2021 (4) TMI 147 - DSC - GST

Seeking grant of Bail - raid and search operation were conducted - fake firms - wrongful availment of credit - issuance of GST invoices without supply of goods - HELD THAT - The accused has violated provisions of the CGST Act 2017. It is also apparently clear that on account of issuance of GST invoices without supply of goods leading to fraudulent availment and utilization of input tax credit to the tune of ₹ 159.20 Crores. It is also evident from the arrest memo generated on line 04-01-2021 having valid document identification number. In the instant case, the competent authority had followed the provisions of Section 69 and after going through the investigation report he had ordered for the arrest of the applicant. It is simply clear that the applicant was in full knowledge that the Firms for which he applied for registration were not suppliers in terms of Section 2 (105) of the Act. All guidelines were followed during the preparation of the arrest memo. The applicant was called in the office of DGG Ghaziabad and he was served upon the summons and his statement was recorded on the same day and the investigation report put up before the competent authority. The applicant is sole mastermind and responsible for every act of himself. Suffice to say prima facie, the accused has committed an economic offence and caused monetary loss to the State which is most harmful. There is a possibility to be tampered with the evidence and tempered with the witnesses if the applicant is released on bail - it is not a fit case for bail. Bail application rejected.

Summary

Issues involved:
Bail application under Section 132(1)(b) of the Central Goods and Services Tax Act, 2017.

Detailed Analysis:

1. Allegations and Investigation:
The accused, Vishan Gupta, was arrested for committing offences under Section 132(1)(b) of the CGST Act, involving fraudulent availment and utilization of input tax credit amounting to ?159.20 Crores through fake firms created by him. The raid and search operation revealed incriminating evidence, and statements of the accused were recorded. Physical verification confirmed that the 47 firms were nonexistent, with no business activity found at the premises. Further investigation uncovered an additional 31 firms controlled by the accused. The prosecution argued that the accused was the mastermind behind the fraudulent activities.

2. Defence Arguments:
The defence contended that the arrest was based on false and frivolous grounds, with no evidence collected against the accused during a 20-month investigation period. It was argued that the arrest lacked proper authorization and the accused had cooperated with the investigation. The defence highlighted the accused's clean record, lack of previous convictions, and readiness to provide sureties. Various case laws were cited to support the bail application.

3. Prosecution's Stand:
The prosecution opposed the bail application, asserting that the accused knowingly engaged in fraudulent activities, using fake firms to pass on input tax credit. The investigation was ongoing, and there were concerns about tampering with evidence and witnesses if the accused was released on bail. The prosecution emphasized that all guidelines were followed in preparing the arrest memo and that the accused was fully aware of the illegitimate nature of the firms he created.

4. Judicial Decision:
After hearing arguments from both sides and reviewing the record, the court found the case to involve a serious economic offence causing substantial monetary loss to the state. Considering the gravity of the offence and the potential for tampering with evidence and witnesses, the bail application was rejected. The court concluded that the accused, Vishan Gupta, was the sole mastermind behind the fraudulent activities, and therefore, not a fit case for bail.

In conclusion, the court denied the bail application of the accused, Vishan Gupta, based on the severity of the economic offence committed under the CGST Act, highlighting the potential risks of tampering with evidence and witnesses if the accused was released on bail.