Facts of the Case

The accused-petitioner, Ratnambar Kaushik, filed an application under Section 439 of the Code of Criminal Procedure, 1973 seeking regular bail in a case arising out of Complaint Case No. DGGI/INT/COMP/GEN/62/2022-Gr-J O/0 DD-DGGI-RU-Udaipur, registered at the DGGI, Jaipur Zonal Unit, Jaipur.

The proceedings concerned alleged offences punishable under Sections 132(1)(a), 132(1)(h), 132(1)(k) and 132(1)(l) of the Central Goods and Services Tax Act, 2017, read with Section 132(5) of the CGST Act.

The allegations related to trading and movement of raw tobacco allegedly under the aegis of non-existent firms. According to the case placed before the Court, raw tobacco was allegedly shipped from Gujarat to Delhi and Noida through purported transactions involving non-existent firms and transportation linked with M/s Singhal Transport Company.

The petitioner was stated to be engaged in trading raw tobacco under the name and style of M/s Galaxy Tobacco, Patparganj Industrial Area, Delhi.

The respondent’s case was that investigation included GPS tracking data obtained from entities providing GPS tracking services to M/s Singhal Transport Company, toll data obtained from NHAI, RFID data, and e-way bill data. On analysis of GPS data vis-à-vis e-way bill data concerning seven trucks carrying raw tobacco from Gujarat, the Department alleged that although the consignments were cleared in the name of M/s Maa Ambey Enterprises, Bakoli, the trucks actually proceeded to M/s Galaxy Tobacco at Patparganj, Delhi.

The Department alleged that the petitioner was actively involved in clandestine procurement and supply of raw tobacco with the intention of facilitating unaccounted manufacture and supply of Jarda in contravention of applicable GST and Central Excise law.

As recorded in the order, the alleged quantity of raw tobacco clandestinely procured/supplied was 90,520 kg, and the approximate total tax/duty allegedly evaded was ₹15,57,28,345, comprising components of Central Excise duty, NCCD, GST and Cess.

The petitioner had remained in custody since 21 July 2022, while the complaint had been filed on 17 September 2022.

Issues Involved

  1. Whether the petitioner was entitled to regular bail under Section 439 CrPC in a prosecution alleging offences under Sections 132(1)(a), 132(1)(h), 132(1)(k) and 132(1)(l), read with Section 132(5), of the CGST Act, 2017.
  2. Whether the nature and gravity of the alleged economic offence, involving alleged tax/duty evasion of approximately ₹15.57 crore, justified denial of bail.
  3. Whether the petitioner’s custody period of about three months, completion of investigation, and filing of the complaint were sufficient grounds for grant of regular bail.
  4. Whether the petitioner’s contention that he was merely a trader of raw tobacco, and not a manufacturer, weakened the allegation of duty/tax evasion attributed to him.
  5. Whether the Department’s reliance on GPS data, toll data, RFID data and e-way bill data prima facie indicated clandestine procurement and supply of raw tobacco.
  6. Whether economic offences should automatically be treated as a separate class for denial of bail, particularly in light of Satender Kumar Antil vs Central Bureau of Investigation.
  7. Whether precedents involving substantially longer custody periods or bail granted to co-accused persons were applicable to the petitioner’s case.

Petitioner’s Arguments

The petitioner argued that the allegations emerging from the judicial remand application were prima facie not directed against him in the manner alleged by the prosecution.

It was submitted that under Section 132 of the CGST Act, the maximum punishment applicable to the alleged offence could extend to five years’ imprisonment and that the matter was triable by a First Class Magistrate as a complaint case.

The petitioner contended that he could not be said to have evaded duty of approximately ₹15 crore because he was neither a manufacturer nor shown as a manufacturer in the remand application.

It was further argued that the petitioner was engaged in trading raw tobacco falling under Chapter Heading 2401. According to the petitioner, raw tobacco was subjected to GST at 28% with Cess at 72%, and even on that basis the tax computation would be ₹6,83,31,285, rather than the higher figure alleged by the Department.

The petitioner also argued that the statement of his employee, Sharad Kocchar, had allegedly been recorded under immense pressure, threat and coercion and was retracted after his release.

It was submitted that, as per the Panchnama dated 19 July 2022, no documents, records or devices had been seized from the premises.

The petitioner emphasised that he had been in custody since 21 July 2022, the investigation had been completed, the complaint had already been filed, and the trial was likely to take considerable time.

The petitioner relied upon several judicial precedents, including:

  • Satender Kumar Antil vs Central Bureau of Investigation, 2022 SCC OnLine SC 825;
  • Ramchandra Vishnoi Etc. vs Union of India, Criminal Appeal Nos. 1742–1743/2022, decided on 10 October 2022;
  • Dipanshu Gupta vs Union of India, CRLMB No. 3399/2022;
  • Ronak Kumar Jain vs Union of India, 2021 (10) TMI 1309;
  • Saurabh Kumar Jain vs Union of India, 2021 (8) TMI 117;
  • Rajesh Arora vs State, fourth bail application No. 3987/2020;
  • Lakshya Agarwal vs DGGI, CRLMB No. 20392/2021;
  • Nitin Verma vs Union of India and Another, CRLMB No. 54497/2021; and
  • Pravin Jangir vs Union of India, CRLMB No. 16092/2021.

Respondent’s Arguments

The Union of India strongly opposed the bail application.

The respondent submitted that searches had been conducted at M/s Millitrek Technologies Pvt. Ltd. and M/s Sanskar Security Solutions, which allegedly provided GPS tracking services to M/s Singhal Transport Company for monitoring truck movements between Gujarat and Delhi.

