2024 (3) TMI 1087 - HC - GST

Seeking grant of bail - irregular availment of Input Tax Credit - creation and operation of fake GST firms and issuing fake GST invoices from these firms - involved in the passing of fake ITC from 102 non-existent firms to the tune of Rs. 274.89 Cr. by way of issuing invoices without any actual supply of goods - HELD THAT - It reveals from the perusal of the record that by blaming Naveen Aggarwal the accused persons want to escape from liability whereas there is sufficient and ample evidence to the effect that they themselves were managing the affairs of illegal activities and fake ITC (Income Tax Credit) was availed by them and they were engaged in a number of illegal financial transactions and in such circumstances if they are granted bail, as rightly held by the learned Sessions Judge while rejecting their bail applications, there is a strong possibility of applicants fleeing from justice and also they may tamper with the crucial evidence or make influence to the witnesses. This Court is also of the view that the present matter relates to serious economic offence, which may affect the economy of the country. The applicants have committed gross violation of the provisions of the GST Act. Wrongful availment / utilization of input tax credit amounting to Rs. 315 Cr. has been made by them and this amount will increase a lot with the advancement of the investigation. The Court genuinely feels that at this stage there is no possibility of false implication of the applicants. The maximum period of imprisonment provided for such offence under the GST Act, which is five years, causes no hindrance in rejection of bail applications in such type of cases relating to economic offences. Considering the entire facts and circumstances of the case and keeping in view the nature and gravity of offence, which is an economic offence in nature, complicity of accused, role of the applicants and without expressing any opinion on the merits of the case, the Court is of the view that the applicants have not made out a case for bail. The bail applications are liable to be rejected and the same are accordingly rejected.

Summary

Issues:
The case involves bail applications under Sections 132(1)(b) and 132(1)(i) of the C.G.S.T. Act, 2017, pertaining to the operation of fake GST firms and issuance of fake invoices leading to a significant revenue loss.

Prosecution Story:
During a search operation, various incriminating items were found at the office-cum-residence of one of the applicants, including forged rubber stamps, Aadhaar and PAN cards, and electronic devices. Evidence revealed a syndicate operating 102 fake firms, issuing fake invoices without actual goods supply. Accused confessed to creating and operating these firms, passing fake ITC worth Rs. 274.89 Cr.

Applicants' Defense:
Applicants claimed innocence, stating they were misled by a chartered accountant, Naveen Aggarwal, who used their documents to set up fake firms. They denied involvement in unauthorized transactions or causing revenue loss, asserting they were unaware of the illegal activities.

CGST Department's Submission:
The department alleged that the applicants were responsible for running fake firms, issuing fake invoices, and causing substantial revenue loss through illegal financial transactions, emphasizing their involvement in passing fake ITC.

Court's Decision:
After considering submissions and evidence, the court found substantial proof of the applicants' direct involvement in the economic offenses. It noted the seriousness of the offense, the potential for tampering with evidence, and the risk of fleeing from justice. Citing recent Supreme Court decisions emphasizing the gravity of economic offenses, the court rejected the bail applications, highlighting the need for a different approach to economic crimes due to their impact on the country's financial health and development.

Conclusion:
Given the nature and gravity of the economic offense, the court denied bail to the applicants, emphasizing the need to address economic crimes seriously to safeguard the financial integrity of the nation. The rejection was based on the applicants' active participation in the illegal activities, the substantial revenue loss incurred, and the potential threat posed by their release on bail.