Limited, a company engaged in manufacturing copper products (copper busbar, copper rods, enameled copper wire, etc.)
• Respondent No. 1: State of Gujarat
• Respondent No. 3: Assistant Commissioner of State Tax-4, Enforcement Division – 2 (the arresting officer)

What does the company do?

M/s. Madhav Copper Limited purchases copper scrap from various suppliers within India and abroad, and manufactures finished copper products. It had 131 suppliers in total.

What went wrong?

Out of 131 suppliers, 39 suppliers’ GST registrations were cancelled ab initio (meaning cancelled from the very beginning, as if they never existed) by the GST Department on the ground that they were fictitious/fake entities. This meant that all the ITC claimed by Madhav Copper Limited from these 39 suppliers became ineligible.

The Arrest

• The applicant was arrested on 23.02.2022 by the Assistant Commissioner of State Tax-4, Enforcement Division – 2.
• He was arrested under Section 132(1)© of the CGST Act, 2017 and Section 132(1)© of the GGST Act, 2017, using powers under Section 69 of the GGST Act, 2017.

Custody Battle

• On 24.02.2022, the Additional Chief Metropolitan Magistrate, Ahmedabad granted custody for interrogation up to 03.03.2022.
• On 03.03.2022, the respondent applied for 5 more days of custody — this was rejected.
• The respondent challenged this rejection before the City and Civil Sessions Court, Ahmedabad — that was also rejected on 08.03.2022.

Complaint Filed

• A Criminal Complaint No. 40504 of 2022 was filed against the applicant and M/s. Madhav Copper Limited for offences under Section 132(1)© of the GGST Act, 2017 and CGST Act, 2017 read with Section 120B of the Indian Penal Code (criminal conspiracy).
• The complaint/charge-sheet was filed on 22.04.2022.

The Applicant’s Business Defence

• All purchases were made from registered dealers with valid GSTINs.
• Payments were made through banking channels.
• Goods were purchased under proper Tax Invoices and E-Way Bills.
• The company filed regular GST returns.
• A show-cause notice for the period 01.07.2017 to 03.10.2019 under Section 74/122 of the GGST Act, 2017 for ₹20,86,67,524/- was received, to which a reply was filed and ₹7,71,22,360/- was deposited under protest.

Prior Bail History

• The applicant’s anticipatory bail application was dismissed by the Supreme Court on 21.09.2021 in Writ Petition (Criminal) No. 301 of 2021.
• Special Leave to Appeal No. 9541–9542 of 2021 was also dismissed on 11.02.2022.

Arguments

Applicant’s Arguments (Mr. N.D. Nanavaty, Senior Counsel)

1. Legitimate Business: M/s. Madhav Copper Limited is a genuine manufacturing company. All purchases were from registered dealers with valid GSTINs, through proper tax invoices, E-Way bills, and banking payments.

2. No Show-Cause Notice Adjudicated: The earlier show-cause notice has not been adjudicated yet. Without assessment or adjudication of GST liability, powers under Section 69(1) read with Section 132 of the GGST Act, 2017 cannot be invoked. The procedure under Chapters XI and XIV was not followed.

3. "Reasons to Believe" Required: The Commissioner must have material on record to form a belief that an offence was committed. Without initiating the process of tax assessment, the Commissioner cannot have “reason to believe.”

4. Section 132(6) Bypassed: The condition precedent of Section 132(6) of the CGST Act, 2017 and GGST Act was completely bypassed.

5. Co-accused Got Bail: Afzal Sadikali Savjani and Mahmad Abbas Rafikali Meghani had already been granted bail, so parity demanded the same for the applicant.

6. Charge-sheet Already Filed: Since the complaint was already filed on 22.04.2022, there was no further need for custodial interrogation.

7. Reliance on Supreme Court Precedents: Cited Arnesh Kumar v. State of Bihar (2014) 8 SCC 273 to argue that arrest for offences punishable with less than 7 years should only happen when there is exclusive necessity.

8. Trial Will Take Long: The trial has no time-bound procedure and will take its own time to conclude, making prolonged pre-trial detention unjust.

