HIGH COURT OF MADHYA PRADESH : JABALPUR (Division Bench) M.Cr.C. No.24219/2020 Jagdish Arora and another -Versus- Union of India, through Senior Intelligence Officer, GST Intelligence, Bhopal Shri Mukul Rohatgi, Senior Advocate with Shri Ajay Gupta, Shri Rahul Diwaker, Shri Kapil Wadhwa and Shri Ravi Kant Patidar, Advocates for applicants. Shri Vikram Jeet Banerjee, Additional Solicitor General and Shri Siddharth Seth, Advocates for respondent/Union of India. CORAM : Hon'ble Shri Justice Ajay Kumar Mittal, Chief Justice. Hon ble Shri Justice Vijay Kumar Shukla, Judge. ORDER (Jabalpur, dtd. 18.08.2020) Per : Vijay Kumar Shukla, J.- Hearing convened through video conferencing. 2. This is first bail application filed under Section 439 of Code of Criminal Procedure [for short CrPC ] on behalf of applicants, namely, Jagdish Arora and Ajay Kumar Arora, who have been taken into judicial custody in connection with Crime No.DGGI/BhZU/1204/03/2020-21/SDPL, registered at Central Goods and Service Tax, Bhopal, in respect of offence punishable under Section 132(1)(a) read with section 132(1)(i) of Central 2 Goods and Service Tax Act, 2017 [hereinafter referred to as CGST Act ]. 3. bail application preferred by applicants under Section 437 of CrPC before learned Judicial Magistrate First Class, Bhopal, was rejected on 14-7-2020. Thereafter, they moved application before Court of Sessions under Section 439 of CrPC, which also faced dismissal vide impugned order dated 16-7- 2020. 4. Shorn of unnecessary details : factual expose adumbrated in nutshell, are that applicants were taken into custody by Central Goods and Service Tax Department (CGST Department) on 7-7-2020, while their formal arrest was shown on 8- 7-2020 under Section 69 of CGST Act, and they have been in jail since 9-7-2020. instant case arises out of proceedings initiated by CGST Department in relation to purported evasion of Goods and Service Tax (GST) by Company Som Distilleries Pvt. Ltd. [hereinafter referred to as SDPL ] purportedly leviable and evaded on account of production and sale of sanitizers. 5. At outset, petitioners claimed that neither Jagdish Arora nor Ajay Kumar Arora, applicants herein, are Directors/ Managers/Officers/employees or authorized representatives of 3 SDPL and as such, they are not responsible for day-to-day business affairs of Company. In fact, both applicants had resigned their Directorship from SDPL on 01-4-2009, i.e. nearly 11 years ago. certified copy of Form-32 having details of resignation from Directorships is appended to application as Annexure-P/3. It is asserted that CGST Department, however, has not collected or placed on record even iota of documentary evidence in order to substantiate their version. It is strenuously urged that applicants are entitled to bail on this ground alone. 6. It is putforth that initially GST authorities had communicated that demand of GST liability was made to extent of 7,96,00,000/-. Thus, in order to demonstrate its bona fide SDPL immediately deposited 8 crores under protest. According to petitioners CGST Department has now increased purported liability to 33 crores as afterthought. 7. It is argued that instant arrest proceedings are completely premature, as till date assessment proceedings have not commenced and, therefore, there is no concretized liability that GST Department can fasten on SDPL. To bolster submission, reliance is placed on decisions of High Court of Madras in case of M. Jayachandran Alloys Pvt. Ltd. vs. Superintendent of GST and Central Excise W.P. No.5501/2019 4 and Delhi High Court in Make My Trip (MMT) vs. Union of India, 2016 (44) STR 481 (Delhi), confirmed by Supreme Court in judgment rendered in case of Akhil Krishan Maggu and another vs. Deputy Director, DGGI and Ors C.W.P. No.24195/2019 (OM). 8. It is stated on behalf of applicants that SDPL is private limited company which was incorporated in year 1986 under provisions of Companies Act, 1956. SDPL is engaged in business of manufacture and sale of alcohol based products and has made its mark across country, primarily on account of consistently and uniformly manufacturing high quality products. It is significant and honest contributor towards Government exchequer and contributes about 38 crores annually on account of various taxes. company also provides employment to about 800-1000 persons across India. 9. It is pleaded that prior to March, 2020 SDPL was not manufacturing sanitizers. On 19-3-2020 vide order No.1(2)/2020- SP-1 Government of India directed Chief Secretaries of all States to initiate steps to enhance production of hand sanitizers and further accord necessary permission to sanitizer manufacturers and distilleries, which on account of having existing infrastructure and ability to manufacture alcohol based products, could easily 5 manufacture sanitizers. This was done to meet increased demand in order to curb spread of COVID-19 pandemic. 