Supreme Court Grants Bail in GST Evasion Case: Ratnambar Kaushik vs. Union of India (2022)

Introduction

Date of the Judgment: 05 December 2022
Citation: Petition for Special Leave to Appeal (Crl.) No. 10319 of 2022
Judges: Hon’ble Mr. Justice A.S. Bopanna and Hon’ble Ms. Justice Hima Kohli
Can an individual accused of GST evasion be granted bail when the investigation is complete and the charge sheet has been filed? The Supreme Court of India recently addressed this question in a case involving allegations of clandestine tobacco transportation and tax evasion. The Court considered the period of incarceration, the nature of the evidence, and the stage of the proceedings to determine whether bail should be granted. The judgment was delivered by a bench of Hon’ble Mr. Justice A.S. Bopanna and Hon’ble Ms. Justice Hima Kohli, with the opinion authored by Hon’ble Ms. Justice Hima Kohli.

Case Background

The petitioner, Ratnambar Kaushik, was accused of clandestinely transporting raw, unmanufactured tobacco. The prosecution alleged that the tobacco, brought from Gujarat, was intended for the clandestine manufacture and supply of chewing tobacco without paying the required taxes. The authorities claimed that while 7 trucks carrying 90,520 kgs of tobacco were initially identified, further investigation revealed a total of 287 trucks involved in similar transportation. The respondent, Union of India, contended that the total tax, duty, and cess involved amounted to ₹15,57,28,345, based on the projected manufacture of zarda pouches from the seized tobacco. The petitioner disputed these claims, arguing that the tax liability for the 7 trucks was significantly lower.

Timeline:

Course of Proceedings

The petitioner had filed a bail application under Section 439 of the Code of Criminal Procedure (Cr.P.C.) before the High Court of Judicature at Rajasthan, Bench at Jaipur, which was dismissed on 21.10.2022. The High Court’s dismissal led to the petitioner’s appeal before the Supreme Court.

Legal Framework

The petitioner was charged under Section 132(1)(a), (h), (k), and (l) read with Section 132(5) of the Central Goods and Services Tax Act, 2017. These sections pertain to offenses related to:

• ✓ Section 132(1)(a): “Supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax.”
• ✓ Section 132(1)(h): “Obtains any invoice or bill or any other document which is false or incorrect.”
• ✓ Section 132(1)(k): “Transports any goods without the cover of documents as may be specified in this behalf.”
• ✓ Section 132(1)(l): “Evades tax, or attempts to evade tax, or abets the evasion of tax.”
• ✓ Section 132(5): “The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of sub-section (1), and the offences specified in clause (f) or clause (g) or clause (j) of sub-section (1) and punishable under clause (ii) of sub-section (1) shall be cognizable and non-bailable.”

The punishment for offenses under Section 132(1)(l)(i) of the Central Goods and Services Tax Act, 2017, includes imprisonment that may extend to five years and a fine.

Arguments

Petitioner’s Arguments:

• ✓ The allegations made by the respondent are far-fetched.
• ✓ Even if the allegations regarding 7 trucks carrying 90,520 kgs of raw tobacco are accepted, the GST would only amount to ₹1,93,26,020.
• ✓ The cess amount of ₹11,04,34,400 claimed by the respondent is without proof of manufacture of zarda and is a projected value to inflate the total amount to more than ₹15 Crores.
• ✓ The allegations are made to allege a cognizable and non-bailable offense to deny bail and take the petitioner into custody.