State’s Arguments (Mr. Mitesh Amin, Public Prosecutor)

1. Massive Fraud: The scam involved fake purchases of ₹762.66 Crores from 36 fictitious entities, resulting in wrongful ITC of ₹137.28 Crores. The applicant defrauded the State Exchequer of almost ₹138.70 Crores.

2. Class ‘A’ Offence: Given the magnitude of the fraud, the offence falls under Class ‘A’ category.

3. No Co-operation: The applicant did not co-operate with the investigating agency before or after arrest. He denied knowing Afzal Sadikali Savjani and gave no information about his connection with the Angadia (informal money transfer operators).

4. Money Routed Through Angadias: Payments to fake companies were withdrawn by cash or routed through Angadias. WhatsApp chats between the applicant and Mohammed Abbas Shabbirali Savjani (Mohamad Tata) and Afzal Sadikali Savjani showed connections to illegal transactions and Angadia companies.

5. Angadia Statements: Statements of Angadias — Ranchhodbhai Joitabhai Patel of V.K. Angadiyu, Jagdish Maganbhai Prajapati of P. Umesh Angadiyu, and Rameshbhai Ishwarbhai Patel of S.R. Angadiyu — disclosed that they knew the applicant and that money was routed through them.

6. Prior Bail Rejections: The applicant’s anticipatory bail was rejected by the Supreme Court. Co-accused Mohammed Abbas Shabbirali Savjani’s bail was also rejected by the Supreme Court in Special Leave to Appeal (Crl.) No. 6085 of 2022.

7. Investigation Still Ongoing: Further investigation was needed for a few more months to uncover more evidence.

8. Reliance on Precedents:

• Kirtiraj Pankajbhai Sutariya v. The State of Gujarat and Others in Special Leave to Appeal (Crl.) No. 2358 of 2022 — Supreme Court found allegations serious and denied bail.
• Sandeep Goyal v. Union of India in Special Leave to Appeal (Crl.) No. 1803 of 2020 — fake firms committed serious fraud.
• Paresh Nathalal Chauhan v. State of Gujarat in Criminal Miscellaneous Application No. 6237 of 2020.

Key Legal Precedents

Cases Cited:

1. Arnesh Kumar v. State of Bihar: (2014) 8 SCC 273Cited by applicant — arrest for offences with less than 7 years punishment should only happen when exclusively necessary

2. Satender Kumar Antil v. Central Bureau of Investigation and Another: 2022 SCC Online SC 825 - Cited by applicant in support of bail

3. Mohammed Zubair v. State of NCT of Delhi and Others: 2022 LiveLaw (SC) 629 - Cited by applicant in support of bail

4. Sanjay Chandra v. Central Bureau of Investigation: (2012) 1 SCC 40Cited by Court — delay in concluding trial is an important factor in bail decisions

5. Sanjay Raghunathprashad Gupta v. State of Gujarat: Criminal Miscellaneous Application No. 4146 of 2016 - Referenced in context of trial delay as a bail factor

6. Kirtiraj Pankajbhai Sutariya v. The State of Gujarat and Others: Special Leave to Appeal (Crl.) No. 2358 of 2022 - Cited by State — Supreme Court found allegations serious and denied bail

7. Sandeep Goyal v. Union of India: Special Leave to Appeal (Crl.) No. 1803 of 2020 - Cited by State — fake firms committed serious fraud

8. Paresh Nathalal Chauhan v. State of Gujarat: Criminal Miscellaneous Application No. 6237 of 2020 - Cited by State in support of denying bail

9. Mohammed Abbas Shabbirali Savjani v. The State of Gujarat and Another: Special Leave to Appeal (Crl.) No. 6085 of 2022 - Cited by State — co-accused’s bail rejected by Supreme Court

10. State of Gujarat v. M/s. Madhav Copper Limited: Miscellaneous Civil Application (for Direction) No. 1 of 2022 in Special Civil Application No. 15201 of 2021 - Cited by applicant — Division Bench noted co-operation from the respondent

Key Statutory Provisions:

Section 439, Code of Criminal Procedure: Gives the High Court power to grant regular bail

Section 132(1)(C), CGST Act, 2017 / GGST Act, 2017: Offence of availing ITC using fake invoices or fraudulently without any invoice

Section 132(1)(i), CGST Act, 2017: Punishment: where ITC wrongly availed exceeds ₹500 lakhs — imprisonment up to 5 years with fine

