20 Crl. Misc. No.

1049/2019 and
Crl. Misc. No. 1051/2019

IN THE COURT OF THE LXII ADDL.CITY CIVIL &

SESSIONS JUDGE (CCH-63), BENGALURU.

Dated this the 27 th day of March, 2019

Present :

Sri.Parameshwara Prasanna.B
B.A.,LL.B.
LXII Addl.City Civil & Sessions Judge,
Bengaluru.

Criminal Miscellaneous No.1049 / 2019

AND
Criminal Miscellaneous No.1051 / 2019

PETITIONER : Mrs. Suman Mahendra Kumar Singhi

In Crl.Misc.1049/19 W/o Mr. Mahendra Kumar Singhi,
Aged about 46 years,
Residing at No.2/1A, Munnath,
Nanjappa Road,
Shanthi Nagar,
Bengaluru – 560 027.

PETITIONER : Mr. Mahendra Kumar Singhi,

In Crl.Misc.1051/19 S/o Mr. Prithvi Raj Singhi
Aged about 56 years,
Residing at No.2/1A, Munnath,
Nanjappa Road,
Shanthi Nagar,
Bengaluru – 560 027.
(By Sri. Harish S V, Advocate)
/VS/
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RESPONDENTS : 1. The commissioner of Commercial Taxes,

Karnataka,
Vanijya Terige Karyalaya,
Gandhinagar,
Bengaluru 560 009.
2. The Additional Commissioner
of Commercial Taxes (Enforcement),
South Zone, VTK-2 building,
B-Block, 3rd Floor, 80 feet road,
Kormangala,
Bengaluru 560 047.
3. The Assistant Commissioner of
commercial Taxes,
(Enforcement-3),
South Zone,
VTK-2 Building,
80 Feet road,
Koramangala,
Bengaluru – 560047.
4. The Deputy Commissioner of
Commercial Taxes,
(Enforcement-5),
South Zone,
VTK-2 Building,
80 Feet Road,
Koramangala,
Bengaluru -560047.

5. The commissioner of Central Tax,

Bengaluru East Commissionerate,
4th Floor, BMTC Building,
Old Airport Road, Domlur,
Bengaluru-560 071.

(By learned Special Public Prosecutor)

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COMMON ORDERS

Since these two criminal miscellaneous petitions

referred above are inter connected with each other, they are

disposed off by this common order.

These two petitions have been filed by the petitioners

under section 438 of Cr.P.C. for an order of anticipatory bail

in the event of their arrest by the respondent police for the

offence punishable under section 132 of Central goods and

services Act 2007 (herein after referred as GST Act).

2. In the petitions it is contended that the

petitioners are the Directors of M/s Steel Hypermart India

Pvt. Ltd, and M/s. Singhi Buildtech Pvt. Ltd. Both said

companies are registered under the provisions of GST Act

and they are assessed to income Tax and the said

companies interalia engaged in the business of Trading in

iron and steel. That solely on the basis of mere suspicion

about the involvement of the said companies in the circular

trading with other companies, the Joint Commissioner (ST)

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(Eng) (FAC), Salem, Tamilnadu requested the second

respondent to take up inspection of said companies.

Pursuant to the said request, the second respondent issued

a authorisation to the subordinate officers including the

respondent No. 3, 4 and 5 to search the residence of the

petitioners and the other Directors, in exercise of powers

vested under section 67 of the KGST Act. Accordingly search

carried out by the respondent and other officers on

09.01.2019 and consequently, the respondent No. 3 has

sealed the premises of the petitioners at 11.30 pm illegally.

The petitioners' company challenged the said action of

sealing the premises as ultra vires before Hon'ble High court

of Karnataka, Bengaluru in writ petitions No. 2253/2019

and 2254/2019. After filing of the said writ petitions the

respondent No. 3 issued a endorsement dated 17.01.2019

agreeing to unseal the premises subject to the petitioners

appearing before the respondent No. 3 for unsealing the

premises. In the aforesaid writ petitions the Hon'ble High

court of Karnataka, Bengaluru directed the respondent to

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unseal the premises of the petitioners as per order dated