10. Accordingly State of Madhya Pradesh issued licence to SDPL to manufacture hand rub sanitizer for period 24-03-2020 to 30-6-2020. Subsequently, licence was extended by State of Madhya Pradesh, till 30-6-2025. 11. On 4-4-2020, SDPL was granted certificate of approval by Government Analyst, who confirmed fact that sanitizers produced by Company were in conformity with prescribed standards. SDPL commenced production of hand sanitizers on 25-03-2020. As hand sanitizers are also alcohol based product, manufacturing of same is heavily regulated and monitored by State Excise Department. Furthermore, even raw material for production of hand sanitizer which is Rectified Spirit (RS) or ENA, also known as Neutral Spirit, is controlled substance and usage and manufacturing of which is monitored by Excise Department. 12. It is next pleaded that as per Distillery, Bottling and Warehouse Rules, made under Madhya Pradesh Excise Act, 1915, manufacturing premises are under direct control of Excise Officer, who oversees factory for 24 hrs. said officer 6 is responsible for monitoring production carried out at such controlled premises and dispatches/supply of all alcohol based products from premises. Excise Officer has issued certificate dated 30-6-2020 certifying that total production of hand sanitizer by SDPL till 30-6-2020 has been 2090245 litres and that company has supplied total of 917721.46 litres of sanitizer. copy of said certificate is appended as Annexure- P/8. 13. It is asseverated that SDPL has filed its GST returns for March and April, 2020, wherein GST Tax has been paid at 1,72,03,623/-. due date for GSTR 3B return for month of May, 2020 was 27th June 2020 and GSTRI due date is 28th July 2020, which are yet to be filed. Central Board of Indirect Taxes has extended limitation for filing of GST returns, vide Notifications dated 03-4-2020 and 24-6-2020, therefore, Company is not in breach of any statutory or regulatory deadlines and it has fully complied with GST regime. 14. GST Department carried out search and seizure proceedings at premises of SDPL on 26-6-2020 which continued till 28-6-2020 and thereafter, on 30-6-2020. It is case of applicants that search proceedings were carried out in complete derogation of procedure envisaged in law and in 7 violation of COVID-19 Guidelines. search warrants have not been provided/served/shown to responsible persons; documents have been seized without proper inventory and without providing copies thereof, stock is being taken randomly without aid of SDPL s Store Manager; and proper panchnamas are not being prepared and served by respondent. It is canvassed that because of above-mentioned irregularities, several employees of Company were abused, humiliated and even assaulted. They are being interrogated rigorously till late hours and are not being spared and allowed to go home, nor they have been allowed to meet their lawyers. It is averred that false declaration about permitting applicants to meet their lawyers has been made in memo of arrest. Further, employees of Company have been physically tortured and beaten up inhumanly. 15. It is further argued on behalf of applicants that being aggrieved by action of GST Department, SDPL has preferred writ petition before this Court forming subject-matter of W.P. No.9650/2020 [Som Distilleries vs. Directorate of GST & Others], wherein notice has been issued to respondents vide order dated 14-7-2020. 16. It is also contended that levy of GST in present case is illegal as GST is to be paid on actual amount of sale 8 consideration. dispute is raised about GST to be paid by Company as both, quantity and valuation are based on hypothetical reasonings. 17. action of CGST authorities has also been challenged as they have committed deliberate and egregious errors in valuation of purported GST liability of SDPL, in order to bring alleged acts within purview of Section 132(5) of CGST Act. GST authorities have committed mischief in valuation of hand rub sanitizer manufactured by SDPL with sole motive of taking alleged tax evasion above 500 lacs. case of GST Department is completely contrary to figures certified by Excise Department. comparative chart of CGST and actual figures of Excise Department has been reproduced in application. On basis of figures enumerated in chart it is submitted that figure for total production, supply and closing stock of sanitizer, as estimated by CGST, is not correct and same is based on hypothetical reasoning. basis of calculation made by GST Department is completely erroneous and contrary to law. 18. It is also asseverated that for sake of argument, even if allegations of GST authorities are taken at face value, 9 GST assessable upon sale of sanitizer viz. Genius at most, ought to be valued as follows : Sr.No. Particulars as alleged by GST GST Payable Authorities 1. Clandestine production and supply of 80 lacs alleged 5,35,000 litres Genius Sanitizer. (Communicated orally on 11-7-2020) 2. Qty. of Genius sanitizer to tune of 3,47,000 litres seized at Biscuit and 52 lacs Basket Warehouse of Som Distilleries Pvt. Ltd. (which in fact, have not been sold and were stored for buffer purposes). 