2022 (1) TMI 552 - HC - GST

Seeking grant of Bail - bogus ITC was claimed on the strength of fake invoices without physical receipt and supply of goods - Section 132(1)(c) of CGST Act, 2017 - HELD THAT - In the instant case, the petitioner was arrested on 05.08.2021 for an offence punishable under Section 132(1)(c) CGST Act, 2017 having availed fake ITC by the firm M/s. Arshee Ventures during the period from July, 2017 to March, 2019. As is made to understand, the business premises of the firm was searched and inspected in the year 2018 by CGST Intelligence Wing and the petitioner s statement was recorded and was further examined on couple of times once in the year 2019 and soon before his arrest in the month of August, 2021 and in the meantime, final PR was submitted on 5th October, 2021. The petitioner is claimed to be the authorized agent of M/s. Arshee Ventures with his wife as its proprietor. The allegation is to the effect that the firm in question availed ineligible ITC and also made it available for other business entities by providing fake invoices and thus, passed on within and outside the State. The details of the documentation regarding the illicit transactions have been revealed during investigation. The conclusion which has been drawn by the investigating agency is entirely based on documents which are shown to have been seized during and in course of investigation. The fake business entities appear to have been identified. In other words, all the relevant materials which are required to subject the petitioner to prosecution can be said to have been collected during investigation. The petitioner happens to be a local inhabitant of Sambalpur. The firm is being run in the name of wife of the petitioner. Being a permanent resident of Sambalpur, the Court is of the view that there is a remote possibility of petitioner absconding or fleeing from justice. The petitioner is directed to be released on bail on furnishing a bail bond of ₹ 50,00.000/- with two solvent sureties for the like amount to the satisfaction of the learned court below in seisin over the matter with conditions - Application allowed.

Summary

Issues Involved:
1. Bail application under Section 439 Cr.P.C.
2. Allegations of availing ineligible Input Tax Credit (ITC) under CGST Act, 2017.
3. Arguments for and against the bail.
4. Examination of evidence and legal principles for granting bail.
5. Conditions for granting bail.

Issue-wise Detailed Analysis:

1. Bail Application under Section 439 Cr.P.C.:
The petitioner filed an application under Section 439 Cr.P.C. seeking bail in connection with 2 (C) CC No.328 of 2021, arising from DGGI/BbZU/INV/110/GST/2018, registered under Section 132(1)(c) of the CGST Act, 2017.

2. Allegations of Availing Ineligible ITC:
The petitioner, associated with M/s. Arshee Venture, is accused of engaging in irregular transactions since 2016. The CGST authorities alleged that the petitioner and his wife admitted to issuing sale bills without actual supply of goods, claiming tax credit without actual receipt of goods, and admitting tax liability on fictitious transactions. The petitioner allegedly availed ineligible ITC amounting to ?7.3 crore and issued fake invoices to facilitate ITC utilization by other firms.

3. Arguments for Bail:
The petitioner contended that all dues were credited/paid back to the Government, and no benefit was retained or appropriated from the cash credit. It was argued that the entire amount of tax credit availed had either been reversed/returned or used for tax payment, and there was no material suggesting the business concerns were fake or non-existent. The petitioner also highlighted that the offense is punishable with imprisonment up to five years and requested bail considering these facts.

4. Arguments Against Bail:
The opposite party opposed the bail, arguing that the petitioner was involved in availing ineligible ITC of ?7.3 crore without receipt of goods/services and issuing fake invoices. They contended that the investigation revealed multiple parties involved in the fraudulent activities, and releasing the petitioner on bail could lead to tampering with evidence. The opposite party emphasized the socio-economic nature of the offense and its impact on society, arguing against leniency in granting bail.

5. Examination of Evidence and Legal Principles for Granting Bail:
The court noted that while considering bail, a detailed examination of evidence should be avoided, and only the existence of a prima facie case should be assessed. The Supreme Court's principles in P. Chidambaram Vs. Directorate of Enforcement and Kalyan Chandra Sarkar Vs. Rajesh Ranjan were referenced, emphasizing factors such as the nature of accusation, severity of punishment, reasonable apprehension of tampering with evidence, and the possibility of securing the accused’s presence at trial.

6. Conditions for Granting Bail:
The court acknowledged that the petitioner, a local inhabitant of Sambalpur, had been in custody since August 2021, and the trial was unlikely to conclude soon. Considering the completion of the investigation and the submission of the final PR, the court granted bail with stringent conditions to ensure the petitioner does not tamper with evidence or abscond. The conditions included furnishing a bail bond of ?50,00,000 with two solvent sureties, surrendering the passport, and not leaving the court’s jurisdiction without permission.

Conclusion:
The bail application under Section 439 Cr.P.C. was allowed, and the petitioner was granted bail with specific conditions to ensure compliance and prevent any potential tampering with evidence or absconding. The court emphasized the need for a judicious and non-arbitrary exercise of discretion in granting bail, especially in cases involving economic offenses.