2021 (8) TMI 621 - HC - GST

Seeking grant of Anticipatory Bail - input tax credit availed on the basis of bogus invoices - failure to attend before authorities when called for - HELD THAT - The petitioners have failed to appear before the authorities, which has issued the notices, as they are involved in availing and utilizing wrongful input tax credit on the strength of invoices and E-way bills, which are issued from the non-existent and suspicious firms and further passed on input tax credit to various taxpayers throughout the country, thereby causing huge loss to the State Exchequer. No merit in both these petitions - Petitions dismissed.

Summary

Issues Involved:
1. Grant of anticipatory bail.
2. Alleged evasion of tax and use of fake documents.
3. Provisional attachment of bank accounts.
4. Non-appearance before authorities.
5. Challenge to the vires of Section 69 of CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Grant of Anticipatory Bail:
The petitioners sought anticipatory bail in proceedings initiated by the respondents following an inspection on 24.06.2021 and subsequent summons under Section 70 of the HGST/CGST Act, 2017. The petitioners argued that their firms, involved in wholesale trading of iron and steel products, were subject to a raid and their bank accounts were frozen. They contended that they could not appear before the authorities due to time constraints and health reasons, but had sent replies requesting extensions.

2. Alleged Evasion of Tax and Use of Fake Documents:
The respondents alleged that the petitioners availed input tax credit (ITC) based on tax invoices from suspicious firms in Delhi. These firms were found to be non-existent upon verification. Statements from vehicle owners indicated that no goods were transported as claimed by the petitioners. The respondents formed an opinion that the petitioners prepared bogus documents to show inward supplies. The analysis of inward supplies revealed that the petitioners' firms had availed ITC on the strength of invoices from non-existent firms, leading to a demand for tax, interest, and penalty totaling over ?36 crores.

3. Provisional Attachment of Bank Accounts:
The petitioners' bank accounts were provisionally attached by the State Tax Unit. This action was taken following the inspection and the issuance of summons, as part of the proceedings under the HGST/CGST Act, 2017. The attachment was a measure to secure the alleged tax liability.

4. Non-Appearance Before Authorities:
The petitioners failed to appear before the authorities despite multiple summonses. The respondents argued that the petitioners sought adjournments on various grounds and did not comply with the directions to join the proceedings. The petitioners' non-appearance was viewed as an attempt to delay the proceedings and avoid the consequences of the alleged tax evasion.

5. Challenge to the Vires of Section 69 of CGST Act, 2017:
The petitioners contended that the vires of Section 69 of the CGST Act, 2017, which empowers authorities to arrest individuals for tax evasion, was under challenge in another case (CWP-8268-2020). They argued that their arrest should be stayed pending the outcome of that challenge.

Judgment:
The court dismissed the petitions for anticipatory bail, finding no merit in the arguments presented. The court noted that the petitioners were involved in creating fake documents and evading taxes amounting to over ?36 crores. The petitioners' failure to appear before the authorities and comply with the summonses further weakened their case. The court emphasized the importance of the GST system and the interconnected chain of sellers and purchasers, highlighting that any fraudulent activity disrupts this chain and causes significant loss to the State Exchequer. The court also referenced a previous judgment (CRM-M-1511-2021) where regular bail was denied in a similar case involving GST fraud.