PUESH KUMAR GUPTA Vs. STATE OF GUJARAT

JUDGEMENT

(1.) This application is filed seeking bail under section 438 of the Code of Criminal Procedure, 1973 in respect of the offences punishable under Sections 406, 420, 467, 468, 471, 474, 120B of the Indian Penal Code and under Sections 85(1)(b), (C),(e), (f), (g), 85 (2)(g), 85(4), and 85(6) of the Gujarat Value Added Tax Act, 2003 for which FIR came to be registered at C.R. No.I4 of 2016 with the CID (Crime) Ahmedabad Zone Police Station.

(2.) The broad facts of the case are; 2. 1 The petitioners herein (except Mr Anil Kumar Chauhan i.e. the petitioner in Criminal Misc. Application No. 20340 of 2017 and Mr John Benedict who is the petitioner in Criminal Misc. Application No. 20344 of 2017, who are the authorized signatories of the Company) are Directors of Dharampal Satyapal Limited Company, having its registered Office at S.P Mukherjee Marg, New Delhi, 11006. The Company, which is admittedly not made a party to the complaint has its units at Assam, Noida and Uttar Pradesh. 2. 2 Eleven Consignment Sales Agents (for short 'CSA)and one individual were appointed as such from time to time in the State of Gujarat. Each of the said CSAs obtained their individual TIN number. 2. 3 The controversy centers around the operation of business dealings on the basis of three statutory forms namely Form 'F', Form 'C' and Form 'H', which are, under the provisions of the Central Sales Tax Act; respectively used for the purpose of transferring the goods to branch of the Company without sale; inter state sale; and dispatching the goods in the course of export. The broad facts in the FIR would indicate that one Mr Amit Pancholi had procured various relevant documents from certain economically backward class of persons and then TIN numbers in their names were obtained and the existence of firms or other entities was fictitiously shown and their names were used for the operation of the scam. It is alleged that after obtaining the delivery of the goods in New Delhi under the guise of its branch transfer, the goods were in fact sold in the State of Gujarat; but a show was made as if the goods are sold in New Delhi, Haryana and Rajasthan by issuing Form 'C' in the name of certain business people most of whom were dealing in ready made garments. It is alleged that, in fact, such persons had received ready made garments referable to Form 'C' in question, but a wrongful claim was made as if tobacco/its products were sold to them. It is alleged that in some cases even the refund was claimed. 2. 4 It is the case of the Investigating Agency that the above referred modus operandi was resorted to with a view to avoid the tax in as much as the liability of the tax in the local market of tobacco and its product is farfar more than the tax on similar goods sold inter State. It is also the case of the Investigating Agency that no tax is payable if branch transfer of the goods is made in any State in India as also if the goods are dispatched in the course of export. 2. 5 The FIR would further indicate that two persons namely Rajendra Keshwani and Amit Pancholi are alleged to have played a vital and crucial role in operation of the scam. That, to the above 12 CSAS, goods worth more than 916 crores were dispatched by the Company and the tax amounting to more than 200 crores has been avoided. 2. 6 Inviting the attention of this Court to observations made by this Court in paragraphs 7 and 9 in the order dated 13.10.2016 passed in Criminal Misc. Application No. 18706 of 2016 in the case of Rajendra alias Sonu Jethabhai Keshwani and Minesh Manubhai Vyas seeking anticipatory bail, observing that red carpet treatment was given to the accused persons herein, it was submitted that the investigator moved into action against the petitioners without any incriminating material against the petitioners, only in response to the said observations. 2. 7 Parity is also sought by the learned counsel for the petitioners while referring to the said order as also the order passed in the case of Amit Pancholi by the lower Court and in the case of Ashok Jain by this Court. 2. 8 It was next contended that in absence of Company being accused and in absence of the case of the investigator specifying as to which of the Directors were incharge and were in active control of the scam in question, the FIR itself was flawed. 2. 9 It was next contended that in the FIR, no specific role, either against the Company or against its Directors is contemplated and the master minds are stated to be accused Nos. 22, 23 and 24 above referred, who have been admitted to anticipatory bail or regular bail. It was contended that it is even whispered that any of the Directors of the Company were financially benefited out of the scam. It was also submitted that, it was even alleged that refund of the tax was either received by any of the Directors of the Company or the Company and that the act of the Company in dispatching the goods in Form 'F' is even questioned and thus it is argued that so far as the Company and its Directors are concerned, the dispatch of goods in question by branch transfer is found to be legal and valid under Form 'F'. 