3. Genius Sanitizer seized at job work site of Som Distilleries and Breweries Ltd. 23.50 lacs (unsold stock). 4. Genius sanitizer seized at various warehouses in various cities of around 04.45 lacs 38,000 litres (unsold stock). 09.80 lacs 5. Stock Transfer of Genius Sanitizer TOTAL 169.75 lacs 19. It is also submitted on behalf of applicants that although Company is disputing any demand of GST authorities, but in order to demonstrate its bonafide Company has already deposited 8 crores towards GST, under protest. To substantiate submission reference is made to order of Apex Court passed in case of C. Pradeep vs. Commissioner of GST, dated 6-8-2019, wherein it is held that even if 10% or some 10 portion of disputed liability is paid, while filing appeal, no coercive action ought to be taken and no arrest made. 20. Further, reliance is placed upon judgments of Gujarat High Court in Akshay Dinesh Patel vs. Commissioner of Central Goods and Services Tax (R/Crl Misc. Application No.1442 of 2020) and Calcutta High Court rendered in case of Sanjay Kumar Bhuwalka vs. Union of India (CRM No.3327 of 2018), wherein benefit of bail was granted to accused persons on deposit of certain portion of disputed liabilities/dues. 21. That apart, reference is made to Sub-section (7) of Section 107 of CGST Act, which postulates that where appellant has paid amount under sub-section (6), recovery proceedings for balance sum, shall be deemed to be stayed. It is putforth that statutory provision under CGST Act permits applicants to prefer appeal against amount of tax in dispute upon depositing of such amount and further stays recovery proceedings during pendency of such appeal. It is strenuously urged that applicants could have conveniently preferred such appeal by depositing 10% of amount in dispute. However, it is pertinent to note that to show their bonafide, Company has already deposited entire disputed amount of 8 crores, under protest. 11 22. next plank of submission on behalf of applicants is that their arrest is bad in law, because final assessment and adjudication has yet not been initiated. To buttress submission, reliance is placed on judgment passed by Madras High Court in M. Jayachandran Alloys Pvt. Ltd. vs. Superintendent of GST and Central Excise W.P. No. 5501 of 2019, wherein it is clarified that power of arrest can be exercised only after liability is quantified upon due assessment. In paras 27 and 36 of judgement it is specifically observed : 27. Act provides for assessment to be made after notice to be issued to assessee xx xx xx 36. Though discussions and conclusions therein have been rendered in context of Chapter V of finance Act, 1994, levying service tax, I am of view that they are equally applicable to provisions of CGST as well. Section 132 of Act as extracted earlier, imposes punishment upon assessee that commits offence. There is no dispute whatsoever that offences set out under (a) to (l) of provision refer to those items that constitute matters of assessment and would form part of order of assessment to be passed after process of adjudication is complete and taking into account submissions of assessee and careful weighing of evidence found and explanations offered by assessee in regard to same. Thus, it is submitted that procedure adopted in instant case, where arrest has been made without completion of assessment proceedings, runs counter to established provisions 12 of law. It is trite law that power of arrest is to be used with great circumspection and not casually. 23. Support was drawn from pronouncement in Make My Trip (MMT) (supra), wherein it is ruled that provisions of CGST Act is para materia with provisions of Finance Act, 1994. Based on said observation, Delhi High Court had observed that power of arrest cannot be resorted to, whilst bypassing procedures laid down in Act. 24. submission was reiterated that applicants cannot be made vicariously responsible for default of Company, as they do not hold Managerial/Directorial or any Executive position in company. fastening of criminal liability on applicants of purported defaulted Company under Section 132 of CGST Act and consequently arresting them, is squarely contrary to established criminal jurisprudence concerning vicarious liability of penal provisions of India. 25. reference is made to clause (1) of Section 137 of CGST Act, which stipulates that person who at time of alleged offence was in charge of, and was responsible to, Company for conduct of business of Company, as well as Company, shall be deemed to be guilty of offence and shall be 13 liable to be proceeded against and punished accordingly. In present case applicants, who are neither Directors nor they occupy any Managerial post or position in Company, cannot, by any stretch of imagination, be observed to be persons in charge of and responsible to Company for conduct of business of Company and hence, be deemed guilty of alleged offence. It is, therefore, submitted that applicants have been wrongly arraigned as accused in instant case. applicants are not Directors of SDPL, therefore, they could not be held responsible for GST tax evasion, if any, by Company. 