Respondent’s Arguments:

• ✓ The petitioner clandestinely transported raw, unmanufactured tobacco from Gujarat.
• ✓ The tobacco was cleared in the name of M/s Maa Ambey Enterprises but was transported to M/s Galaxy Tobacco in Delhi.
• ✓ The unmanufactured tobacco was used for clandestine manufacture and supply of chewing tobacco without paying taxes.
• ✓ The total tax/duty and cess involved would be ₹15,57,28,345, based on the projected manufacture of zarda pouches.
• ✓ Investigation revealed 287 more trucks loaded with raw tobacco, as per Toll/RFID data from NHAI.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues but considered the following:

1. Whether the petitioner should be granted bail considering the nature of the allegations, the period of incarceration, and the stage of the proceedings.
2. Whether the evidence presented by the respondent warrants continued custody of the petitioner.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The court considered the following legal provisions:

• ✓ Section 132(1)(a), (h), (k), and (l) read with Section 132(5) of the Central Goods and Services Tax Act, 2017: These provisions define the offenses related to tax evasion, false invoices, and illegal transportation of goods.
• ✓ Section 439 of the Code of Criminal Procedure (Cr.P.C.): This section deals with the power of the High Court or Court of Session to grant bail.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• ✓ The Court considered Section 132(1)(l)(i) of the Central Goods and Services Tax Act, 2017, noting that the punishment for the alleged offense is imprisonment that may extend to 5 years and fine.

What weighed in the mind of the Court?

The Supreme Court’s decision to grant bail was primarily influenced by the following factors: the completion of the investigation and filing of the charge sheet, the period of incarceration already served by the petitioner, and the nature of the evidence being primarily documentary and electronic. The court emphasized that the trial would take time to complete and that the petitioner’s presence could be secured through conditions imposed by the trial court.

Fact:Law Ratio

Logical Reasoning:

The court observed that the evidence to be tendered by the respondent would be primarily documentary and electronic, with ocular evidence from official witnesses, mitigating the risk of tampering or influencing. The court also noted that the petitioner had already undergone incarceration for more than four months and that the trial would take time to complete.

The Supreme Court stated, “In considering the application for bail, it is noted that the petitioner was arrested on 21.07.2022 and while in custody, the investigation has been completed and the charge sheet has been filed.”

The court also noted, “Further, in a case of the present nature, the evidence to be tendered by the respondent would essentially be documentary and electronic. The ocular evidence will be through official witnesses, due to which there can be no apprehension of tampering, intimidating or influencing.”

The court concluded, “Therefore, keeping all these aspects in perspective, in the facts and circumstances of the present case, we find it proper to grant the prayer made by the petitioner.”

Key Takeaways

• ✓ Bail can be granted in GST evasion cases when the investigation is complete, the charge sheet is filed, and the accused has been incarcerated for a significant period.
• ✓ The nature of evidence (documentary and electronic) and the risk of tampering are key factors in bail considerations.
• ✓ The court may impose conditions to secure the presence of the accused during the trial, such as depositing the passport.

Directions

The Supreme Court directed the trial court to:

• ✓ Release the petitioner on bail subject to conditions.
• ✓ Direct the petitioner to deposit his passport.
• ✓ Impose other conditions to secure the petitioner’s presence during the trial.
• ✓ Ensure the petitioner is produced before the trial court forthwith to comply with the order.

Development of Law

The ratio decidendi of this case is that in cases of economic offenses under the Central Goods and Services Tax Act, 2017, bail can be granted when the investigation is complete, the charge sheet is filed, and the accused has been incarcerated for a significant period, especially when the evidence is primarily documentary and electronic. This judgment reinforces the principle that pre-trial detention should not be prolonged unnecessarily, and the focus should be on securing the accused’s presence during the trial. This case does not change the previous position of law, but it applies the existing principles of bail jurisprudence to a specific context of GST evasion.

Conclusion

The Supreme Court granted bail to Ratnambar Kaushik, who was accused of GST evasion, considering that the investigation was complete, the charge sheet was filed, and the petitioner had been incarcerated for more than four months. The court emphasized that the evidence was primarily documentary and electronic, reducing the risk of tampering, and imposed conditions to ensure the petitioner’s presence during the trial. This judgment highlights the importance of balancing the need for investigation and prosecution with the individual’s right to liberty.