Section 132(2), CGST Act, 2017: Repeat offenders can get up to 5 years imprisonment with fine

Section 132(6), CGST Act, 2017 / GGST Act, 2017: Condition precedent that must be satisfied before prosecution

Section 138, CGST/GGST Act: Allows compounding (settling) of offences even after prosecution begins, on payment of tax, interest, penalty and compounding amount

Section 69, GGST Act, 2017: Power of arrest — Commissioner can arrest if he has “reasons to believe” an offence is committed

Section 70, GGST Act, 2017: Power to summon persons for evidence

Section 73, CGST/GGST Act, 2017: Assessment for non-fraud cases

Section 74, CGST/GGST Act, 2017: Assessment for fraud cases

Section 120B, Indian Penal Code: Criminal conspiracy

Section 204(a), Code of Criminal Procedure, 1973: Issuance of summons to accused

Judgment

The Applicant — Nileshbhai Natubhai Patel — WON. The bail application was allowed.

The Court’s Reasoning:

The Court, after carefully hearing both sides, noted the following key points:

1. Charge-sheet already filed: The complaint was filed on 22.04.2022, meaning the investigation had reached a stage where custodial interrogation was no longer the primary need.

2. Trial will take long: The Magistrate had registered the complaint and issued summons. There is no time-bound procedure after cognizance of the offence, and the trial will take its own time. Keeping the accused in jail indefinitely before the trial concludes would be unjust.

3. Maximum punishment is 5 years: The offence under Section 132(1)(i) carries a maximum of 5 years imprisonment — not life imprisonment. This is a significant factor in favour of bail.

4. Compounding is possible: Section 138 allows the offence to be compounded (settled financially) even after prosecution begins. This further tilted the balance in favour of bail.

5. Balancing act: The Court acknowledged the serious allegations (₹138.71 Crores fraud, 39 fictitious firms) but balanced this against the practical realities of the justice system.

Bail Conditions Imposed:

The applicant was ordered to be released on bail subject to the following conditions:

• Execute a personal bond of ₹2,00,000/- (Rupees Two Lakhs) with one surety of the like amount to the satisfaction of the trial Court.
• [a] Not take undue advantage of liberty or misuse liberty.
• [b] Not act in a manner injurious to the interest of the prosecution.
• [c] Surrender passport (if any) to the lower court within a week.
• [d] Not leave India without prior permission of the concerned trial court.
• [e] Furnish present address of residence to the Investigating Officer and the Court, and not change residence without prior permission of the trial court.
• Authorities to adhere to COVID-19 protocols before release.
• Release only if not required in connection with any other offence.
• If any condition is breached, the Sessions Judge is free to issue a warrant or take appropriate action.

FAQs

Q1: Why was bail granted despite such a massive fraud allegation of ₹138 Crores?

The Court balanced the seriousness of the allegations against practical realities — the charge-sheet was already filed, the trial would take years, and the maximum punishment is only 5 years (not life). The Court felt it was not just to keep the accused in jail indefinitely before the trial even begins.

Q2: What exactly is the alleged fraud?

The State alleged that M/s. Madhav Copper Limited made fake purchases of ₹762.66 Crores from 36-39 fictitious supplier firms and wrongfully claimed ITC of approximately ₹137.28–₹138.71 Crores, defrauding the government exchequer.

Q3: What is “Input Tax Credit (ITC)” and why does it matter here?

ITC is a mechanism under GST where a business can reduce its tax liability by the amount of GST it has already paid on its purchases. If the purchases are fake (no actual goods exchanged), then the ITC claimed is fraudulent — which is exactly what the State alleged here.

Q4: What is the significance of the 39 suppliers’ registrations being cancelled “ab initio”?

“Ab initio” means “from the beginning.” When the GST Department cancelled these 39 suppliers’ registrations ab initio, it meant those suppliers were treated as if they were never registered — making all ITC claimed from them invalid from day one.

Q5: What is the role of “Angadias” in this case?

Angadias are informal money transfer operators. The State alleged that money paid to fake companies was routed back to M/s. Madhav Copper Limited through Angadias, essentially completing the fraud cycle. Statements from three Angadia operators confirmed their knowledge of the applicant.

