2018 (12) TMI 1350 - DSC - GST

Cancellation of Bail - Wrong availment of Input Tax Credit - opening bogus companies in the name of dummy proprietors and through these companies had issued fake invoices with no actual supply of goods - cancellation of Bail - Held that - The allegations are clear enough to make out a case falling under clause (b) of sub-section (1) of Sec. 132 of the CGST Act, 2017. The contention of Id. counsel for the accused/applicant that the application for judicial remand of the accused did not disclose the details of the offence except of making of a mention that Sec. 132(1)(b) is alleged, has no merits as admittedly when the application for judicial remand was preferred by the applicant before the Ld. Link MM, the entire record file including the arrest, search and seizures was put up for perusal and consideration. The allegations of tax evasion against the accused/ respondent was of less than ? 5 crores and as such taking out the Offence from the purview of sub-section (5) of Sec. 132 of the Act, thus, making it non-cognizable and bailable. Admittedly, the file which has been produced by the applicant/ petitioner clearly notes in the note-sheet of the inquiry that the accused / respondent as well as the co-accused Adesh Jain in their respective statements recorded u/s 70 of CGST Act on 31.07.2018 have stated that they both were indulging in the act of providing false invoices to other companies I firms/ agents and thus were passing on wrongful availment of input tax credit. Cancellation of Bail - Held that - The law is well settled that very cogent and overwhelming circumstances are necessary for an order directing the cancellation of the bail, already granted. Generally speaking, the grounds for cancellation of bail, broadly (illustrative and not exhaustive) are - interference or attempt to interfere with the due course of administration of justice or evasion or attempt to evade the due course of justice or abuse of the concession granted to the accused in any manner. The satisfaction of the Court, on the basis of material placed on the record of the possibility of the accused absconding is yet another reason justifying the cancellation of bail. However, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. Not only there are serious allegations against the accused/ respondent of his having made fictitious sales of value of more than ? 200 crores and having consequently caused loss to the government of the GST evasion/wrongful availment of input tax credit of the value of more than ? 27 Crores, it is also alleged that the accused/respondent had indulged in the act of threatening the witnesses who were otherwise coming forward to give their statement to the department/petitioner as to how the bogus firms were created and how their documents were misused - there are merits in the application of the applicant/ petitioner seeking cancellation of bail of the accused / respondent. The order granting bail to the accused/ respondent is hereby set aside - application allowed.

Issues Involved:
1. Application for cancellation of bail granted to the accused.
2. Allegations of tax evasion and involvement in generating fake invoices.
3. Determination of whether the offense is cognizable and non-bailable.
4. Consideration of whether the accused threatened witnesses.
5. Review of legal precedents and relevant provisions of the CGST Act, 2017.

Issue-Wise Detailed Analysis:

1. Application for Cancellation of Bail:
The petitioner, Commissioner of Central Tax, GST, Delhi (West), sought the cancellation of bail granted to the accused by the Ld. CMM, PHC, New Delhi on 01.08.2018. The accused, along with a co-accused, was arrested for generating fake invoices and passing on undue ITC without actual supply of goods. The Ld. Link MM granted bail to the accused while remanding the co-accused to judicial custody.

2. Allegations of Tax Evasion and Involvement in Generating Fake Invoices:
The accused and co-accused were alleged to have floated dummy companies to generate fake invoices, passing on ITC to unscrupulous persons without actual supply of goods, and taking commissions. This activity involved fictitious sales worth ?201 crores and tax evasion exceeding ?27 crores. The Ld. Link MM noted that the offense under Sec. 132(1)(b) of the CGST Act, 2017, was non-cognizable and bailable as the tax evasion amount was less than ?5 crores.

3. Determination of Whether the Offense is Cognizable and Non-Bailable:
The petitioner argued that the accused's tax evasion exceeded ?27 crores, making the offense cognizable and non-bailable under Sec. 132(1)(b) r/w clause (i) of the CGST Act. The Ld. Link MM, however, had considered the tax evasion amount to be less than ?5 crores based on the accused's statement, thus granting bail. The petitioner contended that the accused admitted to sharing profits with the co-accused, indicating a higher tax evasion amount.

4. Consideration of Whether the Accused Threatened Witnesses:
The petitioner claimed that the accused, after being granted bail, threatened witnesses, which was a ground for cancellation of bail. The accused denied these allegations, stating that the statements were doctored. The court noted that credible threats to witnesses could justify bail cancellation.

5. Review of Legal Precedents and Relevant Provisions of the CGST Act, 2017:
The court reviewed relevant legal precedents, including Dolat Ram & Ors vs State of Haryana, and noted that cogent and overwhelming circumstances are necessary for bail cancellation. The court also referred to Sec. 132 of the CGST Act, 2017, which outlines punishments for various offenses, including issuing fake invoices and wrongful ITC availment. The court emphasized that the accused's actions fell under Sec. 132(1)(b) of the CGST Act.

Conclusion:
The court found merits in the petitioner's application for bail cancellation, noting serious allegations against the accused of fictitious sales and threats to witnesses. The court set aside the bail order and directed the accused to be taken into custody and produced before the Ld. CMM, PHC, New Delhi. The observations were stated to be prima facie, and a copy of the order was provided to the counsels for the parties.

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