The Department stated that GPS data for the period from March 2022 to May 2022 had been obtained. It further relied upon toll data obtained from NHAI and RFID data downloaded from the e-way bill server.

According to the respondent, GPS data reflected the actual locations and coordinates through which the vehicles had moved. On comparing GPS data with e-way bill data relating to seven trucks carrying raw tobacco from Gujarat, it was allegedly discovered that although the consignments were cleared in the name of M/s Maa Ambey Enterprises, Bakoli, the trucks actually travelled to M/s Galaxy Tobacco, 500 FIA, Patparganj, Delhi.

The respondent contended that this material indicated the petitioner’s active involvement in clandestine procurement and supply of raw tobacco, allegedly intended to facilitate unaccounted manufacture and supply of Jarda in violation of applicable GST and Central Excise laws.

The Department alleged that 90,520 kg of unmanufactured tobacco had apparently been used for clandestine manufacture and supply of Jarda without payment of applicable duties and taxes.

The approximate computation placed before the Court was:

  • Raw tobacco allegedly procured/supplied clandestinely: 90,520 kg
  • Estimated number of ₹1 MRP Jarda pouches capable of manufacture: 22,63,00,000
  • Estimated taxable value: ₹6,90,21,500
  • Total alleged tax/duty involved: ₹15,57,28,345

The respondent relied upon Lalit Goyal vs Union of India & Another and Y.S. Jagan Mohan Reddy vs Central Bureau of Investigation, AIR 2013 SC 1933, to stress the seriousness of economic offences and the relevant considerations governing bail.

Court Order / Findings

The Rajasthan High Court considered the material available on record and the judgments cited by both sides.

The Court noted that:

  • the petitioner had been in custody since 21 July 2022;
  • the complaint had been filed on 17 September 2022;
  • the alleged offence under Section 132 of the CGST Act was punishable with imprisonment that could extend to five years, along with fine; and
  • as per paragraph 8.4 of the complaint and paragraph vii of the reply, the alleged total tax/duty evasion attributed to the petitioner was ₹15,57,28,345.

The Court considered Lalit Goyal vs Union of India & Another and observed the factual context in which the Supreme Court had declined to interfere with the order concerned in that matter.

The Court also referred to Y.S. Jagan Mohan Reddy vs Central Bureau of Investigation, wherein the Supreme Court emphasised that economic offences involving deep-rooted conspiracies and huge loss of public funds require serious consideration, and that courts must examine the nature of accusations, evidence, severity of punishment, character of the accused, possibility of securing presence at trial, apprehension of witness tampering, and larger public or State interest.

The Court distinguished Ramchandra Vishnoi Etc. vs Union of India. It observed that in that case the appellants had undergone nearly fourteen months of custody, and co-accused persons had also obtained bail. The Court found that those circumstances did not advance the present petitioner’s case.

The Court further considered Satender Kumar Antil vs Central Bureau of Investigation, particularly the Supreme Court’s clarification that economic offences cannot mechanically be placed into a single category and bail cannot be denied merely on that basis; gravity of the offence, object of the special statute and attending circumstances must be examined.

Ultimately, the High Court held that in the present case the allegation concerned ₹15,57,28,345, while the custody period was only about three months. Considering the facts, circumstances, nature and gravity of the alleged offence, the Court found it inappropriate to enlarge the petitioner on bail.

Result: The regular bail application was dismissed.

Important Clarification

A significant legal clarification emerging from the order is that the mere description of an offence as an “economic offence” does not automatically justify denial of bail. The Court expressly considered the principle discussed in Satender Kumar Antil vs CBI, which recognised that economic offences may involve varied activities and differing factual situations and, therefore, should not mechanically be grouped together for the purpose of refusing bail.

At the same time, the Court clarified through its application of the governing principles that bail remains dependent upon the specific facts of each case, including:

  • gravity and nature of allegations;
  • magnitude of alleged tax or duty evasion;
  • nature of supporting material;
  • period of custody;
  • stage of investigation and prosecution;
  • attending circumstances; and
  • larger considerations applicable to serious economic offences.

Thus, the bail application was not rejected merely because the case was labelled an economic offence. The Court relied upon the specific allegation of approximately ₹15.57 crore in tax/duty evasion, the alleged evidentiary trail involving GPS, toll, RFID and e-way bill data, the nature and gravity of the accusations, and the comparatively short custody period of about three months.

Sections Involved

Section 439, Code of Criminal Procedure, 1973 — Special powers of the High Court and Court of Session regarding grant of bail.

Section 132(1)(a), CGST Act, 2017 — Punishment relating to specified conduct involving supply of goods or services or both without issuance of invoice, in violation of the Act or Rules, with intent to evade tax.

Section 132(1)(h), CGST Act, 2017 — Punishment relating to acquisition, possession or dealing with goods which the person knows or has reasons to believe are liable to confiscation under the Act or Rules.

Section 132(1)(k), CGST Act, 2017 — Punishment relating to failure to supply information required under the Act or Rules, or supplying false information.

Section 132(1)(l), CGST Act, 2017 — Punishment relating to attempt to commit or abetment of commission of offences mentioned in the relevant clauses of Section 132(1).

Section 132(5), CGST Act, 2017 — Provides that offences specified in Section 132(1)(a), (b), (c) or (d), punishable under Section 132(1)(i), are cognizable and non-bailable.

Link to download the order -https://mytaxexpert.co.in/uploads/1783417616_1368compressed.pdf

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