2022 (9) TMI 1195 - HC - GST

Seeking grant of Regular Bail - evasion of GST - kachcha entry (unaccounted transaction) - offences punishable under Sections 132(1)(a) and 132(1)(i) of Central Goods and Services Tax Act (CGST Act) and Gujarat Goods and Services Tax Act, 2017 - HELD THAT - In the facts of the present case, based on the unaccounted transactions, the evasion of tax has been unearthed by the department. The department has already filed the complaint before the Court concerned. The department objected the bail application mainly on the ground that investigation is still under way. This Court is of considered view that, merely raising the contention that investigation is still going on is not enough, but, department should have point out that the further custody of the applicant is necessary. It is on record that, no liability is fixed or determined as per the statutory provisions of the Act. It is the right of the assessee to file an appeal against the assessment subject to deposit of the 10% disputed liability which may not exceed Rs.2 crore. In the facts of the present case, Rs.39,88,318/-, has been recovered during the course of investigation from the applicant. In such circumstances, when trial of the case would not likely to conclude in a reasonable time and the applicant is in custody since 24.03.2022 and considering the bonafide shown by the applicant to deposit the amount, the applicant is to be released on bail subject to deposit of Rs.60 lakhs, before the Office of Chief Commissioner of State Tax, Ashram Road, Ahmedabad within a period of six months in six equal installments from the date of his release - the applicant is ordered to be released on regular bail - application allowed.

Summary

Issues:
Application for regular bail under Section 439 of the Code of Criminal Procedure for offences under Sections 132(1)(a) and 132(1)(i) of the CGST Act and Gujarat GST Act - Refusal of bail by lower courts - Allegations of tax evasion activities and unaccounted sales - Arguments on lack of corroborative evidence and ongoing investigation - Constitutional right of liberty vs. gravity of economic offence - Discretion in favor of the applicant - Conditions for bail.

Analysis:
The applicant filed an application seeking regular bail in connection with a case registered under the CGST Act and Gujarat GST Act. The applicant, a proprietor of a business in Surat, was alleged to be involved in tax evasion activities, including creating software for tax evasion and conducting unaccounted sales. The department claimed a loss to the Government Exchequer of Rs.10.94 crore due to the applicant's actions, leading to charges under Section 132(1)(a) of the Acts.

The applicant's counsel argued that the allegations were based on assumptions and presumptions, with no final adjudication, and that the applicant had regularly complied with GST requirements by filing returns and uploading transactions. The applicant expressed willingness to deposit 10% of the disputed amount and emphasized his roots in society, the compoundable nature of the offence, and the potential delay in trial.

In response, the State contended that the gravity of the economic offence and ongoing investigation warranted denying bail to prevent interference with evidence and witness influence. The State highlighted the significant amount involved in the alleged fraud and the need for a different approach to bail considering the nature of the offence.

The Court considered the arguments and referred to a Supreme Court judgment emphasizing that bail decisions should be based on a case-to-case analysis. The Court noted that while the investigation was ongoing, the liability was not fixed, and the applicant had shown willingness to deposit a substantial amount. Given the circumstances, the Court exercised discretion in favor of the applicant and granted bail subject to conditions, including a deposit of Rs.60 lakhs within six months.

The Court ordered the applicant's release on bail upon executing a personal bond and surety, with specified conditions to safeguard against misuse of liberty and ensure cooperation with the investigation. Breach of conditions would lead to cancellation of bail, and the trial court was directed not to be influenced by preliminary observations made during the bail order. The Court permitted direct service of the judgment.

In conclusion, the Court allowed the application for regular bail, balancing the applicant's liberty with the seriousness of the alleged economic offence, and imposed conditions to ensure compliance and cooperation during the trial process.