2. 10 It was also argued that there is no allegation against any of the Directors having fabricated any of the documents on the basis of which the scam is allegedly operated. 2. 11 Learned counsel for the petitioners also invited the attention of this Court to Section 2(10) defining the expression "dealer" as also other relevant provisions to point out that it was the dealer i.e. the 12 CSAs who were responsible to bear the tax liability after the dispatch of the goods by the Company in Form 'F'. 2. 12 It was argued by the learned Counsel Mr Mehta in which learned Counsel Mr Joshi also joined, that this Court while admitting Ashok Amritlal Jain to anticipatory bail by an order dated 05.05.2017 passed in Criminal Misc. Application No. 367 of 2017 observed that the entire case could be said to be based upon the documentary material and that as such no custodial interrogation of the applicant was required or imperative. It was argued that even the accused Vishal Jain who had received the refund in the course of the scam has been admitted to regular bail and accused Ashok Amritlal Jainfather of Vishesh Jain was admitted to anticipatory bail unconditionally. 2. 13 It was contended that a show was made by the investigator as if the three persons who have been either admitted to anticipatory bail or regular bail were absconders, whereas, in fact, they were before the Court seeking bail/anticipatory bail. 2. 14 It was argued that the FIR contains specific reference to role of Amit Pancholi having created the fictitious movement of documents and entities, and thus, the question as to creator of the entities/scam is answered in the FIR itself. It was also argued that no material so far during the course of more than a year of investigation is brought on record pointing out the benefits received by the Company/Directors out of the scam, and therefore, the Investigating Agency cannot be permitted to make out the imaginary grounds for seeking custodial interrogation of the petitioners. It was submitted that 'C' Form and 'H' Form were admittedly issued by the petitioners, and therefore also, no question of petitioners custodial interrogation arises. It was contended that, in fact, the investigator was trying to go beyond the FIR and other material which does exist. 2. 15 The learned counsel also submitted that full cooperation is given by the applicants so far in the course of investigation and the applicants would continue to cooperate with the Investigating Agency. Referring to various documents produced on record, it was contended that there was constant appearance by applicants/Company before the investigator whenever required and detailed explanation of the facts involved in the case was also given and on oath the deposition was made and without prejudice and with a view to get released various documents as also to see that the accounts of the Company freezed by the officials concerned are defreezed and business is revived under those accounts, a sum of more than 100 crores allegedly assessed has already been deposited with the concerned taxing agency and the appeal against such assessment is pending. 2. 16 Learned Public Prosecutor submitted that the entire scam was noticed on 19.01.2016 when a godown and other places of CSAs were raided. It was contended that the FIR is the only relevant document since it only puts the criminal machinery into motion and that other documents are also required to be considered. Referring to the modus operandi of the scam, the learned PP would contend that the Company Dharampal Satyapal Limited, appointed 11 CSAs and the Company is the principal of such agents and that Value Added Tax is inter alia dependent upon the movement of goods primarily under Form 'F', 'C' and 'H'. It was submitted that movement of goods occurred between the principal and the agents under Form 'F' and subsequently Form 'C' and Form 'H' were misused. It was contended that under Form 'F' a total goods worth Rs. 916 crores and more were dispatched without attracting the tax liability by way of branch transfer in the State of Gujarat. It was contended that no dispute has been raised by any one that, the entities under the banner of whom the scam was operated were fake and genuine. It was submitted that for the operation of scam, the people coming from economically weaker section of the Society like autorickshaw drivers were selected and were posed as CSAs and Director/s of the Company held meeting with such persons as and when required and executed the CSA agreement with them. It was contended that the accused John Benedict and Anil Kumar Chauhan are signatories of CSAs Agreement executed in the year 20092010, 20102011 and 20112012. It was contended that the Directors had given the authority to Mr John to execute such agreements. It was