Hyderabad: The Telangana High Court on Thursday dismissed petitions filed by directors and management of the Sujana Group’s shell companies who challenged the summons issued by the Hyderabad GST Commissionerate.
A division bench comprising Justice V. Ramasubramanian and Justice P. Keshava Rao while passing final orders on the petitions filed by eight shell companies of the Sujana Group said there was “nothing wrong” in the CGST authorities thinking that persons involved should be arrested.
In March, the bench had passed interim orders giving relief to the petitioners against arrest until further orders.
On Thursday, the judges said the cases filed against the petitioners constituted a threat to the very implementation of the GST law within a short duration of its inception. It rejected the pleas of directors to direct the authorities not to arrest them.
Court backs CGST move against Sujana group
The Superintendent (Anti Evasion) of the Hyderabad GST Commissionerate had issued summons to the officials, including those from Sujana Universal Industries, under Section 70 of the Central Goods and Services Tax Act, 2017 and the invocation of the penal provisions under Section 69 of the Act. “We do not wish to grant relief to the petitioners against arrest in view of the special circumstances of evasion of tax and there is nothing wrong in the respondent CGST authorities thinking that persons involved should be arrested,” Justice Ramasubramanian observed.
A special squad of the GST commissionerate had conducted searches on the premises of the companies on allegations that they had defrauded the exchequer to the tune of `225 crore. The summons were issued to the directors and managements under Section 70 of the CGST Act, asking them to appear before the Super-intendent (Anti Evasion). Challenging the summons, the directors, past and present, of the shell companies, a chief financial officer of one of the companies and the partner of a partnership firm approached the High Court with eight individual writ petitions.
The court had then granted interim orders not to arrest the petitioners, but laid down the condition that they had cooperate with the investigation.
The Union government on behalf of the CGST department contended that the petitioners had committed offences under clauses (b), (c) and (f) of sub-section (1) of Section 132 of CGST Act, 2017, all of which were punishable with imprisonment which may extend to five years apart from a fine.
Counsel brought to the notice of the court that sub-sections (1) and (2) of Section 69 of the Act dealt with the power of arrest and production before the magistrate in the case of cognisable and non-bailable offences.
After considering arguments from both sides, the bench found fault with regard to fraudulent input tax credit claims to the tune of Rs 225 crore by the petitioners.
The bench said, “Even before the GST regime is put on track, the petitioners exploited the law without the actual purchase or sale of goods or hiring or rendering of services, projecting a huge turnover that remained only on paper, giving rise to a claim for input tax credit to the tune of about Rs 225.00 crore. There is nothing wrong in the CGST authorities thinking that persons involved should be arrested.”
