2021 (7) TMI 233 - HC - GST

Seeking grant of Bail - Input tax credit - credit availed without supply/ receipt of goods and services - offence under Section-132(1)(b)(e)(f)(i)(j)(l) of the Central Goods Services Tax Act, 2017 - HELD THAT - The statement of the Petitioner being then recorded, the Officers strongly sensed something fishy and dubious going on in the matter touching the unwanted entitlement and availment of ITC. It is said that ten (10) Firms have been created by hatching conspiracy in carrying out such magnitude of business activities like transfer of goods and services inter se without those taking place in reality and showing fake transactions to be genuine with other financial adjustment as those were ascertained upon investigation leading to the arrest of the Petitioner on 16.12.2020. Materials are yet to surface as to the developments with regard to the notices/summons issued to those entitles for deposit of the ITC as according to the Prosecution, illegally availed for pecuniary gain by playing fraud on the system and mechanism in place. The Petitioner is said to have been involved in commission of the above Economic offences which are considered to be grave. Such dubious activities in committing offences for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as developed country in the globe in which our march is on - the roles alleged to have been played by the Petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime. This Court is not inclined to accept the present move of the Petitioner for grant of bail - Application dismissed.

Issues:
1. Bail application under Section-439 of Cr.P.C. for release of the Petitioner.
2. Allegations of creating fake firms and generating fake bills for availing Input Tax Credit (ITC).
3. Opposing arguments by the Senior Standing Counsel for CGST regarding Economic Offences and tampering with evidence.
4. Evaluation of materials collected during the investigation.
5. Gravity of the economic offences committed by the Petitioner.
6. Impact of the alleged offences on the State Exchequer and GST system.
7. Decision on the bail application.

Analysis:
1. The Petitioner filed a bail application under Section-439 of the Cr.P.C. seeking release in connection with a case under Section-132(1)(b)(e)(f)(i)(j)(l) of the CGST Act. The Petitioner was accused of creating fake firms and generating fake bills to avail ITC without actual supply of goods or services, manipulating bank accounts, and handling accounts with signed blank cheques from account-holders.

2. The Petitioner's counsel argued that the case relied on statements of implicated individuals seeking to evade legal consequences, with no direct evidence linking the Petitioner to the alleged fraudulent transactions. The counsel emphasized the lack of proof showing the Petitioner's personal gain from the inflated ITC transactions and highlighted that similar accused individuals had been granted bail by the Court.

3. The Senior Standing Counsel for CGST opposed the bail application, alleging the Petitioner orchestrated a massive fraud defrauding the State Exchequer of approximately ?40.66 crore through fake documents, fake firms, and non-existent transactions. Concerns were raised about the destruction of crucial evidence by the Petitioner and the potential for tampering with evidence to weaken the prosecution's case.

4. The Court examined the complaint, documents, and the genesis of the case, which originated from a search at the Petitioner's office premises. The investigation revealed the creation of ten fake firms to conduct fictitious transactions, leading to the Petitioner's arrest. The status of notices/summons issued to entities involved in the fraudulent transactions was yet to be determined.

5. The Court acknowledged the gravity of the economic offences attributed to the Petitioner, emphasizing the detrimental impact on the State Exchequer and the objectives of the GST system. The alleged actions were deemed detrimental to the country's development process and international standing, undermining the goals of tax compliance, cost reduction, and trade competitiveness.

6. Considering the serious nature of the offences, the Court declined the bail application, citing the Petitioner's involvement in significant economic crimes aimed at personal financial gain, jeopardizing the integrity of the GST regime and hindering tax compliance efforts.

7. Consequently, the bail application was dismissed, and parties were directed to access the order through the High Court's website due to COVID-19 restrictions, following the prescribed attestation process for legal documentation.

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