GST Update No. 304 on bail granted in case of ongoing investigation proceedings

It is well known principle that the primary objective of bail is to secure the presence of accused at the time of trial or hearing. The action of arrest is to be taken under extreme circumstances as it restricts the freedom of the accused which is the fundamental right of any citizen. It is pertinent to note here that a person should be taken into custody only if there are reasons to believe that they might flee or tamper with the evidence. However, it seems that the revenue authorities have failed to understand this concept and hence, they are not wiling to grant bails easily to the accused. Recently, on similar note, one case was reported before Gujarat High Court in the case of MUNAVVER ISMAIL MEMON V/S STATE OF GUJARAT. The decision imparted in this case is subject matter of discussion of our present update.
The applicant was arrested as on 24.03.2022 and was produced before Metropolitan Magistrate Court on the same day. The bail application filed was rejected vide orders dated 20.06.2022 and 20.07.2022. Being aggrieved by the same, this Writ application is filed. The applicant is proprietor engaged in the business of cosmetic items. The firm was under investigation based on the intelligence reports stating that the applicant was involved in tax evasion activities. It was stated that goods were supplied without issuance of invoice since a software was created by the applicant which was used for tax evasion and showcasing less sales. Further, the applicant has made unaccounted sales and kaccha invoices which were not included in the accounts. It was therefore, alleged that loss of Rs. 10.94 crores were made to the Government Exchequer.
The petitioner submitted that there is no corroborative evidence found during the course of search and therefore the allegations are based on just entries which are made on assumptions and presumptions. Further, the applicant is regular taxpayer and return filer. Therefore, transaction related to sales and purchase are uploaded on the portal. Hence, the custody of applicant is not necessary. It was argued that no show cause notice under Section 61, 73 or 74 have been issued and the applicant is wiling to deposit 10% of the amount within a period of 6 months from date of release before department. It was further argued thatconstitutional right of liberty must be protected, unless further custody of the applicant is necessary as the basic jurisprudence of bail is that bail is a rule and jail is an exception.
The counsel of respondent contended that the applicant has acted contrary to the provisions of the Act. Thus, investigation is going on and therefore, if the applicant is released on bail, the investigation would adversely affect and considering the background facts of the applicant since he can temper with the evidence and influence the witnesses.
The court refereed to the judgement delivered by the Apex Court in the case of P. CHIDAMBARAM VS. DIRECTORATE OF ENFORCEMENT, (2020) 13 SCC 791. Further, it was stated that merely raising the contention that investigation is still going on is not enough. The department should have pointed out that the further custody of the applicant is necessary. It is the right of the assessee to file an appeal against the assessment subject to the pre-deposit amount. Therefore, it was decided to release the applicant on bail subject to certain conditions and on execution of personal bond.
The above decision is a favouring decision for the trade and industry. The Court adopted a liberal approach and granted relief to the taxpayer after acknowledging the repercussions faced by the business houses. It is pertinent to note here that powers of arrest should not be invoked by the departmental officers in routine matter without having any reason to believe that the taxpayer would abscond. Merely having vague belief cannot be considered as a valid ground to compromise with the constitutional right of freedom of any person. The Government should come up with a set of guidelines in this respect to save trade and industry from the wrath of tax officers.

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GST Update No. 304 on bail granted in case of ongoing investigation proceedings

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