further contended that such CSAs were lured in the scam for money or loan etc., and documents supplied by them were used for operation of the scam. It was contended that the investigation so far revealed that the place of their trading etc., is fictitious and no business operations are being done at the said places. It was contended authorship of such fictitious entities and its beneficiaries in the scam is a big question to be probed which would require the custodial interrogation of the Directors of the Company. It was contended that the likely beneficiaries of the scam are the Directors of the Company. It was pointed out by the learned APP that the purpose of the scam was to avoid the tax since the sale of the goods in question within the State would incur farfar high tax liability as compared to inter State sale and no tax liability would be incurred if the goods are dispatched during the course of export. 2. 17 It was contended that being conscious of the scam, the Company itself deposited with the taxing agency a sum of over Rs. 100 crores assessed against it. It was submitted that the tax liability without interest and penalty may come to about Rs. 240 crores. 2. 18 Learned APP also submitted that the custodial interrogation of the petitioner is necessary since the author of fictitious creation i.e. Rajendra Keshwani has outrightly denied his role in the scam. It was submitted that custodial interrogation without protection from this Court, to disinter the above referred aspects made out by the investigator would benefit the investigation. Reliance has been placed upon State represented by CBI v. Anil Sharma reported in (1997) 7 SCC 187 to emphasise the necessity of custodial interrogation. Reliance has also been placed upon in the case of State of Orissa and ors. v. K Srinivasa Rao, reported in AIR 2001 SC 1701 . 2. 19 It was contended that names of the petitioners figured in the FIR itself, and therefore, the Court having noticed such fact indicated that the said accused i.e. the Directors were neither being proceeded against though named in the FIR, nor there was any clean chit given to them and that thus the Investigating Agency had maintained blissful silence qua them in the matter of investigation and that they were being given a red carpet treatment. It was submitted that once the person is named in the FIR, it is the discretion of the investigator to arrest him, and if eventually the Court does find enough material to detain them, it may exercise the discretion by releasing them on bail etc., It was submitted that a person named in the FIR may be arrested by the Investigator if he is satisfied with the material available with him. In the instant case, however, the Court found that the investigation qua the Directors was moving at all, and therefore, the observations came to be made in the above referred order that red carpet treatment was being given to the nine Directors of the Company. It was submitted that, a grievance was made by the Directors/Company that the above observations were made in their absence, right up to the Apex Court which relegated the case to the High Court and eventually the High Court ruled that the observations, in fact, constituted the reason for granting of bail and thus to the above referred persons said remarks were expunged. 2. 20 Learned PP also referred to some of the CSA Agreements to point out that despite the fact that the CSAs were stationed at Ahmedabad, agreement was made at other place, more particularly at Noida, Uttar Pradesh, and thus, there are all the chances of the involvement of the Company/its Directors in the scam. It was pointed out that various meetings had taken place between the representatives of both the parties and thus the Directors of the Company had an occasion to meet persons belonging to economically weaker section of the society like autorickshaw drivers and that it was thus within their knowledge prima facie, that the entities were fictitious. 2. 21 Learned PP would contend that the Directors of the Company are prime suspects in as much as though it is being argued before this Court that they were unaware of the illegal activities of other accused, at no point of time in any of the documents or correspondence entered into by the Directors with the Investigating Agency it was ever contended that they had been fooled by the scammers. It was submitted that at no point of time any of the scammers were told by the Directors that a huge liability of Rs. 240 crores were assessed and that they shall bear such liability. That they have voluntarily accepted such liability, which would, prima facie, indicate the involvement of the Directors in the scam. 2. 