2021 (11) TMI 644 - HC - GST

Seeking grant of anticipatory bail - availment of fraudulent input tax credit under fake invoice without movement of goods - section 67(2) of CGST Act - non-compliance with the summons - non-existent suppliers - HELD THAT - There is sufficient evidence against applicant. He is engaged in availing fraudulent tax credit. The statement of applicant was recorded u/s. 70 of the Act. There are 12 non existent suppliers. The respondents have power to arrest. What is required is reason to believe about involvement of the suspect. There is sufficient evidence on record to satisfy the reason to believe. No case is made out for granting relief to the applicant - Bail application rejected.

Summary

Issues:
Apprehension of arrest under Section 132 of Central Goods and Services Tax Act, 2017; Rejection of anticipatory bail application based on fraudulent input tax credit and non-existent suppliers; Allegation of false implication and coercion during investigation; Legal provisions under CGST Act for demand of tax, recovery, and genuine transactions; Sufficiency of evidence for custodial interrogation and arrest.

Analysis:
The applicant faced apprehension of arrest under Section 132 of the Central Goods and Services Tax Act, 2017 for alleged involvement in fraudulent activities related to input tax credit. The investigation revealed that the applicant availed of fraudulent input tax credit through fake invoices without actual movement of goods. The scrutiny of suppliers indicated that 12 of them were non-existent, raising suspicions regarding the legitimacy of transactions amounting to approximately ?13 crores. The applicant's statement under Section 70 of the CGST Act further confirmed the irregularities, as he admitted to obtaining invoices without actual supply of goods from three suppliers who were found to be non-existent.

The applicant's plea for anticipatory bail was rejected by the Sessions Court, leading to the High Court's review of the case. The applicant claimed false implication and coercion during the investigation, alleging demands for deposits and post-dated cheques, along with bribery accusations against the first respondent. The applicant argued that the CGST Act provides mechanisms for tax demands and refunds, emphasizing proper banking channels and accounting for transactions. However, the respondent contended that there was substantial evidence against the applicant, highlighting the fraudulent nature of transactions and the necessity of custodial interrogation due to ongoing investigations.

Upon reviewing the evidence, the High Court found sufficient grounds to believe that the applicant was indeed involved in availing fraudulent tax credit, considering the non-existent suppliers and the applicant's recorded statement. The court emphasized the power of arrest based on a valid reason to believe the suspect's involvement, dismissing the applicant's reliance on previous case laws that were deemed inapplicable to the present circumstances. Ultimately, the court concluded that based on the factual aspects and evidence presented, there was no basis for granting relief to the applicant, leading to the rejection of the anticipatory bail application.

In the final order, the High Court rejected the anticipatory bail application, reinforcing the decision based on the evidence and legal provisions under the CGST Act, highlighting the seriousness of the allegations and the need for further investigation through custodial interrogation.