26. petitioners urges that alleged offences are punishable with imprisonment of only upto maximum period of five years, therefore, their arrest was not necessary and they are entitled for grant of bail, keeping in mind principles enunciated by Apex Court in case of Arnesh Kumar vs. State of Bihar, (2014) 8 SCC 273. 27. learned counsel appearing for applicants referred to provisions of sections 69 and 137 of CGST Act. At this juncture, it is apt to reproduce said provisions : 69. Power to arrest.-(1) Where Commissioner has reasons to believe that person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of 2 of 14 said section, he may, by order, authorise any officer of central tax to arrest such person. (2) Where person is arrested under sub-section (1) for offence specified under subsection (5) of section 132, officer authorised to arrest person shall inform such person of grounds of arrest and produce him before Magistrate within twenty-four hours. (3) Subject to provisions of Code of Criminal Procedure, 1973 (2 of 1974), (a) where person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to custody of Magistrate; (b) in case of non-cognizable and bailable offence, Deputy Commissioner or Assistant Commissioner shall, for purpose of releasing arrested person on bail or otherwise, have same powers and be subject to same provisions as officer-in-charge of police station. 137. Offences by companies. (1) Where offence committed by person under this Act is company, every person who, at time offence was committed was in charge of, and was responsible to, company for conduct of business of company, as well as company, shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished accordingly. (2) Notwithstanding anything contained in sub- section (1), where offence under this Act has been committed by company and it is proved that offence has been committed with consent or connivance of, or is attributable to any negligence on part of, any director, manager, secretary or other officer of company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. (3) Where offence under this Act has been committed by taxable person being partnership firm or Limited Liability Partnership or Hindu Undivided Family or trust, partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and provisions of sub-section (2) shall, mutatis mutandis, apply to such persons. 15 (4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that offence was committed without his knowledge or that he had exercised all due diligence to prevent commission of such offence. Explanation. For purposes of this section, (i) company means body corporate and includes firm or other association of individuals; and (ii) director , in relation to firm, means partner in firm. 28. arrest of applicants under Section 69(1) of CGST Act was assailed to be bad in law, as there is failure on part of prosecution to provide reasons to believe. It is submitted that power to arrest is conferred on Commissioner under Section 69(1) of CGST Act. As provided under Sub-section (3) of Section 69 of GST Act, power under Section 69(1) is subject to provisions of CrPC and, therefore, phrase reasons to believe is to be understood in context of how said phrase is defined in Section 26 of Indian Penal Code, 1860 [for short IPC ]. As such, reasonable belief must be cogent and recorded in writing. In instant case, applicants have been kept in dark and investigation leading upto their arrest has been bereft of any reason being provided for same. 29. It is pleaded that in complete disregard to Section 69 of CGST Act, GST authorities have failed to provide reasons to believe and grounds of arrest in respect of 16 alleged offence punishable under Section 132(1)(a) to (d) of CGST Act. 30. It is strenuously urged that in present case, there is no rationale and intelligible nexus between reasons to believe for applicants committing alleged offence. reasons to believe, cannot be equated with reasons to suspect. To bolster submissions, reliance is placed on judgment rendered in case of N. Nagendra Rao and Co. vs. State of A.P., AIR 1994 SC 2663, wherein Supreme Court has observed that expression reason to believe means that even though formation of opinion may be subjective, but it must be based on material on record. It cannot be arbitrary, capricious or whimsical. It is, thus, check on exercise of power to seize goods. Further reliance has been placed in judgment of Apex Court rendered in case of K.K. Ahuja vs. V.K. Vora and another, (2009) 10 SCC 48, to contend that in case of vicarious liability, person of company has to be legally in charge and also responsible for conduct of company. Paras 22 and 23 of judgement