2021 (2) TMI 562 - HC - GST

Seeking anticipatory bail - Availment of fraudulent ITC upon the strength of fake invoices providing fabricated information on E-way bill portal - HELD THAT - It is not in dispute that the suppliers have their valid PAN cards as well as Bank accounts and they have been granted registration by the Respondents itself after doing complete verification from their end, in terms of Chapter VI of CGST Act, 2017. Moreover, the suppliers of the Companies of the applicant have been filing requisite GSTR returns and doing all the compliances under CGST Act, 2017, on the basis of which ITC is credited to the Account of the Companies of the applicant - From the material available on record, it established that the suppliers have supplied goods to the Companies, which have been further exported by the Companies to the buyer. In addition to it, payments received by the Companies from their foreign buyers are further transferred to account of the suppliers via-online. Copy of some of the Ledgers maintained by the Company qua their suppliers are annexed herewith as Annexure A-32. Therefore, it is wholly misconceived that the suppliers are non-existent. Supply of goods by the transporter - e-way bill uploaded by the supplier - HELD THAT - It goes to many levels of checks and inspection by the Custom Authorities and Export General Manifesto (EGM) are issued at different stages. It leaves no doubt that the goods are not transported by the concerned vehicle as it goes through different level of checks and inspections. However, the facts have not been investigated by the respondents. It is not in dispute that on the day the impugned order has been passed, the said Judge granted regular bail to the husband of the applicant after spending nearly 50 days in custody who is the person involved in dayto-day affairs of the company, however, dismissed the anticipatory bail of the applicant - It is also not in dispute that the applicant and her husband were called for investigation by the Investigating Agency/Department on 10.12.2020 and their statements were duly recorded. Husband of the applicant was arrested but applicant was released on the same day - Admittedly, the export made by the companies of the applicant in crores of rupees. The Investigating Agency has conducted as many as 5 raids including the residence and office premises of the applicant and seized the evidence such as original documents, purchase and sale invoices, ledgers and Bank Statements, hard disks, CPU, export details, etc. The custodial interrogation of the applicant is not required - petitioner shall cooperate with the investigation and make herself available for interrogation by police officer, as and when required - petition allowed.

Summary

Issues involved:
1. Petition filed under section 438 Cr.P.C. seeking anticipatory bail in relation to an investigation under Central Goods & Service Tax Act, 2017.
2. Allegations of creating bogus export firms, fraudulent availing of ITC, and financial dealings by the applicant and her husband.
3. Opposition to the petition based on non-cooperation in the investigation, absconding, and strict adherence to the law by the investigating agency.
4. Dispute over the validity of the investigation, search procedures, and lack of stay granted by the Court in related writ petitions.
5. Defense arguments regarding the transfer of funds between company and personal accounts, tax payments, and lack of personal assets by the applicant.
6. Analysis of offenses under CGST Act, 2017 related to ITC availing, tax evasion, and fraudulent refund claims by the companies.
7. Verification of supplier details, export transactions, and compliance with GST regulations by the companies involved.
8. Examination of the involvement of the applicant in the company affairs, the role of suppliers, and the transport of goods in the export process.
9. Comparison of treatment between the applicant and her husband in the investigation and the necessity of custodial interrogation.
10. Directions given for release on bail, cooperation with the investigation, non-influence on witnesses, and the trial court's independence.

Analysis:

The judgment concerns a petition seeking anticipatory bail under section 438 Cr.P.C. in connection with an investigation under the Central Goods & Service Tax Act, 2017. The prosecution alleges the creation of bogus export firms and fraudulent availing of Input Tax Credit (ITC) amounting to ?45 crores. The applicant and her husband are accused of financial misdeeds, including transferring significant amounts between company and personal accounts. The defense argues that the fund transfers were for generating interest and were reflected in bank statements and audited ledgers, with corresponding tax payments made. The defense also claims that the companies did not fraudulently avail ITC and were compliant with GST regulations.

The opposing counsel asserts that the applicant was actively involved in the companies' financial affairs and was aware of the alleged misdeeds to claim GST refunds. The investigating agency maintains that the applicant is not cooperating, absconding since her husband's arrest, and the investigation is being conducted lawfully. The court notes discrepancies in the investigation process, including search procedures and lack of stay granted in related writ petitions, but ultimately allows the petition and directs the applicant's release on a personal bond of ?25,000.

The judgment delves into the details of the alleged offenses under the CGST Act, 2017, including ITC availing, tax evasion, and fraudulent refund claims by the companies involved. It examines the compliance of the companies with GST regulations, the validity of export transactions, and the involvement of suppliers in the process. The court emphasizes that custodial interrogation of the applicant is unnecessary and directs cooperation with the investigation while refraining from influencing witnesses or tampering with evidence. The trial court is instructed not to be influenced by the observations made in the order, ensuring its independence in the proceedings.