2022 (6) TMI 353 - DSC - GST

Seeking grant of Bail - availment and utilisation of ineligible Input Tax Credit (ITC) on the basis of fake invoices issued in the name of or by several fake/non-existent firms - violation of Section 132(1) (b) and (c) r/w. 132(5) of Central Goods and Services Tax Act 2017 - HELD THAT - Offence committed by the applicant is economic offense which is well planned. In the investigation of the respondent, non existent/fake suppliers were noticed. Applicant availed benefit of ITC on the basis of fake invoices. Investigation is till in progress. There is documentary evidence against the applicant of his involvement in the commission of the crime. At the time of arrest, applicant was informed about the grounds of his arrest. Applicant was present at the office of respondent and his statement was recorded, this shows that applicant was aware about the matter against him. There is no violation of guidelines of Hon ble Supreme Court in the matter of ARNESH KUMAR VERSUS STATE OF BIHAR ANR 2014 (7) TMI 1143 - SUPREME COURT . Further, this cannot be a sole ground to grant bail in such an offence. Therefore, it is not a fit case to grant bail. In the matter of DAULAT SAMIRMAL MEHTA VERSUS UNION OF INDIA THROUGH THE SECRETARY AND OTHERS 2021 (2) TMI 762 - BOMBAY HIGH COURT is concerned, in this matter, investigation was going on for more than two years and thereafter, there was arrest of the applicant. After arrest of the applicant, he immediately filed application U/s.138 of CGST Act for compounding of offence. He was released on bail upon certain conditions including deposit of Rs.25 Crores. In the present matter, applicant has not shown his willingness to cooperate with the investigation. Applicant has not disclosed name of the broker through whom he received fake invoices. Suppliers of the applicant are fake/non existent. Investigation is started just prior to one month of arrest of the applicant. Investigation is still in progress. Therefore, ratio laid down in the cited judgment cannot be applied to the facts of the present case. Bail application dismissed.

Summary

Issues:
Grant of bail under Section 439 of Cr.P.C. for violation of Section 132(1)(b) and (c) r/w. 132(5) of CGST Act 2017.

Analysis:
1. Allegations and Investigation:
The respondent alleges that the applicant, a proprietor of a business, engaged in availing and utilizing ineligible Input Tax Credit (ITC) through fake invoices amounting to Rs.10 Crores. The investigation revealed that the applicant availed ITC from fake/non-existent suppliers, causing a revenue loss of Rs.7.57 Crores. The applicant was arrested for contravention of CGST Act, with the investigation still ongoing to trace more fake suppliers.

2. Applicant's Argument:
The applicant's counsel argued that the applicant's transaction was genuine, and his arrest was in violation of the guidelines set by the Supreme Court in Arnesh Kumar case. The counsel cited a High Court judgment to support the bail application, emphasizing that the applicant's maximum punishment is five years and that there is no evidence of tampering with witnesses.

3. Opposition and Concerns:
The respondent opposed the bail application, highlighting that the investigation is ongoing, and releasing the applicant may lead to tampering with evidence or alerting fake suppliers. The applicant's admission of the offense and failure to disclose crucial details like the broker's identity were raised as concerns against granting bail.

4. Judicial Decision:
The Additional Sessions Judge considered the economic offense committed by the applicant as well-planned, involving non-existent/fake suppliers. The judge noted documentary evidence of the applicant's involvement and the ongoing investigation. The judge found no violation of Supreme Court guidelines in the arrest process and deemed it insufficient grounds for bail in such a serious offense. The judge also distinguished a cited judgment where bail was granted based on different circumstances, ultimately rejecting the bail application.

5. Final Order:
After a thorough analysis of the arguments and facts presented, the bail application (No. 274 of 2022) was rejected by the Additional Sessions Judge, emphasizing the seriousness of the offense, ongoing investigation, and lack of cooperation from the applicant in disclosing crucial information. The judge concluded that the application did not merit bail and disposed of the matter accordingly.