In a significant legal development, the Telangana High Court has granted pre-arrest bail to businessman Devendra Surana. The Managing Director of Bhagyanagar India Limited is currently under investigation for the alleged wrongful availment of Input Tax Credit (ITC) exceeding Rs 97 crore.
Surana sought protection under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023, following an investigation by the Directorate General of GST Intelligence (DGGI), Hyderabad.
What was the matter?
The case revolves around 153 transactions carried out between November 2022 and March 2023. Bhagyanagar India Limited had purchased copper scrap from M/s AMZ Traders worth around Rs 97.25 crore. These transactions were supported by invoices, e-way bills, and transport records, with payments made through formal banking channels. However, the DGGI raised concerns after the supplier's GST registration was cancelled retrospectively, leading to allegations of wrongful ITC claims.
Due diligence and defense
Surana's counsel argued that all transactions were genuine and carried out transparently. The company had undertaken proper due diligence, including verification of the supplier's GST credentials and KYC compliance. The Court acknowledged that the petitioner had acted in good faith based on the records available at the time and granted him protection from arrest.
What were court's observations?
Justice K. Sujana observed that custodial interrogation was not required in the present case. The Court noted that the investigation is largely based on documentary evidence already available with the Department. It also took into account Surana's consistent cooperation during the probe. He has responded to all summons, recorded statements, and submitted the necessary documents. The Court further noted that there is no past record of tax evasion against him and that he has already deposited Rs 17.5 crore toward the disputed amount.
While recognising that offences under GST laws are serious, the Court made it clear that arrest should not be automatic, especially in cases involving documentary evidence. It emphasized that even in matters involving high-value ITC claims, arrest is not mandatory and must be justified with concrete reasons.
The Court also referred to established legal principles, noting that anticipatory bail serves as an important safeguard of personal liberty under Article 21 of the Constitution. It reiterated that authorities must exercise arrest powers cautiously and only on the basis of tangible material.
As part of the relief granted, the Court directed Surana to surrender before the DGGI within two weeks. Upon doing so, he will be released on bail after furnishing a personal bond of Rs 1 lakh along with two sureties. He has been asked to cooperate fully with the investigation, appear whenever summoned, and not leave India without prior permission. Additionally, he must surrender his passport and refrain from influencing witnesses or tampering with evidence.
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