Facts of the Case

The Petitioner, Rahul Agarwal, Director of M/s. New Laxmi Steel and Power Private Limited, a company engaged in manufacturing Sponge Iron and TMT Bar through two units, approached the Orissa High Court under Section 438 of the Code of Criminal Procedure seeking anticipatory bail. The application arose from Summon No.346/CG&GST dated 20.02.2020 issued to the company's Production Manager by the Enforcement Range, Cuttack, under Section 70 of the Odisha Goods and Services Tax Act, 2017, pursuant to an authorised inspection/search of the company's offices and manufacturing units and the consequential seizure of documents. The investigation concerned alleged wrong availment of Input Tax Credit and non-payment of GST on taxable supplies, based on allegations that ITC had been availed on fake GST invoices without any actual purchase or sale of goods. An interim protection order had earlier been passed on 01.05.2020 pending final disposal of the application.

Issues Involved

  1. Whether anticipatory bail under Section 438 CrPC is warranted where the allegation is availment of ITC on the strength of fake GST invoices without actual movement of goods.
  2. Whether custodial interrogation of the persons connected with the transactions is necessary for effective investigation into large-scale ITC fraud under the OGST Act.
  3. Whether the Petitioner's apprehension of arrest was well-founded at the given, premature stage of investigation.

Petitioner's Arguments

  • The summons issued under Section 70 of the OGST Act was for interrogation in connection with the investigation into the company's affairs, and the Petitioner apprehended arrest pursuant to it.
  • Protection from coercive action was sought under Section 438 CrPC, relying on the interim order dated 01.05.2020 already in force.
  • The averments, annexures and other documents placed on record were relied upon to contend that the apprehension of arrest was genuine and warranted protection pending investigation.

Respondent's Arguments

  • The Additional Standing Counsel (OGST) opposed the grant of anticipatory bail, pointing to the seriousness of the allegations of availment of ITC on fake GST invoices without actual purchase or sale of goods.
  • It was submitted that fraudulent ITC claims of this nature cause huge liability upon the Government exchequer and strike at the implementation of the GST law.
  • The State's stand was that interrogation of persons connected with the transactions, with reference to the seized documents, was essential for proper investigation, and that granting protection from coercive action would render this exercise futile.

Court Order / Findings

  • The Court held that allegations of availing ITC on the basis of fake GST invoices without actual purchase and sale of goods, or hiring or rendering of services, are very serious in nature.
  • Fraudulent ITC claims create huge liability upon the Government and constitute a threat to the very implementation of GST law, enacted to accelerate the country's economic growth.
  • For proper and effective investigation into such economic offences, interrogation of the persons concerned with reference to documents on the details of the transactions is an absolute need; granting protection from coercive action at this stage would likely render the exercise futile.
  • The Court found that the Petitioner's apprehension of being arrested was not well-founded at this premature stage.
  • The ABLAPL was accordingly dismissed, and the interim order dated 01.05.2020 was held not to survive.
  • The Petitioner was directed to appear before the Investigating Officer, CT & GST (Enforcement Range), Bhubaneswar, on receipt of fresh summons.

Important Clarification

  • Anticipatory bail cannot be used to shield an accused from custodial interrogation in cases involving allegations of fake invoicing and fraudulent ITC claims, particularly where investigation is at a nascent stage.
  • Courts will be reluctant to extend Section 438 CrPC protection where interrogation with reference to seized documents is essential to unearth the true extent of an economic offence of this nature.
  • Mere issuance of a summons under Section 70 of the OGST Act for interrogation does not, by itself, establish a well-founded apprehension of arrest sufficient to justify anticipatory bail.

Sections Involved

  • Section 438, Code of Criminal Procedure, 1973 – power of the court to grant anticipatory bail against apprehended arrest.
  • Section 70, Odisha Goods and Services Tax Act, 2017 – power to summon persons to give evidence and produce documents during an inquiry.

Decision – In Favour of

Department. The anticipatory bail application was dismissed, with the Court holding that the seriousness of the alleged fake-invoice ITC fraud required custodial interrogation, and the Petitioner's apprehension of arrest was not well-founded.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Orissa at Cuttack
  • Case No.: ABLAPL NO.4308 OF 2020
  • Coram: Hon'ble Mr. Justice D. Dash
  • Date of Order: 29.03.2022
  • Parties: Rahul Agarwal vs State of Odisha

Link to Download the Order

Download the Order

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