2022 (7) TMI 133 - HC - GST

Seeking grant of bail - availment of fraudulent credit - fake GST invoices issued by the Traders of Bullion and Diamond Products without supply of corresponding goods - Sections 132(1)(b) and 132(1)(c) of the Central Goods and Service Tax, 2017 - HELD THAT - On perusal of the material placed on record, it appears that so far case of present applicant is concerned, his role and modus operandi, unearth, while the authority was investigating the case of Bharat Soni and others. In the present case, the applicant herein being a Director and Proprietor of both the firms have categorically stated that his company made deposit of Rs. 2 crores to Electronic Cash Ledger and also had made payment totaling Rs.90 lakhs by reversing the alleged ITC. It is evident that the applicant has paid Rs.2,90,00,000/- through Electronic Cash Ledger as well cash. The amount involved is Rs.9.33 crores. In such circumstances, more than 10% amount has been deposited. It is settled law that there is no straight jacket formula for consideration of grant of bail to an accused. It all depends upon the facts and circumstances of each case - Here in the present case, after the arrest, the applicant has shown his bonafideness as discussed hereinabove. The applicant does not have any past record. The authority has expressed the apprehension that if bail is granted, the applicant will flee from justice and considering the pending investigation, his custody is necessary. This contention having no any merits, as merely raising the contention is not enough but it should be substantiate by acceptable material. In the present case, nothing on record to show that the investigation qua applicant is incomplete and he having tendency to flee away from justice. The entire documentary evidence seized by the authority. In such circumstances, when the authority failed to point out that the further custody of the applicant is necessary, and considering the particular facts and circumstances of the present case and keeping in mind the settled law laid down in the case of SANJAY CHANDRA VERSUS CBI 2011 (11) TMI 537 - SUPREME COURT , wherein, it was observed that detention of the accused for an indefinite period is in violation of Article 21. The applicant is ordered to be released on regular bail subject to conditions imposed - application allowed.

Summary

Issues:
1. Bail application under Section 439 of Cr.P.C for alleged offence under Central Goods and Service Tax Act.
2. Allegation of fraudulent credit availment leading to monetary loss to the government.
3. Arrest without completion of investigation and demand notice issuance.
4. Rejection of bail applications by lower courts.
5. Arguments for bail by applicant's counsel.
6. Arguments against bail by standing counsel for respondent.
7. Consideration of evidence, payment made, and legal provisions.
8. Precedents cited by both parties.
9. Grant of bail based on bonafide actions, lack of past criminal record, and insufficiency of reasons for further custody.

Analysis:
1. The judgment pertains to a bail application filed under Section 439 of the Cr.P.C in connection with alleged offences under the Central Goods and Service Tax Act. The applicant, a Director of two firms, was found to have availed ineligible input tax credit amounting to Rs. 9.33 crores from non-existing fake firms, leading to a monetary loss to the government.

2. The key issue revolves around the fraudulent credit availment scheme orchestrated by the applicant, which was unearthed during a raid on the premises of a third party. The applicant was alleged to have facilitated wrongful availment of input tax credit by issuing invoices without actual supply of goods, thereby committing offences under various sections of the Act.

3. The applicant's counsel argued against the arrest, citing lack of completion of investigation and absence of a demand notice. It was contended that the arrest was in disregard of mandatory provisions of the Act, emphasizing that no demand notice was issued prior to the arrest.

4. Lower courts had previously rejected the bail applications of the applicant, leading to the present bail application before the High Court.

5. The applicant's counsel presented arguments asserting the innocence of the applicant and highlighting actions taken to rectify the situation, including payments made and assurances given to the department regarding reversal of input tax credit if found inadmissible.

6. On the other hand, the standing counsel for the respondent opposed the bail application, emphasizing the gravity of the offence, the alleged conspiracy, and the potential impact on the public exchequer.

7. The High Court analyzed the evidence, including payments made by the applicant, and considered legal provisions such as Section 107(6) of the Act, which provides for deemed stay against coercive recovery of dues on predeposit of disputed tax liability.

8. Both parties cited relevant case laws to support their arguments, with the applicant relying on the principle that bail is the rule and denial is exceptional, while the respondent's counsel highlighted the seriousness of economic offences and the need to view them gravely.

9. Ultimately, the High Court granted bail to the applicant based on the actions taken, lack of past criminal record, and insufficiency of reasons for further custody. The court imposed conditions for bail, including a personal bond and surety, along with various restrictions to ensure the applicant's compliance with the law.