2020 (12) TMI 1119 - HC - GST

Grant of Bail - allegation of bogus input tax credit secured on the strength of fake and fabricated invoices without supply of any physical goods to such other existing and non-existing firms - Section 132(1)(i) of the OGST Act 2017 - HELD THAT - The evidence is largely based on documentary evidence. Once the charge-sheet has been filed unless antecedents to the contrary can be demonstrated the presence of the accused may not be required to take the prosecution to its logical conclusion. The object of the law in question is to act as a deterrent in blocking loopholes in an otherwise nascent law which concerns itself with the collection of revenue for the State. Section 132(1)(i) of the Act provides that in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds five hundred lakh rupees with imprisonment for a term which may extend to five years and with fine. Similarly Section 132(ii) of the Act provides a punishment with imprisonment for a term which may extend to three years and with fine when the amount in question is greater than 2 crores but does not exceed 5 crores. There is no hard and fast rule and no inflexible principle governing the exercise of such discretion by the Courts. There cannot be an inexorable formula in the matter of granting bail. The facts and circumstances of each case will govern the exercise of judicial discretion in granting or refusing bail. The answer to the question whether to grant bail or not depends upon a variety of circumstances the cumulative effect of which must enter into the judicial verdict. Any one single circumstance cannot be treated as of universal validity or as necessarily justifying the grant or refusal of bail. For the purpose of granting or refusing bail there is no classification of the offences except the ban under Section 437(1) of the Criminal Procedure Code against grant of bail in the case of offences punishable with death or life imprisonment. Hence there is no statutory support or justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. When the Court has been granted discretion in the matter of granting bail and when there is no statute prescribing a special treatment in the case of a particular offence the Court cannot classify the cases and say that in particular classes bail may be granted but not in others - Several High Courts have also opined that while granting bail the Court has to keep in mind the nature of accusations the nature of evidence in support thereof the severity of punishment which conviction will entail the character of the accused circumstances which are peculiar to the accused reasonable possibility of securing the presence of the accused at the trial reasonable apprehension of the witnesses being tampered with the larger interests of the public and the State and other similar considerations and have granted bail to the persons accused under section 132 of the CGST Act. The petitioner is directed to be released on bail on furnishing a bail bond of 5, 00, 000/- with one surety for the like amount to the satisfaction of the learned trial court with the conditions imposed - petitioner shall co-operate with the trial and shall not seek unnecessary adjournments on frivolous grounds to protract the trial - bail application allowed.

Issues Involved:
1. Bail application under Section 439 of the Cr.P.C.
2. Allegations of fraudulent business transactions and availing bogus Input Tax Credit (ITC).
3. Modus operandi and scale of fraud.
4. Evidence and search findings.
5. Legal provisions and punishments under the OGST Act.
6. Arguments by the petitioner's counsel.
7. Arguments by the Additional Standing Counsel.
8. Judicial discretion in granting bail.
9. Precedents and principles regarding bail in economic offences.
10. Conditions for granting bail.

Detailed Analysis:

1. Bail Application under Section 439 of the Cr.P.C.:
The petitioner, currently in custody, filed a bail application under Section 439 of the Cr.P.C. corresponding to 2(C)CC Case No.35 of 2020 for offences punishable under Section 132(1)(b)(c) and (i) of the OGST Act, 2017. The petitioner’s previous bail application was rejected by the ASJ-cum-Special Judge (CBI-I), Bhubaneswar.

2. Allegations of Fraudulent Business Transactions and Availing Bogus ITC:
The prosecution alleged that the petitioner, in collusion with others, created several dummy and non-existent entities to avail bogus ITC, defrauding the revenue. The entities involved included M/s Siddhi Binayak Steel, M/s Varmora Steel & Cement, among others.

3. Modus Operandi and Scale of Fraud:
The fraudulent activities involved passing bogus ITC secured through fake invoices without actual supply of goods. This caused a significant loss to the State exchequer, estimated at ?96.39 crores. The petitioner allegedly availed ITC worth about ?46.10 crores and passed on ITC worth ?50.29 crores.

4. Evidence and Search Findings:
Searches conducted by the authorities revealed no actual business activities at the declared premises, multiple entities operating from the same location, and lack of transport documents or warehousing facilities. Incriminating documents were seized, and the petitioner was found to have placed orders through unverified brokers.

5. Legal Provisions and Punishments under the OGST Act:
Section 132(1)(i) of the OGST Act provides for imprisonment up to five years and a fine for tax evasion exceeding ?500 lakh. Section 132(ii) prescribes up to three years of imprisonment for amounts between ?2 crores and ?5 crores, and Section 132(1)(iii) provides for up to one year of imprisonment for amounts between ?1 crore and ?2 crores.

6. Arguments by the Petitioner’s Counsel:
The petitioner’s counsel argued that the petitioner was not involved in the alleged offences and was arrested on frivolous grounds. They contended that the authorities had not identified the creators of the fictitious companies and that the FIR did not establish the petitioner’s involvement in manipulating or purchasing materials.

7. Arguments by the Additional Standing Counsel:
The Additional Standing Counsel argued that the proceedings were rightly initiated, and the petitioner was engaged in a complex GST fraud. They emphasized the economic impact of the fraud and the provisions of the OGST Act that allow for both criminal prosecution and civil proceedings.

8. Judicial Discretion in Granting Bail:
The court noted that in such cases, evidence is largely documentary, and once the charge-sheet is filed, the presence of the accused may not be necessary unless contrary antecedents are demonstrated. The court highlighted the importance of judicial discretion in granting bail, considering various factors and circumstances.

9. Precedents and Principles Regarding Bail in Economic Offences:
The court referred to precedents, including Anil Mahajan v. Commissioner of Customs and Sanjay Chandra vs CBI, emphasizing that there is no hard and fast rule for granting bail. The court must consider the nature of accusations, evidence, severity of punishment, and other relevant factors.

10. Conditions for Granting Bail:
The court directed the petitioner to be released on bail with conditions, including furnishing a bail bond of ?5,00,000, cooperating with the trial, not influencing witnesses, and submitting passports. The court clarified that the discussions were limited to the bail application and the tax liability assessment would proceed as per law.

Conclusion:
The bail application was disposed of, with the petitioner being granted bail under specified conditions, ensuring cooperation with the trial and adherence to legal obligations.

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