31.01.2019. The entire proceedings initiated by the

respondents including the search and seizure are solely

based on the suspicion. The petitioners are innocent and

they have been carrying out the business in a legitimate

manner. The respondents are making hectic effort to arrest

the petitioners, hence on genuine apprehension of imminent

arrest by the respondent, the petitioners are constrained to

file for anticipatory bail. The ingredients required for

effecting an arrest of the petitioners as prescribed under

section 132 of GST act is lacking. The offences alleged

against the petitioners are not exclusively punishable with

death or imprisonment for life. The petitioners are

permanent residents of their addresses shown in cause title

of the petition and they have got permanent abode and as

such they will neither abscond nor delay the proceedings in

case of grant of bail. The petitioners are ready to co-operate

with the respondent during investigation and they are also

ready and willing to furnish solvent sureties and to abide by

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any conditions that may be imposed by the Court. Inter-alia

with these contentions, the petitioners seeks for allowing of

their respective bail petitions.

3. Per contra, the Learned Special Public Prosecutor

in his objections has contended that the petitioners are the

directors of M/s Steel Hypermart India Pvt. Ltd, and M/s.

Singhi Buildtech Pvt. Ltd. It is urged that 2 nd respondent

based on confidential report received from Joint

Commissioner (ST) (Eng) (FAC), Salem, Tamilnadu dated

03.01.2019 took decision for inspection of business

premises of aforesaid companies as there was material on

record to show that the aforesaid companies along with

other business concern viz. M/s Metal Craft, M/s Jindal

Steels, M/s India Ispat, M/s Ferrum Merchant and M/s

Ferrous and Alloys were involved in the circular Bill trading

in the states of Tamil Nadu and Karnataka. That on the

basis of the authrisation for inspection issued vide FORM

GST INS-01 MA No. 1817/2018-19 dated 08.01.2019 by the

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2nd respondent, the 3rd respondent visited the aforesaid

companies for inspection and during the course of

inspection since the books of accounts were not produced

for verification as a precautionary measure in the interest of

Revenue the business premises were sealed in order to

ascertain as to whether the physical stock held at the

business premises valued at Rs. 7.43 Crore were covered by

purchase invoices and related supporting documents. The

officers have examined the data available in the Analytics

Software of the tax department pertaining to the aforesaid

companies which has reveled that the tax payment in cash

made by M/s. Singhi Buildtech Pvt. Ltd., Bengaluru for the

financial year 2017-18 and 2018-19 is only Rs. 36,15,617/-

and Rs. 195.78 crores out of total inward supplies /

purchase is Rs. 234.29 crores in 2017-18 and 2018-19 is

made only from registered Taxable persons involved in

circular trading and on examination of the Analytics

software of M/s Steel Hypermart India Pvt. Ltd, it is reveled

that Rs. 232.37 crore out of total outward supplies / sales of

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Rs. 269.22 crore in 2017-18 and 2018-19 is made only to

the registered taxable persons involved in circular trading. It

is contended that the petitioners along with other business

concerns are involved in circular bill trading within

themselves with an intention to avail undue input tax credit

benefit and to avoid payments of taxes. It is further urged

that aforesaid companies have availed various credit

facilities from bank and financial institutions and the

petitioners being the Directors might be having diverted its

funds with dishonest intention of making personal gain and

in order to unearth the truth the custodial interrogation of

the petitioners is required. The investigation is at initial

stage. The petitioners after getting interim anticipatory bail

are not co-operating with the investigating authority. The

investigation authority must be given the complete

independence to investigate the cases since it involves

National interest. The nature of offence is economic offence

where under the petitioners have deprived the state of its

revenue to the tune of several hundred of crore rupees

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which will directly effect the economy of the state. If the

petitioners are granted with bail they may abscond and the

investigation would be hampered and the possibility of the

petitioners fleeing away from justice and committing similar

kind of offences cannot be ruled out. Interalia, on these

grounds, the learned Special Public Prosecutor prayed for

rejecting of the petitions.

4. The counsel for petitioners argued that the

petitioners are innocent. They have been carrying out the

business in a legitimate manner. It is argued that as per the

GST act the maximum punishment which is liable to be

imposed is only 5 years and as per section 138 of GST act

the offences is compoundable before the commissioner. He

further submitted that the petitioners have paid the GST by

creating invoices and no irregularity or loss of revenue has

been caused to the Central or State Government. He further

submitted that the petitioners have not availed any loan or

not raised any amount from the bank, even in the input tax,

the credit has also been given and that has not been
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deducted or claimed from the Central or State Government.