have been referred to, which we think apt to reproduce : 22. Section 141 uses words "was in charge of, and was responsible to company for conduct of business of company" (emphasis supplied). It is evident that person who can be made vicariously liable 17 under sub-section (1) of Section 141 is person who is responsible to company for conduct of business of company and in addition is also in charge of business of company. There may be many directors and secretaries who are not in charge of business of company at all. meaning of words "person in charge of business of company" was considered by this Court in Girdhari Lal Gupta v. D.N. Mehta [1971 (3) SCC 189] followed in State of Karnataka v. Pratap Chand [1981 (2) SCC 335] and Katta Sujatha vs. Fertiliser & Chemicals Travancore Ltd. [2002 (7) SCC 655]. This Court held that words refer to person who is in overall control of day to day business of company. This Court pointed out that person may be director and thus belongs to group of persons making policy followed by company, but yet may not be in charge of business of company; that person may be Manager who is in charge of business but may not be in overall charge of business; and that person may be officer who may be in charge of only some part of business. 23. Therefore, if person does not meet first requirement, that is being person who is responsible to company for conduct of business of company, neither question of his meeting second requirement (being person in charge of business of company), nor question of such person being liable under sub-section (1) of section 141 does not arise. To put it differently, to be vicariously liable under sub- section (1) of Section 141, person should fulfil 'legal requirement' of being person in law (under statute governing companies) responsible to company for conduct of business of company and also fulfil 'factual requirement' of being person in charge of business of company. 31. In present case, GST authorities have not placed on record any material whatsoever, to support such reason to believe against applicants. Such reason to believe must be recorded by Commissioner of CGST himself with application of mind. 18 32. That all offences under CGST Act are compoundable under Section 138 of CGST Act and hence, arrest is wholly unnecessary. object and purpose of CGST Act is not penal in nature, but it is economic for purpose of legislation being to recover any amount, that may be due to Government exchequer. To substantiate submission, it is urged that Calcutta High Court in Sanjay Kumar Bhuwalka (supra) while deciding bail application in case of similar nature observed thus : . I do agree with such contention of Mr. Basu that GST Act of 2017 is essentially fiscal statute and statement of object and reason has to be read together, which is aimed at realization of revenue. Revenue is monetary payment due to Government and non- payment, whatever be means applied for such non- payment confers right on Government, both Central and State, to realise revenue whereas penal provision of arrest and detention is only when there is violation of provision under statute which is not intention of Legislature to achieve fiscal object regardless of existence of provision for arrest of offender in Act. 33. That apart, it is submitted that Court below has committed grave error in rejecting bail application moved on behalf of applicants. impugned order has been passed mechanically without giving due consideration to correct position of law or facts. Further, court below has failed to appreciate letter and spirit of CGST Act, which is to recover 19 dues payable under Act and as such its primary object cannot be meted out by imposing punitive punishment. 34. Prayer for grant of bail has also been made on medical grounds. It is stated that applicant No.2, Ajay Kumar Arora is old and infirm person of 61 years of age. He is heart patient having undergone open heart bypass surgery in year 2009. He is also suffering from extreme form of Asthma and as such, is highly vulnerable to COVID-19 virus. Despite these ailments, with view to demonstrate his bona fide, he joined proceedings before G.S.T. Officers for first time on 02-7-2020. On that day, he was interrogated from 12 noon till 10 p.m. After fully co-operating with Department, he gave written intimation humbly requesting to be excused from personal appearance on account of his health condition and his peculiar vulnerability on account of COVID-19 pandemic. Despite his precarious health he was again called on 3-7-2020, 4-7-2020 and 6-7-2020 and further fully co- operated with Department. Copies of medical documents have been placed on record. 