22 It was contended that the cases of those admitted either on anticipatory bail or regular bail and the case of the petitioners herein is comparable in as much as their role is different and that their exact role can be known during the custodial interrogation and that the Court itself drew the distinction between the two set of accused by stating that the petitioners before it were hounded whereas red carpet treatment was given to accused Nos. 1 to 9 who even according to the State are the principal accused. It was contended that this fact itself distinguishes the two cases and no parity can be claimed. 2. 23 It was also pointed out that the main consideration for admitting father of Vishesh Jain to anticipatory bail was the voluntary deposit of the tax money by Vishesh Jain, and therefore also, the said case cannot be compared with the facts of the present case. It was also submitted that there were striking dissimilarities between cases on which parity is claimed and the case of the petitioners herein. Reliance has been placed upon in the case of Dineshkumar Vasudev Nayak v. State of Gujarat reported in (2003) 2 GLH 274 more particularly para 5 thereof, which held that the parity cannot be claimed on mere comparison of two cases but individual attributes of person and other relevant considerations are also required to be taken into account before applying the principle of parity. 2.24 In rejoinder the learned counsel for the petitioner contended that each of the CSAs were granted TIN number by concerned department of taxing agency presumably after due verification and there was no reason for the Company to suspect their credentials before entering into the agreements with them. It was contended that bonafide agreement was entered into with CSAs. It was also submitted that on mere denial by one of the accused about his involvement in the offence, it was unjust and unreasonable for the State to ignore the statements of other accused/witnesses, more than 26 in number. 2. 25 Having anxiously considered the rival contentions, the question as to whether custodial interrogation of the petitioners is necessitated in the facts and circumstances of the case is required to be determined on the basis of the prima facie material placed on record of the case. Bearing in mind the principle laid down in CBI v. Anil Sharma and the case of State of Orissa v. K Srinivasa Rao (Supra), as also sections 41 of the Code of Criminal Procedure, 1973 the above question is required to be answered without appreciating the case of the either side on merits at this stage of the proceedings. It cannot be disputed that as and when necessary and if the facts of the case so requires, an authorized Police Officer can obtain the custody of a person for investigation/interrogation either with or without warrant as the case may be. The arrest, however, cannot be made on mere imagination; but it can always be made inter alia on reasonable suspicion on fortification of the "reason to believe" on the basis of the information of the person having committed the offence. The necessity of the arrest of a person would, therefore, depend upon the facts and circumstances of each case and no straight jacket formula can be laid for that purpose. It is a settled legal position that a person can be proceeded against and can be tried even without arresting him. 2. 26 In so far as facts of the present case are concerned, it appears that the petitioners are sought to be proceeded against for the offences in question in individual capacity but as Directors of the Company afore stated. The FIR avers the commission of the offence particularly by the Company by allegedly employing dubious method for avoidance of the tax as above stated. The Company, however, is made a party to the proceedings and the FIR does specify as to which of the nine Directors of the Company had played an active role. In this context, it would be relevant to refer to Sections 85 (1)(b)(c)(e)(f)(g), 85 (2)(g), 85(4) and Section 85(6) of the Gujarat Value Added Tax Act, 2003 (for short 'VAT Act'), which deal with the procedure in relation to the offences by Company etc. The person incharge of the affairs of the Company at the time of commission of the offence and who was responsible to the Company for the conduct of its business is the person, who is deemed to be guilty of the offences; along with the Company. FIR contains averments in general against the directors and no other material is shown in agreement with above referred provision is placed on record of the case or shown to this Court. 2. 