2024 (7) TMI 49 - HC - GST

Seeking grant of bail - creation of fake firms for availing fraudulent credits - HELD THAT - Considering the facts and circumstances of the case, submissions of the learned counsel for the applicant 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 applicant remained in jail and without expressing any opinion on the merits of the case, the Court is of the view that the applicant has made out a case for bail. The bail application is allowed subject to fulfilment of conditions imposed.

Summary

Issues Involved:
Fraudulent Input Tax Credit scheme, Arrest without recovery, Bail application

Fraudulent Input Tax Credit scheme:
The case involved the creation of fake mother firms passing on fraudulent Input Tax Credit (ITC) amounting to crores. The accused masterminds and their accomplices were found to have committed offenses under Section 132 of the CGST Act, 2017. The applicants argued that no concrete evidence linked them to the creation of fake firms or passing on ITC. They highlighted the absence of liability assessment, penalties, or taxes under the Act. The defense also emphasized the lack of criminal history and the absence of GST recovery notices against the applicants.

Arrest without recovery:
The defense contended that the applicants were arrested solely based on recorded statements without any recovery of incriminating evidence. The defense further argued that the source of how the non-existent companies were registered and ITC was passed remained unknown. Despite opposition from the Directorate General of Goods and Services Tax Intelligence (D.G.G.I.), the defense sought bail for the applicants during the case's pendency.

Bail application:
After considering the submissions from both parties, the court acknowledged the seriousness of the offenses and the absence of concrete evidence linking the applicants to the fraudulent scheme. The court noted the lack of devices establishing the creation of fake firms. Despite refraining from expressing an opinion on the case's merits, the court granted bail to the applicant subject to specific conditions, including not tampering with evidence, appearing before the trial court, and refraining from committing similar offenses. Any breach of these conditions would allow the prosecution to move for bail cancellation.