NAQEEB NAJEEB MULLA v. SUPERINTENDENT OF CENTRAL TAX HEAD QUARTERS PREVENTIVE UNIT BELAGAVI GST COMMISSIONERATE

CORAM: THE HON'BLE MS. JUSTICE J.M.KHAZI ORAL ORDER (PER: THE HON'BLE MS. JUSTICE J.M.KHAZI) Petitioner who is accused in O.R.No.17/2024-25, is seeking relaxation of condition No.1 imposed by the trial court whereby he is directed to deposit a sum of Rs.1 crore while releasing him on bail.

#2. Petitioner and his father Najeeb Mulla are Tax Consultants. The Superintendent of Central Tax arrested petitioner and produced before jurisdictional Magistrate in case file No.GEXCOM/ AE/INV/GST/3958/2024-AE O.R. No.17/2024-25 dated

27.06.2024 (for short ‘O.R.No.17/2024-25’) alleging “1. …….Apart from being Tax Consultant, the respondent is the Proprietor of M/s. Federal Logistics & Co. (GSTIN- 29EZEPM3298F1ZW) having their Registered Principal place of business at Shop No 2, CTS No 758, Plot No 53, 1st, Rukamini Nagar, Belagavi- 590016.

#2. Investigation was initiated against the respondent and other related firms for which the respondent is the tax consultant namely M/s. IK Aeroamphibious Private Limited - 3 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 (Trade Name- I.K Detailing), (GSTIN-29AAGC18338C1ZF) having the same Principal Place of business at Plot No. 53 Shop No.2 Cts No.758 R.S. No. 1291/1, Rukamini Nagar, Belagavi, 590016 and M/s Royal Jamo's Resort having (GSTIN-30AAGCI8338C1ZW) a firm on the same PAN- AAGC18338C registered in the state of Goa and Shabbir Huseni Chunawala, Trade Name-Matrix Engineering And Services, GSTIN: 27AFKPC0545B1Z1 and M/s. Air Systems, GSTIN- 29AFKPC0545B1ZX for passing of fraudulent ITC without actual supply of goods/services.

#3. Simultaneous searches dt. 20/06/2024 were conducted at the Principal Place of Business of the following firms- Federal (i) M/s. (GSTIN- Logistics 29EZEPM3298F1ZW), Shop No 2, CTS No 758, Plot No 53, 1st, Rukamini Nagar. Belagavi, 590016. Co. & (ii) Residential premises of Shri Naqeeb Najeeb Mulla Prop. Of M/s. Federal Logistics & Co. (GSTIN- 29EZEPM3298F1ZW), at Sy No.42/1a, Azam Ngar, Belagavi-590001, Karnataka. (iii) M/s. IK Aeroamphibious Private Limited (Trade Name- I.K Detailing), (GSTIN-29AAGC18338C1ZF) Plot No. 53 Shop No.2 Cts No.758 R.S. No. 1291/1, Rukamini Nagar, Belagavi-590016. (iv) Residential premises of Shri Imran K. Madiwale, Prop. Of M/s. IK Aeroamphibious Private Limited (Trade Name- I.K Detailing), (GSTIN-29AAGC18338C1ZF) and M/s Royal Jamo's Resort having (GSTIN-30AAGC18338C1ZW) at Plot No. 504, City Survey Number S65, RS No. 1389, Scheme No.13, TV Centre, Belagavi (v) Residential premises of Shri Shabbir Huseni Chunawala, Prop. Of Matrix Engineering and Services, GSTIN: 27AFKPC054581Z1 and M/s Air Systems, GSTIN: 29AFKPC0545B1ZX at Plot No 117, 185/1, Saifee Villa Bungalow, 2nd Stage Hanuman Nagar, Belagavi, Karnataka-590019 (vi) M/s. Air Systems, GSTIN- 29AFKPC054581ZX at Shruti Mahal, Shahu Nagar, Belagavi, 590010.

#4. During the course of investigation, it was found that the respondent is the regular tax consultant along with his father Shri Najeeb Mulla and files GST and Income Tax - 4 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 related Returns and handles tax related matters of the firms mentioned above. The respondent only files the monthly and quarterly Returns for these firms.

#5. Based on the facts unearthed during the course of Investigation, it was found that the taxpayer has key credentials for the abovementioned firms and using those credentials, the respondent has issued fake invoices to pass on fraudulent ITC without actual supply of goods/services. filing of statutory Returns Private

#6. The respondent filed monthly returns for the firm M/s Royal Jamo's Resort having (GSTIN- 30AAGC18338C1ZW) and showed supply of goods/services to M/s. IK Aeroamphibious (GSTIN- 29AAGC18338C1ZF), both firms registered under the same PAN but engaged in different kind of businesses and passed on the said ITC to his own firm M/s. Federal Logistics & Co. (GSTIN- 29EZEPM3298F1ZW). Further, passing on the said fraudulent ITC to Matrix Engineering and Services, GSTIN: 27AFKPC0545B1Z1 and some other firms. Limited,