Q6: Can the applicant be sent back to jail after getting bail?

Yes! If the applicant violates any of the bail conditions, the Sessions Judge can issue a warrant and cancel the bail.

Q7: What is “compounding of offences” under Section 138?

Compounding means settling the criminal case by paying the tax, interest, penalty, and a compounding fee to the government. Once compounded, the criminal proceedings are abated (stopped). The Court noted this as a factor showing the offence is not of the most serious nature.

Q8: Why did the applicant’s earlier anticipatory bail get rejected by the Supreme Court?

The Supreme Court had found the allegations serious enough to deny anticipatory bail. However, the situation changed after the charge-sheet was filed and the applicant had already been in custody for several months, which is why the High Court took a different view for regular bail.

Q9: What happens next in this case?

The trial will proceed before the Magistrate’s Court. The prosecution (GST Department) will need to prove its case by presenting evidence. The applicant will remain on bail subject to the conditions imposed, until the trial concludes.

Q10: Does this judgment mean the applicant is innocent?

Absolutely not! This is only a bail order — it does not decide guilt or innocence. The Court only decided that the applicant can be released from jail while the trial is pending. The trial will determine whether he is guilty or not.

1. This application has been filed under Section 439 of the Code of Criminal Procedure for regular bail in connection with the File No. ACST(3)/ENF-1/SUMMONS/2020-21 and DCST /ENF-2/AC-6/CONFIDENTIAL/2021-22 registered with

Office of the Chief Commissioner of State Tax, Enforcement, Coordination Branch, Ahmedabad.

2. The applicant was arrested on 23.02.2022 by the Assistant Commissioner of State Tax-4, Enforcement Division – 2 (the respondent No.3), in connection with the alleged offences punishable under Section 132(1)(c) of the Central Goods and Services Tax Act, 2017 (in short referred to herein as ‘CGST Act, 2017) and Section 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017 by exercising powers under Section 69 of the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to in short as the ‘GGST Act, 2017’).

3. The learned Additional Chief Metropolitan Magistrate,

Ahmedabad by an order dated 24.02.2022 had granted

custody for interrogation upto 15.00 hours of

03.03.2022. On 03.03.2022, the respondent No.3

moved an application for further custody for 5 days

which was rejected by the Court vide order 03.03.2022.

The respondent No.3 had challenged the order dated

03.03.2022 by preferring Criminal Miscellaneous

Application No.38 of 2022 before the learned City and

Civil Sessions Court, Ahmedabad and after hearing both

the sides, the Sessions Court rejected the application by

an order dated 08.03.2022.

4. The registration of 39 suppliers of M/s. Madhav Copper

Limited has been cancelled ab initio on the ground that

those registered dealers were fictitious entities. Hence,

the Input Tax Credit (ITC) availed from these registered

dealers were not available to M/s. Madhav Copper

Limited. On completion of the investigation, the

respondent No.3 - Assistant Commissioner of State

Tax-4, Enforcement Division – 2 filed a Criminal

Complaint No.40504 of 2022 for the offences punishable

under Section 132(1)(c) of the GGST Act, 2017 and

CGST Act, 2017 read with Section 120B of the Indian

Penal Code against the applicant and M/s. Madhav

Copper Limited.

5. It is stated by the applicant that M/s. Madhav Copper

Limited purchased goods under Tax Invoice after

verification of GST registration on the web portal of

GST Department. M/s. Madhav Copper Limited is

engaged in business of manufacturing of copper bus

bar, copper road, profile, copper fabricated products,

enameled copper wire, paper covered copper conductor,

poly wrap submersible winding wire, fibre glass

conductor, tap insulated copper conductor, bare copper

wire and copper strips for which the company

purchases copper scrap from various suppliers from

within India and abroad. It is contended by the

applicant that M/s. Madhav Copper Limited had never

purchased raw materials from any unregistered dealer

or supplier and all the purchases have been made from

the registered dealer / supplier against Tax Invoice, E-

way bill upon payment of the applicable

SGST/CGST/IGST and these dealers were holding a

valid GSTIN. According to the applicant, out of 131

suppliers, 39 suppliers are in question and their

registration was cancelled suo moto under GST ab

initio by the GST Department and therefore, Input Tax

Credit availed from such suppliers have been made

ineligible.

