2022 (8) TMI 918 - DSC - GST

Seeking grant of Anticipatory Bail - preparing fake ITC invoices with intend to cause wrongful loss to the Govt. - evasion of mandatory CGST thereby committing fraud and cheating - Circular trading - Section 132 of Central Goods and Service Tax Act, 2017 - HELD THAT - On careful perusal of the documents it appears investigation was carried out by Anti Evasion of Central Goods and Service Tax and Central Excise (CSGT) and it is revealed that the mentioned company is of applicant/accused was engaged in circulating, receiving and issuing fake invoices for the purpose of availing ITC and passing it to other companies without any actual movements of goods which is an offence under Sec. 132(1)(b)(c) of CGST Act, 2017 - Over all as alleged there is an involvement of tax component of Rs. 6.65 Crores for the period from F.Y. 2017-18 to F.Y.2020-21. It further appears from the enquiry the applicant was aware of the activities of fake invoices. The essence of main allegations of the respondent are that applicant is guilty of circular trading by claiming Input Tax Credit (ITC) on the materials without movement and passing on such ITC to companies and therefore there has been contravention of Sec. 132(1)(b)(c) which is cognizable and non bailable offence U/Sec. 132(5) of the CGST Act. There are some admissions from M/s. Amarnath Industries were aware of some illegal transactions being carried out by accused applicant company for the purpose of evading CGST - It appears instead of cooperating with the ongoing investigation by submitting relevant documents and making themselves available for further investigation and enquiry. Applicant filed an anticipatory bail application before this Court. Looking at the gravity of the offence and the amount involved for which an offence U/sec. 151(1)(c) of CGST Act is imposed for evading huge amount of GST and thereby defrauding the Govt. Exchequer for the tune of Crores of Rupees, investigation is in progress and if released on prearrest bail the investigation will become stagnant and they will tamper with the evidence - It is apposite to note that as per Sec. 132 of CGST Act, 2017 issuance of invoice or bill without supply of goods or services and wrongful availment or utilisation of input tax limit is cognizable and punishable offence if the amount is over Rs. 5 Crores. In the instant case prima facie there appears a sufficient material which requires physical interrogation. Anticipatory bail application dismissed.

Summary

Issues Involved:
1. Entitlement of the applicant/accused to anticipatory bail under Section 438 of the Code of Criminal Procedure.
2. Allegations of evasion of Central Goods and Service Tax (CGST) under Section 132 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Entitlement to Anticipatory Bail:
The applicant sought anticipatory bail under Section 438 of the Code of Criminal Procedure, fearing arrest under Section 132 of the CGST Act, 2017. The applicant, a director of Penrex Chrome Stationary Private Limited, argued that he was not served with a notice clarifying the exact unpaid amount or default in GST payment. The applicant claimed to have paid the GST at the time of clearance of goods and that defaults were committed by sellers who collected GST but did not remit it to the government. The applicant also expressed willingness to cooperate with the investigation, asserting that he had a fixed place of residence and no intention to abscond. However, the respondent argued that despite repeated summons, the applicant failed to appear before the authorities, and the investigation revealed the issuance of fake invoices to evade GST. The court noted that the applicant's involvement in preparing fake ITC invoices to cause wrongful loss to the government by evading CGST constituted a cognizable and non-bailable offense under Section 132(5) of the CGST Act. The court found that the applicant's cooperation was insufficient and that physical interrogation was necessary to prevent tampering with evidence.

2. Allegations of Evasion of CGST:
The respondent presented detailed evidence of the applicant's involvement in a fraud involving fake invoices and circular trading, leading to a significant evasion of GST. The investigation revealed transactions amounting to Rs. 37,35,23,304 with a tax component of Rs. 6,66,33,445 for the period from 2017-2018 to 2020-2021. The applicant's company was listed among risky exporters, and the investigation found that the premises were rented and that the company had inward supplies from entities with surrendered or canceled GST registrations, indicating fake ITC. The court emphasized that economic offenses, especially those involving deep-rooted conspiracies and significant public fund losses, require a different approach in bail matters. The court cited precedents from higher courts underscoring the seriousness of economic offenses. The court concluded that the applicant's actions, including issuing and receiving bogus bills without actual movement of goods, amounted to a grave offense under Section 132(1)(b)(c) of the CGST Act. The court determined that the applicant's custody was necessary for further investigation, given the substantial amount involved and the need to prevent tampering with evidence.

Final Order:
The court rejected the anticipatory bail application, emphasizing the need for the applicant's physical interrogation and the seriousness of the economic offense involved. The concerned police station was informed accordingly.