#7. During the course of Investigation, it was found that the root firm M/s Royal Jamo's Resort having (GSTIN- 30AAGC18338C1ZW), a resort in Goa is Not operational since Dec. 2022 due to some legal disputes over land. The respondent for his vested interests passed on fraudulent ITC of Rs. 10.06 Cr. from M/s Royal Jamo's Resort to M/s. IK Aeroamphibious Private limited to pass on the same to his own firm. Accordingly, the respondent passed on fraudulent ITC of Rs.7.19 Cr from M/s. IK Aeroamphibious Private Limited to his own firm M/s Federal Logistics & Co., a firm created with malafile intention without having any genuine business transactions. Furthermore, the respondent passed on fraudulent ITC of Rs.6.57 Cr. to Shabbir Huseni (Legal Name-Matrix Engineering and Services), creating chain of bogus ITC transfer. Chunawala

#8. The proprietor of M/s Royal Jamo's Resort and M/s. IK Aeroamphibious Private Limited Shri Imaran K Madiwale in his statement dt. 20/06/2024 and 21/06/2024 submitted that the respondent has misused their GST credentials to pass on fraudulent ITC without actual supply of goods/services and siphon off cash, and that the - 5 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 respondent edited and forged copies of statutory GSTR-3B returns to benefit himself.

#9. Shri Shabbir Huseni Chunawala, proprietor of Matrix Engineering and Services and M/s. Air Systems vide his statement dated 20/06/2024 and 08/07/2024 submitted that the respondent has cheated them by misusing their GST credentials to file erroneous GSTR-3B Returns in order to benefit himself as the respondent has siphoned off cash by presenting them with edited and forged copies of GSTR-3B returns showing cash liabilities. Further, the respondent discharged through fraudulent ITC passed on by himself to the said firm through fake invoices. However, the respondent claimed to have discharged the cash liabilities by showing forged and edited GSTR-3B Returns reflecting cash payments. the actual liability

#10. Shri Shabbir Huseni Chunawala also filed a police complaint against the act of cheat done by the respondent.

#11. The said act of forging the Statutory Returns and availing and passing on of fraudulent ITC has been admitted by the respondent when confronted with the evidences gathered and statements of the related parties. The respondent in his statement dated 09/07/2024 and 10/07/2024 admitted that he has been involved in the act of passing of fraudulent ITC without actual supplies of goods by misusing the GST credentials of the firms under his control. Further, the respondent admitted to have forged/edited the GST-returns to siphon off cash and to embezzle funds.

#12. Based on the investigation carried out, Offence Case vide OR No.17/2024-25 dated 27/06/2024 was registered against the respondent for availing and passing on of fraudulent ITC to of Rs.7.19 Cr.”

#3. Vide order dated 18.07.2024 the trial Court granted bail to the petitioner. Among the conditions imposed for granting bail, one of the conditions is to - 6 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 deposit a sum of Rs.1 crore with the trial Court. The trial Court rejected the application filed by petitioner to relax the said condition. The Sessions Court has also rejected the petition filed by him under Section 439 to relax the said condition. In the present petition, he has challenged the said condition contending that the trial Court is not justified in imposing the said condition, on account of which it has become impossible for petitioner to come out on bail. As held by the Hon’ble Supreme Court in several judgments, while granting bail, the Court should not impose such conditions which make it impossible to the accused persons to be released on bail.

#4. In support of his arguments learned counsel for petitioner has relied upon the following decisions:-

#1. Dilip Singh V/s. State of Madhya Pradesh and Another (Dilip Singh)1 1 Crl.A.NO.53/2021 (DD.19.01.2021) - 7 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024

#2. Subhash Chouhan V/s. Union of India and Another (Subhash Chouhan)2

#3. Yashik Jindal V/s. Union of India (Yashik Jindal)3

#4. Mursaleen Tyagi V/s. The State of Uttar Pradesh and Another (Mursaleen Tyagi)4

#5. Sri. Asirul Mandal Alias Lalbabu S/o. Kayar Mandal V/s. State of Karnataka (Sri. Asirul Mandal Alias Lalbabu)5

#5. On the other hand, learned HCGP for respondent No.1 and learned counsel appearing for respondent No.2 submitted that while misusing the credentials of their clients, the petitioner and his father have misappropriated crores of rupees and invested the same in secured property and looking to the gravity of the offence committed by them, the trial Court is justified in imposing the condition in question.

#6. Learned counsel for respondent No.2 has relied upon the following decision: 2 Crl.A.No.186/2023 (DD 20.01.2023) 3 Crl.A.No.2982-2983/2023 4 2023 LiveLAw (SC) 700 5 Crl.P.No. 5644/2024 (DD 15.07.2024) - 8 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024

#1. Ramesh Kumar V/s. State of NCT of Delhi (Ramesh Kumar)6

#7. Heard arguments and perused the record.