35. On behalf of applicant No.1 Jagdish Arora, it is pointed out that he is 64 years old person and is also suffering from various ailments. He had undergone heart surgery in form of Stent in year 2010. He has long history of gastroenterology 20 diseases which on account of COVID-19 pandemic poses serious threat to his life. Despite grave risk to his life, in order to show his bona fide he attended proceedings and was interrogated continuously on 7-7-2020 from 05:30 p.m. till 3 p.m. on next day 8.7.2020. As there was severe chest pain during course of interrogation, he was immediately admitted to I.C.U. of J.P. Hospital, Bhopal. Medical reports have been appended to application. 36. submissions made on behalf of applicants on anvil of aforementioned facts and grounds, can be summarised as follows : (a) applicants are not Directors of SDPL, therefore, they are not responsible for affairs of Company. In this regard reference has been made to provisions envisaged in clause (1) of Section 137 of CGST Act and some pronouncements of High Courts and Supreme Court. (b) power to arrest has to be exercised only upon completion of assessment. Various High Courts viz. Delhi, Karnataka and Gujarat have taken view that power to arrest under Section 132 of CGST Act can only be invoked once assessment is complete. judgment of Madras High Court rendered in case of M/s Jayachandran Alloys (supra) has been referred, wherein it is held that power to punish set out in Section 132 of CGST Act, 21 2017 would stand triggered only when it is established that assessee has committed offence, which has to necessarily be post-determination of demand due from assessee after completion of process of assessment. Para 40 of judgment relied upon being relevant, is extracted hereunder : 40. In present case, Department does not dispute that action was intended or envisaged in light of Section 132 of CGST Act, counter fairly stating that provisions of Section 132 of CGST Act were shown to assessee. There is thus no doubt in my mind that Department intended to intimidate petitioner with possibility of punishment under Section 132 and this action is contrary to scheme of Act. While activities of assessee contrary to Scheme of act are liable to be addressed swiftly and effectively by Department, (the statute in question being revenue statute where strict interpretation is norm), officials cannot be seen to be acting in excess of authority vested in them under Statute. I am of considered view that power to punish set out in Section 132 of Act would stand triggered only once it is established that assessee has committed offence that has to necessarily be post-determination of demand due from assessee, that itself has to necessarily follow process of assessment. (c) High Court of Delhi in case of Make My Trip (MMT) India Private Ltd. (supra) while dealing with power of arrest under Finance Act, 1994 held that without any determination to straight-way conclude, that petitioners had collected and not deposited service tax in excess of 50 lakhs and thereby had committed cognizable offence, would be putting cart before horse. (d) decision in Make My Trip (MMT) India Private Ltd. (supra) was affirmed by Supreme 22 Court in Civil Appeal No.8080 of 2018, by way of speaking order stating that issue is as to whether power of arrest under Section 91 of Finance Act, 1994 can be exercised without following procedure as set out in Section 73-A(3) and (4) of said Act. High Court has decided, after detailed discussion, that it is mandatory to follow procedure contained in Section 73-A(3) and (4) of said Act before going ahead with arrest of person under sections 90 and 91. aforesaid conclusion was affirmed as Supreme Court did not see any reason to deviate from it. (e) applicants have been arrested without any reason to believe . No such reasons as required under Section 69(1) have been provided by respondent. No supporting documents existed at time of arrest and even in proposal to arrest. power to arrest under Section 69 can only be exercised for offences falling under clauses (a) to (d) of Section 132(1) of CGST Act. (f) Sanitizer contains 80% spirit/alcohol, substance sourced, controlled and heavily regulated by Excise Department. Excise Officer is present at premises of Company 24 hrs. day, 365 days year and maintains record of production of hand sanitizer. (g) Excise Department Certificate issued in favour of SDPL evidences that it manufactured only 20 lacs litres of sanitizer and supplied only 9 lacs litres till 30-6-2020 from factory premises. said 23 figures were also affirmed by independent report of flying squad of Excise Department. (h) respondent has taken value at MPR of 500/- per litre without any basis, and by reverse calculation arrived at figure of 381/- per litre as value at which GST is to be assessed. (i) Section 15(1) of CGST Act provides that value of supply of goods shall be transaction value, i.e. price actually paid or payable for supply of goods and not MRP. (j) respondent initially communicated demand of GST liability of 7,96,00,000. SDPL immediately made deposit of 8 crores , i.e. 100% of alleged liability between period 7-7-2020 to 9-7- 2020. (k) In C. Pradeep vs. Commissioner of GST (supra) Apex Court has observed that until assessment is