2022 (4) TMI 599 - HC - GST

Seeking grant of bail - availment of fraudulent ITC - sham subsidiaries - fake bills without the actual supply of goods - Sections 132(1)(C) and 132(1)(b) of the Central Goods and Services Tax Act, 2017 - HELD THAT - Bail, as it has been held in a catena of decisions, is not to be withheld as a punishment. Bail cannot be refused as an indirect method of punishing the accused person before he is convicted. Furthermore, it has to be borne in mind that there is as such no justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. It cannot, therefore, be said that bail should invariably be refused in cases involving serious economic offences. It is not in the interest of justice that the Petitioner should be in jail for an indefinite period - No doubt, the offence alleged against the Petitioner is a serious one in terms of alleged huge loss to the State exchequer, that, by itself, however, should not deter this Court from enlarging the Petitioner on bail when there is no serious contention of the Respondent that the Petitioner, if released on bail, would interfere with the trial or tamper with evidence. Having regard to the entire facts and circumstances of the case, especially the fact that the bread earning son of a family has been in custody for over a year now I do not find any justification for detaining the Petitioner in custody for any longer. As a side note, it is observed that more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trial upstream and bring the upstream parties who are the ultimate beneficiaries who are the gainers in these evil machinations. Thus, it is directed that the Petitioner be released on bail by the court in seisin over the matter, subject to conditions imposed - the instant bail application is allowed.

Summary

Issues Involved:
1. Legality of the bail application under Section 439 of Cr.P.C.
2. Allegations against the Petitioner under Sections 132(1)(C) and 132(1)(b) of the CGST Act, 2017.
3. Examination of the Petitioner's cooperation with authorities and potential flight risk.
4. Consideration of the Petitioner's health condition and family situation.
5. Judicial precedents and principles governing bail.
6. Conditions for granting bail.

Detailed Analysis:

1. Legality of the Bail Application under Section 439 of Cr.P.C.:
The Petitioner, in custody since 12.01.2021, filed for bail under Section 439 of Cr.P.C. corresponding to 2(C)CC Case No.51 of 2020. The initial bail plea was rejected by the 1st Additional Sessions Judge, Rourkela, on 28.07.2021. The Petitioner sought bail for alleged offences under Sections 132(1)(C) and 132(1)(b) of the CGST Act, 2017.

2. Allegations Against the Petitioner:
The prosecution alleged that the Petitioner’s firm, M/S Sony Iron and Steel Trading Co., availed fraudulent ITC from sham subsidiaries of M/S Pacific Packing Industries, amounting to ?5,02,21,055 through fake bills without actual supply of goods. The Petitioner was also implicated for actions related to M/S Harihara Enterprises, based on his confession.

3. Examination of the Petitioner's Cooperation with Authorities and Potential Flight Risk:
The Petitioner’s counsel argued that the allegations lacked substantial evidence and were based solely on the Petitioner’s confession, which cannot be used against him. The Petitioner had been cooperating with the investigation, making multiple appearances to assist authorities. Despite this, he was detained on 12.01.2021. The Petitioner’s family faced severe hardships due to his absence, and he had been advised to undergo bypass surgery. The final charge sheet was submitted, and documentary evidence seized, reducing the risk of evidence tampering. The Petitioner, residing locally, posed no flight risk.

4. Consideration of the Petitioner's Health Condition and Family Situation:
The Petitioner’s counsel highlighted the critical health condition requiring bypass surgery and the family’s dire situation due to his detention. These factors were presented as compelling reasons for granting bail.

5. Judicial Precedents and Principles Governing Bail:
The court referred to several precedents, emphasizing the philosophy of bail as a right for assertion of freedom against state restraints. Key judgments cited included Vaman Narain Ghiya v. State of Rajasthan, Moti Ram v. State of M.P., and Sanjay Chandra v. CBI, which underscored the importance of personal liberty, the presumption of innocence, and the non-punitive nature of bail. The court also referenced Anil Mahajan v. Commissioner of Customs and H.B. Chaturvedi v. CBI, summarizing the legal position on bail, including considerations such as the seriousness of the offence, the likelihood of the accused tampering with evidence, and the necessity of ensuring a fair trial.

6. Conditions for Granting Bail:
The court, considering the facts and circumstances, directed the Petitioner’s release on bail with specific conditions:
- Cooperation with the trial and avoidance of unnecessary adjournments.
- No inducement, threat, or promise to prosecution witnesses.
- Submission of passports and restriction on leaving India without court permission.
- Cancellation of bail upon involvement in similar offences under the GST Act.

Conclusion:
The court allowed the bail application, emphasizing that the Petitioner’s prolonged detention was unjustified. The decision was made without affecting the merits of the case, and the tax liability assessment would proceed per applicable laws. The bail application was disposed of along with any pending applications.