#8. It is not in dispute that the petitioner and his father Najeeb Mulla are tax consultants. It is also not in dispute that they were dealing with the tax matters pertaining to M/s. IK Aeroamphibious Private Limited (Trade Name- I.K Detailing), M/s Royal Jamo's Resort, Matrix Engineering and Services, and M/s. Air Systems,. In addition to being tax consultants, petitioner Naqeeb Mulla is also proprietor of M/s Federal Logistic and Company.

#9. The investigation conducted by Superintendent of Central Tax reveal that misusing the credentials of the companies whose tax matters were dealt by petitioner and his father Najeeb Mulla, they have failed to credit the tax on behalf of the said 6 (2023) 7 SCC 461 - 9 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 firms and on the other hand, based on fake invoices passed on fraudulent ITC without supply of goods/services. The amount misused by them is to the tune of 7.09 crores.

#10. It is alleged the petitioner has committed the offences punishable under Sections 122 and 132 of the Central Good and Services Tax Act,

#2017. The maximum punishment prescribed under Section 132 is imprisonment which may extend to five years and fine.

#11. Section 437 of Cr.P.C. deals with grant of bail in non bailable cases. While granting bail in cases involving non bailable cases, the Court may impose the following conditions:- “437(3)(a) that such person shall attend in accordance with the conditions of the bond executed under this Chapter, (b) that such person shall not commit an offence similar to the offence of which he is accused, or - 10 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 suspected, of the commission of which he is suspected, and (c) that such person shall not directly or indirectly make any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to any police officer or tamper with the evidence, and may also impose, in the interests of justice, such other conditions as it considers necessary.]”

#12. The plain reading of this provision makes it evident that the condition which are required to be imposed are to make sure that the presence of accused be secured so that he should face the trial and also prevent him from committing any offences and also prevent him from threatening and tampering him with the witnesses.

#13. Though these provision does not specifically prohibit directing the accused to deposit cash security, Section 445 of Cr.P.C. gives an indication to this effect. It provides that where any persons is required by any Court or officer to execute a bond with or - 11 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 without sureties, such Court or officer may (except in case of a bond for good behaviour) permit him to deposit a sum of money or Government promissory notes to such amount as the Court or officer may fix in lieu of executing such bond. There may be cases where the accused is not in a position to furnish sureties and offer to deposit a certain sum of money which convince the Court that he may not abscond or else, the amount in deposit would be forfeit to the State. Thus, the general rule is that the accused be released on bail on his executing personal bond as well as furnishing sureties. Only when he is unable to furnish surety and offers cash security the Court may accept the same and impose condition to that effect.

#14. In Ramesh Kumar referred to supra and relied upon by the learned counsel for the respondent No.2 Hon’ble Supreme Court held as under: - 12 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 “criminal proceedings are not for realisation of disputed dues and, thus, a criminal court, exercising jurisdiction to grant bail/anticipatory bail, is not expected to act a s a recovery agent to realise the dues of the complainant, and that too, without any trial-Further held, since denial of bail amounts to deprivation of personal liberty, the court should lean against the imposition of unnecessary restrictions on the scope of S.438 CrPC and, thus, the conditions to be imposed under S.438 CrPC cannot be harsh, onerous or excessive so as to frustrate the very object of grant of anticipatory bail- Further held, the law presumes an accused to be innocent till his guilt is proved and, therefore, as a presumably innocent person, he is entitled to all the fundamental rights including the right to liberty guaranteed under Art. 21 of the Constitution –Further held, the words “any condition” used in S.438 should not be regarded as conferring absolute power on a court of law to impose any condition that it chooses to impose, but any condition has to be interpreted as a reasonable condition acceptable in the facts permissible in the circumstance and effective in the pragmatic sense and should not defeat the order of grant of bail.”

#15. Thus, in the above decision, the Hon’ble supreme Court has held that the direction to deposit certain sums for granting bail should not be resorted to. It also clarified that when in cases of misappropriation, the accused makes an offer to deposit the whole or part of public money allegedly misappropriated by him, it would be open to the Court to impose such a condition. - 13 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024

#16. In the present case, despite the fact that the amount involved is nearly 8 crores, still the trial Court is not justified in directing the petitioner to deposit Rs.1 crore. Therefore, this condition is required to be relaxed. However, having regqrd to the gravity of the offence committed by the petitioner, in order to ensure that he shall not leave the jurisdiction of the Court, it would be necessary to direct him to submit his passport before the trial Court and not to leave India without the permission of the trial Court.

#17. For the above reasons, this Court is of the considered opinion that the condition to deposit Rs.1 crore is liable to be relaxed. Instead of the said condition, the petitioner is directed to produce his passport before the trial Court and he shall not leave India without permission of the trial Court and accordingly, the following; - 14 - NC: 2024:KHC-D:17883 CRL.P No. 103174 of 2024 ORDER Petition filed under Section 482 of Cr.P.C. is allowed. The condition imposed by the trial Court directing the petitioner to deposit a sum of Rs.1 crore is set aside. However, the petitioner is directed to produce his passport before the trial Court and he shall not leave India without the permission of the trial Court. Sd/- (J.M.KHAZI) JUDGE VMB/AC, CT: UMD List No.: 1 Sl No.: 31