2022 (8) TMI 149 - HC - GST

Seeking grant of Regular Bail - creation of fictitious entity to pass ineligible input tax credit - Sections 132(1)(b) of the Central Goods and Services Tax Act, 2017 and Section 132(1)(b) of the Gujarat Goods and Services Tax Act, 2017 - HELD THAT - It appears that so far 2 firms are concerne, investigation is virtually over. The applicant being an authorized attorney of 2 firms, initially he had evaded the investigation but later on after his arrest and during his remand period, he was interrogated extensively and necessary materials have been recovered. Department has also filed complaint against the applicant. The applicant herein to show his bonafide, willing to deposit Rs.2 crore, which is approximately 10% of the alleged amount. Considering the facts and circumstances of the present case, it is worthwhile to note the observation made by the Apex Court in the case of Sanjay Chandra Vs. CBI, 2011 (11) TMI 537 - SUPREME COURT , wherein, it was observed that constitutionally protected liberty must be respected unless the detention becomes necessary. The balance approach is to grant bail subject to certain conditions rather than to keep the individual under detention for an indefinite period. Considering the facts and circumstances of the present case and role attributable to present applicant herein as well as his bonafide to deposit Rs.2 crore, this Court is of the considered view that case is made out for exercising discretion enlarging the applicant on bail - Bail application allowed.

Summary

Issues:
Bail application under Section 439 of Cr.P.C. for offences under CGST Act and Gujarat GST Act - Allegations of creating fictitious entities for ineligible tax credit - Applicant's involvement in evading tax - Rejection of bail by lower courts - Applicant's readiness to deposit Rs. 2 crore - Prosecution's contention of grave economic offense and potential evidence tampering.

Analysis:
The judgment involves a bail application under Section 439 of the Cr.P.C. concerning offenses under the CGST Act and the Gujarat GST Act. The applicant, presently in custody, is accused of involvement in creating fictitious entities to pass ineligible input tax credit, causing a revenue loss of Rs.21.59 crores. The investigation revealed that the applicant, as the authorized representative of the firms involved, facilitated the issuance of fake invoices for unlawful tax credit. The applicant's bail applications before lower courts were rejected.

The defense argued that necessary documents had been recovered during interrogation, further custody was unnecessary, and the applicant was willing to deposit Rs. 2 crore. It was contended that the firms had filed regular returns without any show cause notices, indicating no wrongful availment of input tax credit. The defense urged for bail, emphasizing the absence of trial conclusion possibilities in the near future.

The prosecution opposed bail, citing the gravity of the economic offense, the ongoing investigation, and the potential for evidence tampering if the applicant was released. The prosecution highlighted the substantial tax evasion and the detrimental impact on the nation's economy, advocating against the applicant's release to ensure proper investigation.

The Court considered the arguments of both parties and observed that the investigation regarding the firms was almost complete, with necessary materials recovered during the applicant's interrogation. Taking into account the applicant's willingness to deposit a substantial amount and the Apex Court's stance on liberty, the Court granted bail, subject to the condition of depositing Rs. 2 crore within two months. The Court imposed additional conditions, including surrendering the passport, not leaving India without permission, and providing a current address to authorities.

In conclusion, the Court allowed the bail application, ordering the applicant's release on bail upon fulfilling the specified conditions. The Court emphasized the importance of respecting constitutionally protected liberty unless detention becomes necessary, opting for bail with conditions over indefinite detention. The judgment provided detailed conditions for the applicant's release, with provisions for appropriate action in case of breach.