He further submitted that the preamble of GST act make it

clear that it is intended to levy and collect tax and it has not

defected by the petitioners. He further submitted that the

petitioners are not defaulters to the bank or to the State.

The only allegation which has been alleged against that they

have given inflated transaction and the input tax credit and

sale is not a offence under the said act. The counsel for

petitioners along with memo has produced Audit report

pertaining to the aforesaid companies and submitted that in

respect of the transaction shown in Audit report the tax has

been paid and thus the petitioners have not committed

alleged offence despite of it the respondent police are making

hectic effort to arrest the petitioners, hence on genuine

apprehension of imminent arrest by the respondent, the

petitioners are constrained to file these petitions for

anticipatory bail. He further submitted that after grant of

interim anticipatory bail from this court petitioners have

appeared before I.O. and they are co-operating for

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investigation. Inter-alia with these contentions the Learned

counsel for petitioners prays for allowing of the bail petition.

The counsel for petitioners in support of his argument

has relied upon the decision of the Hon'ble High court of

Karnataka, Bengaluru dated 18.02.2019 passed in Criminal

petition No. 497/2019 C/W Criminal Petition No. 498/2019.

5. Where as the learned Special Public Prosecutor

has argued that the petitioners are the directors of M/s Steel

Hypermart India Pvt. Ltd, and M/s. Singhi Buildtech Pvt.

Ltd. He submitted that the aforesaid companies along with

other business concern viz. M/s Metal Craft, M/s Jindal

Steels, M/s India Ispat, M/s Ferrum Merchant and M/s

Ferrous and Alloys were involved in the circular Bill trading

in the states of Tamil Nadu and Karnataka. He submitted

that the petitioners have committed the serious fraud under

GST Act by claiming crore of rupees worth input tax credit

without there being the real sale of goods. He further

submitted that the petitioner have not paid the input tax

credit. He further submitted that if the scam committed by

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the petitioner is allowed to be continued then it will be

having its own cumulative effect on the economy as a whole.

He further submitted that the investigation is in progress

and the petitioners after obtaining interim anticipatory bail

are not co-operating with the respondent for investigation.

He submitted that the Jail and no bail should be rule in

these type of serious economic offences and economic

offences constitute a class apart and need to be visited with

a different approach in the matter of bail. He submitted that

fair and free investigation not possible in case of grant of

anticipatory bail. If the petitioners are released on bail then

the investigation will be hampered. Interalia, on these

grounds, the learned Public Prosecutor prayed for rejecting

of the petitions.

Learned Special Public Prosecutor in support of his

contentions has relied upon the following citations;

1) 1988 Crl. L. J. 1079- Rajasthan High Court

2) 2001 Crl. L.J 1963-Delhi High Court
3) AIR 2013 Supreme Court 1933.
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4) AIR 2012 Supreme Court 1676.

5) AIR 1997 Supreme Court 3806.

6. Now the points that would arise for my

determination:

1. Whether the petitioners have made out

substantial or reasonable grounds to
enlarge them on anticipatory bail
under Section 438 of Cr.P.C?
2. What Order?

6. My findings of the court on the above points are

as follows:

Point No.1 : In the Negative

Point No.2 : As per final order for the following:

REASONS
8. Point No.1: The case of the prosecution in

brief is that the petitioners herein are the husband and wife

and they are the directors of the M/s Steel Hypermart India

Pvt. Ltd, and M/s. Singhi Buildtech Pvt. Ltd. The aforesaid

companies with other business concerns are involved in

circular bill trading in the state of Tamil Nadu and

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Karnataka and on examination of the data available in the

Analytics Software of the respondent's department it is

noticed that the total outward supplies / sales of M/s.

Singhi Buildtech Pvt. Ltd for the financial year 2017-18 and

2018-19 is Rs. 300,64,44,966/- and the above information

revels that Rs. 195,78 crore out of total inward supply /

purchase of 234.29 crore in 2017-18 and 2018-19 is made

only from registered taxable persons involved in circular

trading. It is further alleged that the total outward supply /

purchase of M/s Steel Hypermart India Pvt. Ltd for the

financial year 2017-18 and 2018-19 is Rs. 2,34,29,84,870

and the above information revels that Rs. 195.78 crores out

of total inward supplies of Rs. 234.29 crores during 2017-18

and 2018-19 is made only from registered taxable persons

involved in circular trading.

