2022 (1) TMI 700 - HC - GST

Input tax credit - claim and availment of bogus ITC on the basis of fake invoices by creating and operating 13 fictitious firms - offences under Sections 132(1)(b),(c) (l) of the OGST Act - HELD THAT - As per the materials on record, the petitioner allegedly obtained GST registration vis- -vis the fake business concerns in collusion with other accused persons by utilizing and forging the personal identity documents of the so called proprietors. The nature and extent of involvement of the petitioner with regard to the alleged transactions is clearly evident and figured out from the materials on record. In so far as the offence under Section 132 OGST Act is concerned, it is in relation to GST fraud alleged to be for an amount of ₹ 319.64 crore, wherein, the petitioner is said to be involved by creating and operating fictitious business entities in the names of persons having no means. As a consequence, bogus ITC was availed by the business establishment for whom he worked as a Chartered Accountant with the allegation of joint liability. Whether, it is a case of petitioner facilitating the bogus ITC being availed is to be dealt with and adjudicated upon during and in course of trial. The GST authorities have managed to find out the alleged fraud being perpetrated towards availing fake ITC by creating bogus business entities and it appears to be an act which apparently makes all the accused persons jointly and severally liable - Having regard to the nature of involvement and the specific role which is claimed being a Chartered Accountant and his period of detention of four months and the fact that sufficient materials have already been collected and as the prosecution now primarily depends on documentation and related evidence and for that, tampering with the evidence seems to be remotely possible, the Court, being aware of the settled position of law applying to the subject matter, is inclined to release the petitioner on bail subject, however, to stringent conditions stipulated. The petitioner is directed to be released on bail on fulfilment of conditions imposed - bail application allowed.

Summary

Issues involved:
1. Application under Section 439 Cr.P.C. challenging rejection order in connection with a case.
2. Allegations of utilizing and passing bogus ITC, creation of fictitious firms, and arrest under OGST Act.
3. Contention of motivated action by authority, innocence of the petitioner, and professional role as a Chartered Accountant.
4. Opposite party's argument of deliberate involvement in fraud, liability under OGST Act, and seriousness of economic offences.
5. Defense emphasizing professional relationship, lack of involvement in operations, and legal provisions not applicable during the period.
6. Reference to Supreme Court's judgment on granting bail in economic offences and considerations for bail in the current case.
7. Involvement of the petitioner in creating fake business entities for bogus ITC, joint liability, and nature of offense under Section 132 OGST Act.
8. Decision to grant bail with stringent conditions to the petitioner based on specific factors and nature of involvement.

Analysis:
1. The petitioner filed an application challenging the rejection order in connection with a case involving allegations of utilizing and passing bogus ITC amounting to a significant sum. The petitioner, a Chartered Accountant, was arrested under the OGST Act based on investigation findings related to the creation and operation of fictitious firms.

2. The petitioner contended that the authority's actions were motivated and denied involvement in siphoning off money through fake firms. The petitioner emphasized being innocent, merely facilitating registration based on documents supplied, and not being associated with the business activities of the firms. The opposite party argued that the petitioner deliberately engaged in fraudulent activities, leading to liability under the OGST Act.

3. The defense highlighted the petitioner's professional relationship with the business entities, claiming no operational involvement or knowledge of the alleged fraud. The defense also argued that the legal provisions invoked were not applicable during the relevant period. The defense sought bail for the petitioner based on legal principles and previous court decisions.

4. The court considered the severity of the offense, the petitioner's alleged involvement in creating fake business entities for bogus ITC, and joint liability under the OGST Act. Despite the serious nature of economic offenses, the court decided to grant bail to the petitioner with stringent conditions, considering factors such as the period of detention, collected evidence, and the unlikelihood of tampering with evidence.

5. The court's decision to grant bail was based on a comprehensive analysis of the petitioner's role, the specific allegations, and the need to balance the interests of justice. The court imposed strict conditions on the petitioner upon release to ensure compliance and prevent any interference with the ongoing investigation and trial processes.