2022 (3) TMI 548 - HC - GST

Seeking grant of bail - wrongful availment and utilization of Input Tax Credit (ITC) - issuance of invoices without supply of goods - evasion of input tax credit - bailable offence as per Section 132 of the TNGST Act 2017 or not - Custodial interrogation - HELD THAT - The reading of Sections 132 (1) (a) (b) and (c) 132(5) of Tamil Nadu Goods and Services Tax Act and the explanation thereof made amply clear that in the instant case the tax evasion exceeds 500 Lakhs i.e. 5 lakhs. It is correct to say the arrest memo and remand report does not reflect the same figure. However the material placed along with the remand report would show that the tax evasion on different heads had exceeding more than 500 Lakhs. From the material placed by the prosecution show a continuous offence committed by the petitioner herein since 2018-2019 and the figure of 4, 78, 47, 505/- was only till July 2021. Whereas the remand application is on 10.01.2022 which reflects the loss of revenue under three different heads with exceeds more than 5 crores. Custodial interrogation - HELD THAT - For grant of bail it is necessary to take into account the apprehension of the respondent that the petitioner who has floated fictitious companies and create records if let out on bail will tamper the evidence. Since the investigation has entered the crucial stage the release of the petitioner at this stage will lead to tampering of evidence. Petition is dismissed.

Summary

Issues:
Bail application under Section 132 of TNGST Act, 2017 for offences related to tax evasion exceeding ?5 crores.

Analysis:
1. Magnitude of Tax Evasion: The petitioner, a proprietor engaged in bill trading activities, is accused of fraudulently passing on Input Tax credit, resulting in a loss of ?5,16,66,620 to the government. The complaint alleges creation of fake invoices without actual movement of goods, availing input tax credit fraudulently, and wrongful utilization of funds, totaling over ?5 crores. The prosecution contends that the offence falls under Section 132(1) of TNGST Act, a non-bailable offence due to the substantial amount involved.

2. Bail Grounds: The petitioner seeks bail citing the evasion amount being ?3.39 crores, a bailable offence under Section 132 of TNGST Act. Additionally, it is argued that inadequate opportunity was given before remand, as required by law. The petitioner's claim of being entitled to bail after custodial interrogation, which has already taken place, is presented as a ground for release.

3. Prosecution's Counter: The respondent asserts that after thorough inspection and record collection, the petitioner failed to produce authentic documents, indicating involvement in tax evasion exceeding ?5 crores. The prosecution presents a detailed breakdown of the tax evasion across different financial years, emphasizing the petitioner's issuance of fake invoices without actual goods movement and minimal cash payments compared to the total amount involved.

4. Legal Provisions: Section 132 of TNGST Act outlines various offences related to tax evasion, with specific penalties based on the amount involved. The law categorizes offences based on the quantum of tax evaded, with imprisonment terms ranging from one to five years and fines. The section also specifies that offences under clauses (a) to (d) are cognizable and non-bailable, emphasizing the seriousness of tax-related crimes.

5. Judicial Decision: The court notes discrepancies between the petitioner's claims of a lesser evasion amount and the prosecution's evidence indicating a higher sum exceeding ?5 crores. Considering the critical stage of investigation and the risk of evidence tampering, the court dismisses the bail application, upholding the non-bailable nature of the offence and the prosecution's concerns regarding potential interference with the case.

In conclusion, the judgment highlights the complexity of tax evasion cases, the legal framework governing such offences, and the judicial scrutiny applied to bail applications in light of the seriousness of financial crimes.