9. It is the case of the prosecution that the

petitioners have committed serious fraud under GST act by

claiming crore of rupees worth input tax credit without there

being the real sale of goods and without paying the GST.
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10. The nature of offence alleged against the

petitioners is economic offence where under the petitioners

alleged to have deprived the state of its revenue to the tune

of more than hundreds of crores of rupees. It is settled law

that economic offences constitute a class apart and need to

be visited with a different approach in the matter of bail.

11. The Honb'e Rajastan, High Court in the decision

report in 1988 Criminal L.J. 1079 held that “Economic

offence involving evasion of lacs of rupees – Bail should

not normally be granted – Anticipatory bail should

normally be out of question. Jail and not bail should be

the in such serious cases”.

12. The Hon'ble Supreme court in the case of Y. S.

Jagan Mohan Reddy v. Central Bureau of Investigation held

that “Economic offences constitute a class apart and

need to be visited with a different approach in the

matter of bail. The economic offence having deep rooted

conspiracies and involving huge loss of public funds

needs to be viewed seriously and considered as grave

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offences affecting the economy of the country as a

whole and thereby posing serious threat to the financial

health of the country. While granting bail, the Court

has to keep in mind the nature of accusations, the

nature of evidence in support thereof, the severity of

the punishment which conviction will entail, the

character of the accused, circumstances which are

peculiar to the accused, reasonable possibility of

securing the presence of the accused at the trial,

reasonable apprehension of the witnesses being

tampered with, the larger interests of the public/ State

and other similar considerations”.

13. The grave and serious allegations of fraud by

way of circular trading is made against the petitioners. The

investigation is at a preliminary stage and in view of the

grave and serious allegations made against the petitioners I

am of the view that the investigating authority should be

given complete independence to proceed with further

investigation since the case involves national interest and

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the custodial interrogation of the petitioners is required for

fair investigation.

14. The Learned Special public Prosecutor argued

that the interim anticipatory bail granted to the petitioners

in fact hampered the investigation and because of it the

petitioners are not co-operating with the investigating

officers. Since the petitioners have not co-operated with

investigating officers I am of the view that the said interim

anticipatory bail granted earlier should be canceled.

15. It is pertinent to note that under GST Act arrest

can be done as per required procedure contemplated

therein. The arresting authority have to obtain authorization

of arrest from the commissioner of Central tax and the said

authorization would be given only after ascertaining the

involvement of the petitioners in the commission of the

offence, which requires detailed investigation and in the case

on hand admittedly till today no authorization for arrest has

been issued by commissioner of Central tax GST

commissionerate and as such even reasonable apprehension

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of arrest of the petitioners is also not made out by the

petitioners.

16. Upon considering the seriousness and gravity of

the offences alleged against the petitioners, this Court is of

the opinion that the petitioners are not entitled for an extra

ordinary relief of anticipatory bail.

17. Moreover, since the investigation is at the initial

stage, in case of grant of anticipatory bail to the petitioners,

they may abscond and the chances of petitioners causing

hurdle to the investigation and causing threat to the

prosecution witnesses and committing similar offences

cannot be ruled out. Hence by considering all these aspects,

this Court is of the opinion that the petitioners are not

entitled for anticipatory bail before the completion of

investigation. Accordingly, I answer point No.1 in the

Negative.

18. POINT NO.2: In view of my findings on point

No.1, I proceed to pass the following:

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ORDER

The anticipatory bail petition filed

by the petitioners in Crl. Misc. No.
1049/2019 and Crl. Misc. No. 1051/2019
under Section 438 of Cr.P.C are hereby
rejected and interim anticipatory bails
granted earlier are hereby canceled.

(Dictated to the Stenographer, transcript the same and typed by her,

and then corrected and pronounced by me in open court on this the
27 th day of March, 2019).

(Parameshwara Prasanna.B),
LXII Addl.City Civil &
Sessions Judge (CCH-63)
Bengaluru.