6. It is the case of the applicant that M/s. Madhav Copper

Limited had made payment of Goods as well as tax to

its supplier through banking channel. M/s. Madhav

Copper Limited have manufactured the final products of

copper out of the material purchased under the Tax

Invoice and then sold to its buyers under the Tax

Invoice and passed on Input Tax Credit received by

M/s. Madhav Copper Limited. It is further the case of

the applicant that M/s. Madhav Copper Limited had

filed regular returns for the business transactions and

the company has not received any show cause notice

either under Section 61 / 73 or 74 of Central Goods

and CGST Act, 2017 or the GGST, 2017, except the

show cause notice for the tax period 01.07.2017 to

03.10.2019 under Section 74/122 of the GGST Act,

2017 for Rs.20,86,67,524/-, to which M/s. Madhav

Copper Limited has filed a reply and had also deposited

Rs.7,71,22,360/- under protest. It the say of the

applicant that the show-cause notices have not been

adjudicated. It is further submitted that the business

transaction of M/s. Madhav Copper Limited for the

period 01.07.2017 to 03.10.2019 has been assessed and

show-cause notice has been passed and therefore, for

the same period, there cannot be a second show-cause

notice unless the first notice is adjudicated.

7. Learned Senior Counsel Mr. N.D. Nanavaty appearing

for the applicant submits that after the arrest, the

complaint in the form of charge-sheet is filed on

22.04.2022. The applicant had co-operated with the

investigation and order of remand was sought for from

the learned Additional Chief Metropolitan Magistrate

and during the period, necessary interrogation was

made of the applicant. It is also submitted that the

applicant is having a manufacturing unit where comes

the raw material and finished products are supplied.

There is a valid registration with the GST Numbers. It

is also submitted that the applicant is not a Proprietor

of any bogus company.

8. It is submitted that there should not be any

indiscriminate use of Section 69 of the GGST Act, 2017,

where the powers so delegated should be only after

proper application of mind and the Commissioner has

to give ‘reasons to believe’ that the person has

committed the offence as alleged and for that purpose,

the officer concerned was required to determine the tax

liability under Sections 73 or 74 of the GGST Act,

2017. In this case, it is submitted that earlier the

notice has not been adjudicated and without any

assessment or adjudication or determination of GST,

without following the procedure of Chapter XI and XIV,

powers under Section 69(1) read with Section 132 of

the GGST Act, 2017 cannot be invoked. Section 132

of the CGST Act clearly suggests that the Commissioner

has to have material on record to form a belief that

offence is committed, has retained the benefit arising

out of the same and the Commissioner would not have

“reason to believe” without any initiation of process of

tax and assessing liability of the responsible person.

The Commissioner is required to show exceptional

situation for the arrest of the applicant before the

issuance of show-cause notice.

9. It is further submitted that the relevancy of the

statement recorded under Section 70 of GGST Act can

be considered only when someone is examined as a

witness as per Clause (b) of Section 136 and contended

that none of the so-called firms or persons in whose

name the entities are registered are shown as witnesses

in the complaint before the Magistrate. The condition

precedent of Section 132(6) of the CGST Act, 2017 and

GGST Act have been completely bypassed.

10. Relying on the decision of the Hon’ble Apex Court

in the case of Arnesh Kumar v. State of Bihar reported

in 2014 8 SCC 273, it is submitted by learned Senior

Counsel Mr. N.D. Nanavaty that Section 69 of the

CGST Act gives powers to the authority to

arrest/release the prisoner on bail and the said powers

are subject to the same provisions as Officer Incharge

of the Police Station. It is submitted that for the

offences punishable with imprisonment for a term less

than 7 years or extend upto 7 years with or without

fine, the arrest of the accused can only be made when

there is an exclusive necessity for arrest. Learned

Senior Counsel Mr. N.D. Nanavaty has also relied on

the following decisions :-

(i) Satender Kumar Antil v. Central Bureau of

Investigation and Another reported in 2022 SCC Online

SC 825 and;

(ii) Mohammed Zubair v. State of NCT of Delhi and

Others reported in 2022 LiveLaw (SC) 629.

11. Learned Public Prosecutor Mr. Mitesh Amin

alongwith learned Additional Public Prosecutor Mr.

