2021 (5) TMI 674 - HC - GST

Bail application - petitioner was acting as middleman by procuring GST registration pertaining to defunct companies - petitioner was receiving commission for selling the details of GST registration of defunct companies - section 132 (5) of the CGST Act - HELD THAT - In the case on hand, it is the insistent stand of the respondent that the value of fraud is to the tune of around ₹ 55 Crores - A perusal of record shows that there are serious allegations against the present petitioner, who is the one of the main accused, that he along with co-accused, by perpetrating fraud and through paper transactions have claimed the relief to the tune of more than ₹ 55 Crores. The case is at preliminary stage and enlarging the petitioner at this point of time on bail would have a detrimental effect on the investigation. Further, without his role as middleman, the whole crime could not have been perpetrated. The nexus of very many persons within the administrative framework could not be ruled out and a proper and full-fledged investigation is necessary to unearth the larger conspiracy involved behind the above. It is not as if the petitioner has been under incarceration for a long length of time. In such a backdrop, this Court is of the considered view that the prayer for grant of bail by the petitioner cannot be acceded to. Petition dismissed.

Summary

Issues:
1. Bail application filed by the petitioner under Section 132 (5) of the CGST Act.
2. Allegations of acting as a middleman in procuring GST registration of defunct companies.
3. Claim of illegal activities causing loss of GST revenue to the exchequer.
4. Dispute over the legality of the petitioner's arrest and detention.
5. Arguments regarding the petitioner's role as a middleman and lack of direct involvement in tax evasion.
6. Opposing arguments emphasizing the petitioner's active participation in fraudulent transactions.
7. Consideration of bail application in light of the seriousness of the economic offense and ongoing investigation.

Analysis:
1. The petitioner sought bail under Section 132 (5) of the CGST Act, contending that he was illegally detained before his arrest. The respondent alleged that the petitioner acted as a middleman, facilitating illegal activities involving defunct companies' GST registrations. The respondent argued that the petitioner's actions led to substantial GST revenue loss, making the offense non-bailable due to ongoing investigations.

2. The petitioner claimed innocence, stating he was only a middleman and not directly involved in tax evasion. The petitioner argued that without a formal assessment of losses and clear evidence of his culpability, he should be granted bail. The respondent opposed bail, citing the petitioner's active role in facilitating fraudulent transactions and benefiting from illegal gains.

3. The court acknowledged the petitioner's middleman role and involvement in procuring defunct companies' credentials for fraudulent transactions. It noted the petitioner's awareness of the misuse of these credentials, rejecting claims of ignorance. The court emphasized the seriousness of economic offenses, cautioning against granting bail without substantial reasons, especially in cases involving significant financial implications.

4. Referring to a similar Supreme Court case involving fraudulent firms, the court highlighted the substantial value of the alleged fraud in the present case, around ?55 Crores. It stressed the need for a thorough investigation to uncover the larger conspiracy and deter such fraudulent activities. The court concluded that granting bail to the petitioner at this stage could impede the investigation and potentially encourage similar offenses, leading to adverse economic consequences.

5. Considering the gravity of the allegations, the court dismissed the petitioner's bail application, emphasizing the need for a comprehensive investigation to unravel the complex web of fraudulent activities and prevent further harm to the economy. The court held that bail, in this case, would not be appropriate given the substantial financial implications and the petitioner's integral role in the fraudulent scheme.