2021 (8) TMI 263 - HC - GST

Grant of Bail - fake Input Tax Credit - offence under Section 132 of the Central Goods And Services Tax Act, 2017 read with Sub-Section 5 of Section 132 of the Act of 2017 - HELD THAT - As is apparent from the contents of complaint filed by the DGGI against the petitioners, the entire exercise of investigation which led to arrest of the petitioners, started from the investigation against Mr. Mohit Vijay Kapil Vijay against whom the allegation was of the tax evasion to the tune of ₹139.05 crores. The petitioners are stated to be part of same racket. It has been admitted by the learned counsels for the Revenue that the order dated 02.06.2020 has attained finality as it was not assailed further. Taking into consideration that the petitioners are in custody since 26.03.2021 27.03.2021 respectively, the complaint has already been filed against them; indisputably, they are not warranted for further investigation, the maximum punishment awardable in such case is of five years, the offence is compoundable though, none has initiated any proceedings in this regard and the factum of release of accused persons namely Mohit Vijay Kapil Vijay on bail by this Court; but, without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioners on bail. Bail application allowed.

Summary

Issues:
1. Jurisdictional conflict between DGGI and CGST in the investigation leading to the arrest of the petitioners.
2. Allegations of wrongful availing of Input Tax Credit (ITC) under the Central Goods and Services Tax Act, 2017.
3. Bail application filed under Section 439 Cr.P.C. by the petitioners.
4. Gravity of the offence and the need for further investigation.

Jurisdictional Conflict:
The bail applications were filed under Section 439 Cr.P.C. by the petitioners who were arrested for offences under Section 132 of the Central Goods and Services Tax Act, 2017. The petitioners contended that the investigation by CGST, leading to their arrest, was unwarranted as DGGI was already investigating the matter. They argued that the investigation was bifurcated to involve them in two cases instead of one, with inflated ITC claims to make the offence nonbailable.

Allegations of Wrongful ITC Availment:
The respondents alleged that the petitioners wrongfully availed ITC amounting to significant sums through firms existing on paper. The investigation revealed inflated ITC claims not only concerning M/s. SKE but also other firms. The gravity of the offence was emphasized, indicating ongoing investigations and the involvement of the petitioners in a larger racket issuing fake invoices.

Bail Application under Section 439 Cr.P.C.:
The petitioners, through their counsel, sought bail stating that they were not required for further investigation, had no criminal antecedents apart from the present complaints, and had been in custody since the respective arrest dates. They argued for bail due to the complaints already being filed against them and the non-bailable nature of the offence being a result of mischievously inflated ITC claims.

Gravity of Offence and Need for Further Investigation:
The respondents opposed the bail applications, highlighting the grave allegations against the petitioners for wrongfully availing ITC, involvement in a large racket issuing fake invoices, and destroying evidence. They argued against bail, citing the ongoing investigation and the seriousness of the offences committed.

In the judgment, the Court noted the previous order granting bail to other accused related to the case and the finality of that order. Considering the petitioners' custody period, the filing of complaints against them, and the lack of necessity for further investigation, the Court granted bail to the petitioners. The Court emphasized that the offence was compoundable, with a maximum punishment of five years, and directed the petitioners to furnish a personal bond and sureties for their release on bail under Section 439 Cr.P.C. with specified conditions.