Pranav Trivedi appears for the respondent – State. It

is submitted that the present applicant is the Director

of M/s. Madhav Copper Limited. The scam alleged is

of fake purchases to the tune of Rs.762.66 Crores from

36 fictitious entities and thereby availing Input Tax

Credit of Rs.137.28 Crores wrongly. It is further

submitted that about 39 supplier firms to Madhav

Copper Limited were found fake. It is also submitted

that it is the magnitude of the benefit illegally availed

to be taken into consideration and the offence can be

classified under Class ‘A’ and by running a Company

by fake purchases, the applicant has defrauded the

State Exchequer of almost Rs.138.70 Crores. The

purchase has been shown of the raw material from the

grey market, thus the cost would be low in selling the

goods. It is further submitted that the applicant and

the other accused are knowing the fake suppliers.

However, no information is disclosed about the identity

of the persons. It is contended that by fake supplies,

the applicant has ensured that all the money goes back

to M/s. Madhav Copper Limited. It is also submitted

that the payment going to the fake companies are

withdrawn by cash periodically or that amount is given

to them by way of Angadias or through another person

or internally, it would be transferred from one fake

company to another.

12. Learned Public Prosecutor Mr. Mitesh Amin

submitted that the applicant had not co-operated with

the Agency prior to his arrest and even thereafter,

there are some prima-facie evidence against him and

statements of the persons complacent in the crime have

not co-operated with the Agency by disclosing true

facts. It is further submitted that the anticipatory bail

application of the present applicant was dismissed by

the Hon’ble Apex Court on 21.09.2021 in Writ Petition

(Criminal) No.301 of 2021 and Special Leave to Appeal

No.9541 – 9542 of 2021 was also dismissed on

11.02.2022. Referring to the orders of the High Court

and the Hon’ble Apex Court in the case of Kirtiraj

Pankajbhai Sutariya v. The State of Gujarat and Others

in Special Leave to Appeal (Crl.) No.2358 of 2022, it is

submitted that the Hon’ble Apex Court had considered

the allegation against the said applicant as serious and

perusing the prima-facie finding in deciding the bail

application, the Hon’ble Apex Court had observed that

no case is made out for release on bail. Placing

reliance on the order of the Hon’ble Apex Court in the

case of Sandeep Goyal v. Union of India in Special

Leave to Appeal (Crl.) No.1803 of 2020, it is submitted

that the fake firms had committed the fraud which is

serious. Reliance is also placed on the observations of

this Court dated 05.05.2020 in the case of Paresh

Nathalal Chauhan v. State of Gujarat in Criminal

Miscellaneous Application No.6237 of 2020 and

thereafter, the order was challenged before the Hon’ble

Apex Court by way of Special Leave to Appeal.

13. Learned Public Prosecutor Mr. Mitesh Amin

submits that summons was issued to the Director of

M/s. Madhav Copper Limited namely Divya Arvindbhai

Monpara, Rohitbhai Bhikhabhai Chauhan and

Pankajbhai Manjibhai Goyani and the co-onspirator

Mukeshbhai Pravinbhai Chadotara. However none of

them had co-operated with the investigating agency. It

is further submitted that the anticipatory bail order of

Mohammad Abbas Shabbirali Savjani was rejected by

this Court on 13.06.2022 in Criminal Miscellaneous

Application No.18055 of 2021. This Court had not

exercised the discretion of granting anticipatory bail to

the present applicant – Nileshbhai Natubhai Patel vide

common judgment dated 14.10.2021 in Criminal

Miscellaneous Application No.17697 of 2011 and allied

matters. It is further submitted that the bail

application of Mohammed Abbas Shabbirali Savjani v.

The State of Gujarat and Another in Special Leave to

Appeal (Crl.) No.6085 of 2022 was even rejected by the

Hon’ble Apex Court and therefore, no relief has been

granted to Mohammed Abbas Shabbirali Savjani

(Mohamad Tata).

