2020 (2) TMI 1297 - HC - GST

Grant of regular bail - bogus firms - intent to evade GST - fake invoices issued for input tax credit (ITC) - bogus transaction of sale of yarn - allegation is that Petitioners make bogus firms and by transacting with bigger firms, they are getting huge amounts of money deposited in the account numbers of the said fake bogus firms so as to save GST and are thus causing huge loss to the State Exchequer on account of loss of revenue - HELD THAT - Rajesh Mittal has played an pivotal role in the entire scam for the purpose of incorporating 18 different firms wherein in a majority of the firms, his e-mail ID or phone number had been used. During the course of investigation, the police has been able to collect evidence to the effect that bank transactions of withdrawal of ₹ 1,21,17,230/- was made in the account of M/s Ansh Hospitality between 23.1.2019 and 30.6.2019 and an amount of ₹ 1,21,21,881/- was deposited and for which the learned counsel representing Manish, owner of the said firm, could not furnish any justification as to on what count the said huge payments had been received and as to what articles had been supplied by him against the said payment. Similarly, during investigation, it was found that bank transactions of huge amount had been effected in the account of M/s Shree Bala Ji Wooltax. The learned counsel for the petitioner-Inder Partap Singh, owner of M/s Shree Bala Ji Wooltax, could not furnish any justifiable explanation as to on what count the said payment has been received, as the said firm was not found to be actually into business. The complicity of the kingpin Rajesh Mittal and also of Manish, owner of M/s Ansh Hospitality and of petitioner Inder Partap Singh, owner of M/s Shree Bala Ji Wooltax, is clearly evident - Keeping in view the enormity of the scam and the colossal loss caused to the State exchequer, which has lost GST, this Court does not find any ground for grant of bail. Bail cannot be granted - petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Grant of regular bail to the petitioners.
2. Allegations of creating bogus firms for GST evasion.
3. Recovery of incriminating materials.
4. Role of each petitioner in the scam.
5. Double jeopardy argument.
6. Prosecution under Section 122 of GST Act and IPC.

Issue-wise Detailed Analysis:

1. Grant of Regular Bail to the Petitioners:
The petitioners sought regular bail in connection with FIR No.571 dated 4.6.2019 registered under Sections 419/420/467/468/471/120-B/259 IPC at Police Station Chandni Bagh, District Panipat. The Court considered the gravity of the allegations and the evidence collected during the investigation.

2. Allegations of Creating Bogus Firms for GST Evasion:
The FIR was lodged based on a secret information received by ASI Vinod Kumar, alleging that the petitioners were involved in creating bogus firms to evade GST, causing a significant loss to the State Exchequer. The police apprehended the accused and recovered laptops, cheque books, fake stamps, and files of bogus firms from their car.

3. Recovery of Incriminating Materials:
The recovered items included laptops, cheque books, fake stamps of ETO and DTC, and files of bogus firms. These materials were taken into possession by the police, and the car used was found registered in the name of Vipul Jindal, a relative of Rajesh Mittal. The investigation revealed that Rajesh Mittal was the mastermind behind the scam, issuing bogus bills through M/s Lalit Trading Company to 18 firms.

4. Role of Each Petitioner in the Scam:
- Rajesh Mittal: Identified as the kingpin, he used his email ID and phone numbers for the registration of bogus firms and issued fake bills to 18 firms, which further transacted with 421 industries in Panipat, causing a loss of about 80 crores in GST revenue.
- Manish: Owner of M/s Ansh Hospitality, could not justify the bank transactions amounting to ?1,21,17,230/- in his firm's account.
- Inder Partap Singh: Owner of M/s Shree Bala Ji Wooltax, also failed to justify the huge payments received, as his firm was not actually conducting business.
- Satnarain: An Advocate by profession, he provided professional services for the registration of firms. There was no evidence suggesting his involvement beyond his professional duties.

5. Double Jeopardy Argument:
The petitioners argued that they were being prosecuted under Section 122 of GST Act, where they had already been granted bail, and thus, prosecuting them under IPC would amount to double jeopardy. The Court clarified that proceedings under Section 122 of GST Act could continue alongside prosecution under IPC for cheating and forgery.

6. Prosecution under Section 122 of GST Act and IPC:
The Court noted that the purpose of Section 122 of GST Act is to secure the realization of evaded tax, and it does not preclude prosecution under IPC for related offences. The evidence collected showed the involvement of the accused in the scam, justifying their prosecution under both laws.

Conclusion:
The Court dismissed the bail petitions of Rajesh Mittal, Manish, and Inder Partap Singh due to their evident complicity in the scam and the significant loss caused to the State Exchequer. However, Satnarain was granted bail, as his involvement appeared limited to providing professional services, and he had already been in custody for about 8 months. The Court emphasized that the observations made should not be construed as an expression on the merits of the main case.