2023 (7) TMI 1295 - HC - GST

Seeking grant of bail - availing fraudulent Input Tax Credit (ITC) - issuing fake invoices in favour of fictitious non existing entities without actual purchase and sale of goods - HELD THAT - The facts and circumstances prima facie indicate that the Applicant is involved in the said crime. Suffice it to say that such economic offences have long term and far reaching ramifications on the financial health of the country and affect the national interest at large in various ways. Considering the consequences of such economic offences that would befall the society, the offences have been held to be of distinct class and under the category of grave offences. Such offences, which affect the financial health of a country need to be investigated thoroughly. In the instant case, the affidavit filed on behalf of the Department reveals that the Applicant has not co-operated with the investigation. He has failed to disclose the e-mail id and the password. He has also failed to hand over the mobile phone, which was registered with the bank. Hence, the mere statement of the Applicant that he is ready and willing to co-operate with the investigation does not serve any purpose. The nature of the offence, necessitates custodial interrogation to facilitate effective investigation and to unearth the fraud in all its facets. The discretion under Section 438 of Cr.P.C. not exercised in favour of the Applicant - application dismissed.

Summary

Issues involved:
The issues involved in the judgment are pre-arrest bail application under Section 438 of Cr.P.C. in relation to alleged fraudulent activities under the Central Goods and Services Tax Act, 2017.

Comprehensive Details:

Issue 1: Involvement of Applicant in Alleged Fraudulent Activities
The Anti Evasion Central Goods and Services Tax Act initiated an inquiry against M/s. Amarnath Enterprises for availing fraudulent Input Tax Credit (ITC) of 14.48 Crores. It was revealed that fake invoices were issued without actual purchase and sale of goods, and fake ITC of Rs. 13.31 Crores was passed on to various recipients. The co-accused, Priyesh Kumar, stated that he had established the concern at the instance of the Applicant, who is the Director of another company. The learned Sessions Judge observed that the Applicant facilitated the commission of the crime and declined to grant pre-arrest bail under Section 438 of Cr.P.C.

Issue 2: Defense and Submissions of the Applicant
The Applicant's counsel argued that the Applicant is not associated with M/s. Amarnath Enterprises or its transactions. It was emphasized that the Applicant paid all GST related to his company and was not involved in the day-to-day operations of M/s. Amarnath Enterprises. The defense contended that the observations of the learned Sessions Judge were erroneous and that the Applicant cooperated with the investigation post-summons under Section 70 of the CGST Act.

Issue 3: Allegations of Main Conspirator and Non-Cooperation
The Special Public Prosecutor asserted that the Applicant was the main conspirator behind the establishment of fake entities and the passing on of fake ITC. It was claimed that the Applicant did not cooperate with the investigation, refused to share essential information, and custodial interrogation was necessary to uncover the conspiracy. The records indicated a close nexus between the Applicant and the fraudulent activities.

Conclusion:
The Court found that the inquiry indicated the Applicant's involvement in the alleged fraudulent activities. The failure to cooperate with the investigation and the seriousness of economic offenses led to the dismissal of the pre-arrest bail application under Section 438 of Cr.P.C. The Court highlighted the need for thorough investigation in cases affecting the financial health of the country.