14. It is also submitted by the learned Public

Prosecutor that the Whatsapp Chat of Mohammed

Abbas Shabbirali Savjani (Mohamad Tata) with the

present applicant and the Whatsapp Chat of Afzal

Sadikali Savjani with the present applicant shows a

connection of illegal transactions and the said Whatsapp

Chat would reveal the connection with the Angadia

Companies. It is submitted that both Mohammed

Abbas Shabbirali Savjani (Mohamad Tata) and Afzal

Sadikali Savjani had not co-operated with the

investigation. Mohammed Abbas Shabbirali Savjani

(Mohamad Tata) is still on the run. The questions

raised during the investigation of the present applicant

reflects his denial of knowing Afzal Sadikali Savjani

and further, has not given any information with regard

to his connection with the Angadia.

15. Learned Public Prosecutor Mr. Mitesh Amin stated

that the statement of Angadias – Ranchhodbhai

Joitabhai Patel of V.K. Angadiyu, Jagdish Maganbhai

Prajapati of P. Umesh Angadiyu and Rameshbhai

Ishwarbhai Patel of S.R. Angadiyu discloses the fact

that they are knowing the present applicant which

disclosed the fact that money was routed through the

Angadias. The forensic report of the Mobile and

phone connection audit shows the inter-se relation

between the present applicant with Mohammed Abbas

Shabbirali Savjani (Mohamad Tata). Thus, it is

submitted that the investigation is required to be

permitted to be proceeded further for a few months so

that more facts would be discovered alongwith

evidence, to support the prosecution case.

16. Countering the above argument of learned Public

Prosecutor Mr. Mitesh Amin, learned Senior Counsel for

the applicant Mr. N.D. Nanavaty submits that till

today, no showcause notice has been sent to the

present applicant. Further, Afzal Sadikali Savjani and

Mahmad Abbas Rafikali Meghani have been granted

bail. Learned Senior Counsel Mr. N.D. Nanavaty has

relied on the observations made by the Division Bench

of this Court in the case of State of Gujarat v. M/s.

Madhav Copper Limited in Miscellaneous Civil

Application (for Direction) No.1 of 2022 in Special Civil

Application No.15201 of 2021 to submit that the

learned Additional Public Prosecutor had not pressed

the relief in terms of Paragraph 11.1 and the

observations of the Court was to the effect that there is

already co-operation received from the respondent who

had been arrested since his anticipatory bail application

was not entertained by the Hon’ble Apex Court.

17. On hearing learned Senior Counsel Mr. N.D.

Nanavaty assisted by learned Advocate Mr. Chetan K.

Pandya for the applicant and learned Public Prosecutor

Mr. Mitesh Amin, assisted by learned Additional Public

Prosecutor Mr. Pranav Trivedi and on going through

the records of the case, it appears that the arrest memo

was made on 23.02.2022, the complaint came to be

filed on 22.04.2022. The applicant was taken for

custodial interrogation during judicial custody. The

facts of the complaint would be required to be proved

by the Director General of GST Department who has

filed the complaint. The learned Additional Chief

Metropolitan Magistrate has ordered to register the

complaint vide order below Exhibit 1. The learned

Magistrate on 22.04.2022 ordered to register the

complaint and issue summons to the accused under

Section 132(1)(c) of GGST Act, 2017 and CGST Act,

2017 read with Section 120B of the Indian Penal Code

making it returnable on 05.05.2022 under Section

204(a) of the Code of Criminal Procedure, 1973. The

applicant is still in jail. Thus as per circumstances,

summons would have been served in jail. The trial

would begin on the recording of the evidence from the

side of the Department. There is no time bound

procedure after the cognizance of the offence. Further,

the trial will take its own time to conclude.

18. In the case of Sanjay Chandra v. Central Bureau

of Investigation reported in (2012) 1 SCC 40, a

reference has been made to the decision in the case of

Sanjay Raghunathprashad Gupta v. State of Gujarat in

Criminal Miscellaneous Application No.4146 of 2016, to

observe that the important factor while deciding the

bail application certainly would be to take into

consideration, the delay in concluding the trial.

19. Section 132(1)(i) (Punishment for certain Offences)

provides for punishment as under :-

“[Whoever commits, or causes to commit and

retain the benefits arising out of, any of the

following offences], namely :-

(a) supplies any goods or services or both without

issue of any invoice, in violation of the provisions

of the Act or the rules made thereunder, with the

intention to evade tax;

(b) issues any invoice or bill without supply of

goods or services or both in violation of the

provisions of this Act, or the rule made

thereunder leading to wrongful availment or

utilisation of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill

referred to in clause (b) or fraudulently avails

input tax credit without any invoice or bill;

shall be punishable -

(i) in cases where the amount of tax evaded or

the amount of input tax credit wrongly availed or

utilised or the amount of refund wrongly taken

exceeds five hundred lakh rupees, with

imprisonment for a term which may extend to

five years and with fine.”