27 That apart, the petitioners are sought to be charged with offences under Sections 85(1)(b),(c),(e), (f),(g) as also Section 85(2)(g) and 85(C) of the VAT Act. It is pointed out by the learned PP as to how the petitioners furnished a false return, false tax invoice bill voucher, cash memorandum, Declaration Certificate of other documents or knowingly kept false accounts or knowingly issuance of false Certificate of Declaration etc., or how a willful attempt to evade tax liability or how there was non compliance of Section 67 or how there was abetment of the said offences as contemplated under Section 85 referred to herein above. This Court is conscious of the fact that, at the stage of anticipatory bail, the exact material fortifying the commission of the specific offences may be available with the Investigating Agency, but it cannot be disputed that there must be some suspicion connecting the applicant with the said offences. What is stated to be relied upon against the petitioners is the factum of execution of the CSA Agreement, their meeting with various CSA agents who were presumably belonging to the weaker section of the Society and illegal movement of goods initiated by CSAs. It is the case of the Investigating Agency that Form 'F' issued by the Company was fictitious. Therefore so far as Company is concerned, admittedly the movement of goods at its end was legal and valid. Suspicion is sought to be raised against the petitioners on the movement of goods subsequent to the Company transferring the goods into the possession of the above referred CSA agents. Except as above, it is pointed out as to how the petitioners were responsible for such movement, and thus, the suspicion prima facie, appears to be imaginary rather than substantial or cogent. It is even alleged that the petitioners received any benefit out of the transaction in question out of the scam in question. Undisputedly, the investigation for a period of more than one year has been done so far and except as above, no cogent material justifying the suspicion against the petitioners forms the record of the case. Even the allegations in the FIR centers around two accused namely Amit Pancholi and Rajendra Keshwani. During the course of more than one year of investigation, the Investigating Agency is unable to collect the material connecting the acts of the said accused or other accused directly with the petitioners. Admittedly, each of the 11 or 12 CSAs possessed individual TIN number and it is under those numbers that they operated. It is the case of the Investigating Agency that the petitioners aided in obtaining such TIN numbers possessed by the 11 or 12 CSA agents. Admittedly, Form 'C' and 'H' were issued by the petitioners and admittedly in some of the cases, refund was claimed by other accused person/s and the petitioners herein. There is also no material with the Investigating Agency demonstrating even indirect benefit to the petitioners. It will be relevant to note that definition of dealer contained in Section 2(10) of the GST Act makes the dealer which would include CSA responsible for tax and the material has been produced on record indicating the movements of goods subsequent to issuance of Form 'F' by the CSAs and the petitioners. The needle of suspicion is, therefore, rightly directed by the investigator against the said dealers and in absence of strong suspicion, sufficient enough to divert such needle of suspicion to the Company or its Directors, it is possible at this stage to say that if the dealer turns out to be fake, the Company or its Directors would be beneficiaries as argued by the learned PP. 2. 28 It is also disputed that the petitioners/Company has so far cooperated with the Investigator as indicated in detail herein above. 2. 29 It is true that the FIR would set the criminal machinery into motion and the Court would be required to look into other material while considering the application under Section 438/439 of the Code of Criminal Procedure; should that material be brought on record. In the instant case as indicated in greater detail such material is wanting. 2. 30 As indicated above, the case revolves around three forms i.e. Form 'F', 'C' and 'H' and other documents used in obtaining TIN numbers and thus as observed by this Court, in the above referred case, the case is substantially based upon documents and in view of the above discussion, it does appear that custodial interrogation of the petitioners is necessary. 2. 31 It is also required to be noted that in absence of the material against the petitioners, so far the petitioners were contemplated to be arrested and in the opinion of this Court rightly so. 2. 32 It is true that the statement of co-accused can form the basis for investigation at preliminary stage of anticipatory bail. However, the foregoing discussion would show that prima facie, the case against the petitioners is based upon imagination rather than the suspicion contemplated under section 41 of the Cr.P.C., 1973 and therefore, even if the statement of the co-accused is taken into consideration, the case for admitting the petitioners to bail is made out. This Court, therefore, orders bail for the petitioners in anticipation of their arrest.

(3.) Learned Advocate for the petitioners on instructions states that the petitioners are ready and willing to abide by all the conditions, including impositions of conditions with regard to the powers of Investigating Agency to file an application before the competent court for their remand. He would further submit that upon filing of such application by the Investigating Agency, the right of petitioners accused to oppose such applications on merits may be kept open.