concluded, respondents cannot invoke Section 132 of CGST Act. (l) applicants have fully co-operated with investigation proceedings. (m) offence under Section 132 of CGST Act is punishable with maximum of 5 years and is compoundable. (n) Frivolity in prosecution has to be considered and in event of there being some doubt as to genuineness of prosecution, in normal course of events, accused is entitled to order of bail. [See : Ram Govind Upadhyay vs. Sudarshan Singh, AIR 2002 SC 1475] 24 (o) applicant No.1 Jagdish Arora, aged about 64 years, is heart patient and had Stent placement in year 2010. He has also long history of gastroenterology diseases. He was admitted to ICU of J.P. Hospital Bhopal, on 8-7-2020. (p) applicant No.2 Ajay Kumar Arora, aged about 61 years, is also heart patient and had undergone open heart bypass surgery in year 2009. He is also asthmatic. 37. respondent submitted that entire exercise undertaken, is strictly in accordance with provisions of Sections 67 and 69 of CGST Act. There is sufficient material to establish direct involvement of applicants in three Companies under investigation. There is basis of investigation which is evident from note-sheets investigation reports. It is submitted that intelligence was received from Director General (DGST), Intelligence Headquarter that several distilleries (including SDPL) across India engaged in manufacture of Ethanol from grains, are involved in GST evasion. Acting on said intelligence, reasonable belief was formed that SDPL had evaded GST on taxable product and documents received for investigation have been searched in premises. During search, statements of employees of Company were recorded. They informed that actual control of Company is at hands of applicants. 25 statement of one Binay Kumar Singh, employee of Company was heavily relied upon by respondent. framing of assessment is not sine-qua-non for making arrest as held by Telangana High Court in P.V. Ramana Reddy Vs. Union of India {W.P. No. 4764/2019 (para 56)} which view was affirmed by Apex Court in Special Leave to Appeal (Criminal) No. 4430/2019 (P.V. Ramana Reddy Vs. Union of India). 38. We have heard learned counsels appearing for parties at length and bestowed our anxious consideration on their respective arguments advanced. record was also produced by respondent in sealed cover. We have gone through record in order to ascertain existence of reasons to believe for proceedings being initiated against applicants. We do not perceive any material, except statement of employee Binay Kumar Singh. There is no documentary material produced on record to show that present applicants were legally in charge and responsible for day-to-day working of Company. They had already resigned legally from Directorship of Company. Merely on bald statement of employee of Company, it cannot be held that present applicants were in charge and responsible for functions of Company. 26 39. On careful consideration of nature and gravity of allegations made against applicants and specific evidence collected in respect of allegations levelled, elaborate discussion of which would not be apt, as it may adversely affect interest of either party, specific facts put forth by learned senior counsel for applicants and reply and other facts and circumstances of case, in considered opinion of this Court, case for granting bail is made out. Therefore, without commenting on merits of case, application for grant of bail to applicants stands allowed. Needless to say that anything observed hereinbefore shall not be taken to be expression of opinion in any ancillary or incidental proceeding taken in pursuance to search on 26.06.2020 to 28.06.2020. 40. It is directed that applicants Jagdish Arora and Ajay Kumar Arora be released from custody on their furnishing personal bond in sum of 5,00,000/- (Rupees five lacs only) each, with separate sureties of like sum to satisfaction of trial Court, for their appearance before it, as and when required, further subject to following conditions : (i) applicants shall co-operate with trial and shall not seek unnecessary adjournments on frivolous grounds to protract trial; 27 (ii) applicants shall not directly or indirectly allure or make any inducement, threat or promise to prosecution witnesses, so as to dissuade them from disclosing truth before Court. (iii) applicants shall not commit any offence or involve themselves in any criminal activity. (iv) In case of their involvement in any other criminal activity or breach of any other aforesaid conditions, bail granted in this case may also be cancelled. (v) applicants shall submit their passports, if any, before trial Court and shall not leave India without prior permission of this Court. 41. Let original records of case be returned to respondent in sealed cover. (Ajay Kumar Mittal) (Vijay Kumar Shukla) Chief Justice Judge ac. Digitally signed by AMITABH RANJAN Date: 2020.08.18 12:43:56 +05'30' Jagdish Arora and another v. Union of India