19.1 Section 132(1)(i) provides for punishment as that

‘in cases where the amount of tax evaded or the

amount of input tax credit wrongly availed or utilised

or the amount of refund wrongly taken exceeds five

hundred lakh rupees, with imprisonment for a term

which may extend to five years and with fine; and

section 132(2) provides that, where any person

convicted of an offence under this section is again

convicted of an offence under this section, then, he

shall be punishable for the second and for every

subsequent offence with imprisonment for a term which

may extend to five years and with fine.

19.2 Section 138 of the Act makes provision for

compounding of offences under the Act, even after the

institution of prosecution, on payment by the person

accused of the offence, such compounding amount in

such manner as may be prescribed. The compounding

shall be allowed only after making payment of tax,

interest and penalty involved in such offences, on

payment of compounding amount as may be

determined by the commissioner, the criminal

proceeding already initiated in respect of the said

offence shall stand abated.

20. Here in this case, the allegations are of wrongfully

availing Input Tax Credit to the tune of Rs.138.71

Crores. Almost 39 firms are alleged to have illegal

dealings with M/s. Madhav Copper Limited. The

authority has alleged that without any bills / invoices,

the present applicant had shown the suppliers only on

paper without any actual transfer of the goods and in

conspiracy with the shell companies had defrauded the

Government Exchequer to the tune of Rs.138.71 Crores,

while on the contrary the applicant has stated that he

was dealing in purchase of goods under tax invoices

after verification of the registration on the web portal

of GST Department and has indicated that M/s. Madhav

Copper Limited is engaged in the business of

manufacturing of copper busbar, copper road, profile,

copper fabricated products, enameled copper wire,

paper covered copper conductor, polywrap submersible

winding wire, fibre glass conductor, tap insulated

copper conductor, bare copper wire and copper strips

by making purchases of copper scrap from various

suppliers from India and abroad and has individually

purchased from registered dealers or suppliers.

According to the applicant, the purchases have been

made by tax invoices and E-Way Bills upon payment of

applicable GST while dealing with the dealers having

valid GSTIN. Taking into consideration the maximum

punishment for the alleged offence and the provisions

of compounding the offences, this Court deems it just

and proper to exercise discretion is exercised in favour

of the applicant, as trial will take its own time to

conclude.

21. Hence, the present application is allowed. The

applicant is ordered to be released on regular bail in

connection with the First Information Report in

connection with the File No.

ACST(3)/ENF-1/SUMMONS/2020-21 and DCST

/ENF-2/AC-6/CONFIDENTIAL/2021-22 registered with

Office of the Chief Commissioner of State Tax,

Enforcement, Coordination Branch, Ahmedabad on

executing a personal bond of Rs.2,00,000/- (Rupees

Two Lacs Only) with one surety of the like amount to

the satisfaction of the trial Court and subject to the

conditions that he shall;

[a] not take undue advantage of liberty or misuse

liberty;

[b] not act in a manner injurious to the interest of

the prosecution;

[c] surrender passport, if any, to the lower court

within a week;

[d] not leave India without prior permission of the

concerned trial court;

[e] furnish the present address of residence to the

Investigating Officer and also to the Court at the time

of execution of the bond and shall not change the

residence without prior permission of the concerned

trial court;

22. The authorities shall adhere to its own Circular

relating to COVID-19 and, thereafter, will release the

applicant only if he is not required in connection with

any other offence for the time being. If breach of any

of the above conditions is committed, the Sessions

Judge concerned will be free to issue warrant or take

appropriate action in the matter. Bail bond to be

executed before the lower Court having jurisdiction to

try the case.

23. Rule is made absolute to the aforesaid extent.

Direct service is permitted. Registry to communicate

this order to the concerned Court/authority by Fax or

Email forthwith.

Sd/-

(GITA GOPI, J)

CAROLINE