The directors of private companies that are suspected to have been floated by the Sujana Industries group have landed in the soup with the latest order of the Telangana High Court delivered on Wednesday. The order vacated the restrictions imposed on GST and Central Excise and Service Tax authorities to not take coercive steps against the directors of VS Ferrous Enterprises Pvt Ltd, Bharani Commodities, and BRS Enterprises &Trading Ltd. The vacation bench comprising Justice M.S. Ramachandra Rao and Justice A. Rajasheker Reddy on Wednesday issued interim directions by vacating the stay imposed on the likely arrest of the said directors by another vacation court on May 15. The vacation bench altered the orders passed on May 15 by another vacation bench, following Supreme Court directions delivered on May 27, which dismissed the special leave petition filed against the judgment of the Telangana HC in a similar matter, wherein the High Court of Telangana had refused to grant protection from arrest to the directors of the companies (also suspected to be shell companies of the Sujana Group) by the authority concerned in cases of GST evasion.
On April 18, the Telangana High Court bench led by Justice V Ramasubramanian was not inclined to grant relief against arrest to petitioners who had approached it challenging the summons issued by Superintendent (Anti-Evasion) of the Hyderabad GST Commissionerate under the Central Goods and Services Tax Act, 2017, and invocation of penal provisions under the law. Challenging the High Court orders for granting relief, the directors approached the apex court, which dismissed the petitions on May 27. Meanwhile, the directors of VS Ferrous Enterprises Pvt Ltd, Bharani Commodities, and BRS Enterprises &Trading Ltd approached the vacation court on May 15, challenging the rules regarding power of arrest under section 69(1) and 132 of the CGST Act. They were given protection from any coercive action and the case came up for hearing again on Wednesday. Additional Solicitor General K. Nataraj, and B. Narasimha Sarma, the counsel for CGST pointed to the decision of the Supreme Court that refused to accord relief in similar cases.
The bench said that the order of the Supreme Court would become a binding precedent on all and vacated the restrictions imposed on the tax authorities to not take coercive steps against the directors. Approximately 20 shell companies, suspected to be floated by the Sujana Group are facing allegations that they availed input tax credit to an extent of Rs. 225 crore with the help of certain fake invoices. No goods were sold or bought, but their records were showing huge business on paper. Showing such fictitious figures, these companies availed input tax credit from the department and banks. When GST officials tracked this and raided their offices, they realised that most of the companies are situated in Nagarjuna Hills near Punjagutta where the Sujana Group has its main office. When notices were served on them, the directors of these companies had approached the High Court individually and had sought protection from arrest.