2024 (6) TMI 158 - HC - GST

Seeking Bail - Fraudulent availing and passing on of Input Tax Credit u/s 132(1)(b) (c) and u/s 132(1)(i) of Central Goods Service Tax Act, 2017 - creation of fake firms - HELD THAT - Considering the facts and circumstances of the case, submissions of the learned counsel for the applicants as well as learned counsel for the D.G.G.I., the nature of the offence, the punishment and the material on record and none availability of any device by using which fake firms are said to be created, the period applicants remained in jail and without expressing any opinion on the merits of the case, the Court is of the view that the applicants have made out a case for bail. The bail application is allowed, subject to conditions imposed.

Summary

Issues: Alleged fraudulent availing and passing on of Input Tax Credit, bail application, liability under Central Goods & Service Tax Act, 2017, creation of non-existent firms, legality of arrest, bail conditions

In the judgment delivered by Hon'ble Subhash Chandra Sharma, J., the case involved the alleged fraudulent availing and passing on of Input Tax Credit (ITC) under the Central Goods & Service Tax Act, 2017. The accused, including Devendra Kumar Jain and Pradip Kumar Jain, were accused of committing offenses under Section 132(1)(b) & (c) and under Section 132(1)(i) of the Act by operating non-existent firms and availing ITC through fake tax invoices. The defense argued that the accused conducted legitimate business activities, did not claim ITC on fake invoices, and had no tax liability at the time of arrest. They contended that no assessment of liability had been made, and the arrests were illegal without proper notice or assessment. The defense highlighted the lack of evidence linking the accused to the alleged fraudulent activities and emphasized the absence of any criminal history. The defense sought bail during the case's pendency, citing the compoundable nature of the offenses and the lack of liability assessment or penalties under the Act.

The Directorate General of GST Intelligence (D.G.G.I.) opposed the bail application, alleging that the accused operated a racket to evade ITC by creating fake firms. The authorities had recorded statements of the accused, but there was no evidence of how the non-existent firms were created. The D.G.G.I. feared that releasing the accused on bail might lead to a recurrence of similar fraudulent activities and misuse of liberty.

After considering the arguments from both sides, the Court, without expressing any opinion on the case's merits, granted bail to the applicants, Pradip Kumar Jain and Devendra Kumar Jain. The Court noted the lack of evidence regarding the creation of fake firms and the period the applicants had already spent in jail. The bail was allowed subject to specific conditions, including not tampering with evidence, not pressurizing witnesses, appearing before the trial court as required, refraining from committing similar offenses, and not influencing potential witnesses. The prosecution was given the right to move for bail cancellation in case of any breach of the imposed conditions.