2024 (3) TMI 1127 - HC - GST

Seeking an order granting Police custody of A.1 for ten days - creating false GST accounts and claiming irregular Input Tax Credit - conspiracy with the companies with a common intention of misappropriating funds - HELD THAT - There is no dispute that the Respondent/A.1 served as an Additional Director at Messrs. Avexa Corporation Private Limited for 67 days, specifically from 09.12.2019 to 14.02.2020. In the impugned Order, the learned Magistrate noted that the alleged forged invoices, submitted by the Accused company's Directors to claim the input tax credit, and Annexure-9A, consisting of purported fake bills from the shell company Tanisha Infra Zone Private Limited, as referenced on pages 15, 16, and 17, were relied upon by the Prosecution. Notably, these bills were raised on 18.03.2019, 22.03.2019, and 26.02.2019, respectively, when A.1 was not serving as an Additional Director at M/s. Avexa Corporation Private Limited. The learned Magistrate arrived at this conclusion based on the documents presented by the Prosecution, considering it as one of the reasons for denying the Order for police custody. The learned Magistrate has additionally considered the remarks provided in the remand report, which highlight that the Directorate General of Goods and Services Tax Intelligence (DGGI) had previously investigated the submission of counterfeit invoice bills by the shell companies associated with the firm. These entities purportedly claimed to be engaged in development activities in the Amaravati region, although no actual work transpired. Consequently, the DGGI recommended a penalty of Rs. 16 crores against A.1's company under the Central Goods and Services Tax Act, 2017. This indicates that the DGGI, Hyderabad, has already undertaken a significant portion of the investigation. It is also observed in the report that after verifying all the existing records available with ADCL, the payment was released to the extent of work done after following the due procedure of the Department and per the terms and conditions of the agreement and after due certification by PMC M/s. LEA Associates South Asia Private Limited, at every stage, as mentioned in Para No. 6(A), to ensure that the requisite quality quantity checks are done both by the PMC in the presence of the Department the Principal Contractor. Having not disputed the detailed report of the committee, it is now somewhat difficult to appreciate the contention of the Petitioner/Complainant that the diversion of Government funds by Avexa through the shell companies has to be investigated - Upon considering the entire material on record, this Court finds no illegality in the Order passed by the learned Magistrate, and it needs not be interfered with. The Criminal Revision Case is dismissed.

Summary

Issues Involved:
1. Legality of the Order refusing police custody under Sections 397 and 401 of Cr. P.C.
2. Necessity of police custody for further investigation.
3. Adequacy of the investigation conducted by DGGI, Hyderabad.
4. Allegations of diversion of government funds and creation of fake invoices.
5. Applicability of IPC sections and provisions under the Central Goods and Services Act, 2017.

Summary:

1. Legality of the Order refusing police custody under Sections 397 and 401 of Cr. P.C.:
The petitioner sought to set aside the Order dated 06.03.2024, which refused police custody of A.1. The learned Magistrate rejected the petition citing that the assertions lacked adequacy to authorize police custody, as the Central GST Department had already completed the investigation. The scope of the Revision was limited to assessing the legality and propriety of this Order.

2. Necessity of police custody for further investigation:
The learned Special Public Prosecutor argued that the severity of the offence necessitated a more in-depth investigation. She emphasized that custodial interrogation was imperative due to the financial nature of the offence involving substantial fraud. However, the learned Magistrate noted that the alleged forged invoices were submitted when A.1 was not serving as an Additional Director, thus denying police custody.

3. Adequacy of the investigation conducted by DGGI, Hyderabad:
The learned Magistrate considered the DGGI's investigation, which had already recommended a penalty of Rs. 16 crores against A.1's company under the CGST Act, 2017. The DGGI had investigated the submission of counterfeit invoice bills and found no actual work transpired, suggesting that a significant portion of the investigation was already undertaken.

4. Allegations of diversion of government funds and creation of fake invoices:
The petitioner alleged that A.1 conspired with others to create shell companies, tampered with accounts, submitted forged documents, and diverted funds intended for developmental works. However, the committee report indicated no agreement between ADCL and M/s. Avexa Corporation Private Limited and that payments were released following due procedure, thus not substantiating the allegation of fund diversion.

5. Applicability of IPC sections and provisions under the Central Goods and Services Act, 2017:
The respondent's counsel contended that the parties involved were private entities with no contractual relationship with the Government, hence IPC sections could not be attracted. He also cited sections 132, 134, and 137 of the CGST Act, arguing that any offence should be dealt with under this Act, requiring the Commissioner's sanction for prosecution.

Conclusion:
The Court found no illegality in the Order passed by the learned Magistrate and dismissed the Criminal Revision Case. The observations made were only for adjudicating the present Revision Case and not a final expression of opinion on the merits of the case.