2024 (8) TMI 1442 - HC - GST

Grant of bail - wrongful availment ITC by generating fake invoices causing wrongful gain to the three companies and wrongful loss to the Government - evidence available against the petitioner regarding committing a crime under the CGST Act or not - HELD THAT - The analysis of the Court below suffers from perversity as it is not the condition precedent for prosecuting a person under section 132 of the CGST Act. The provisions explicitly state that whoever commits or causes to commit and retain the benefits arising from any supplies, goods, or both without the issue of any invoice or without supplying the goods avails input tax credit is liable to prosecution. Thus, the absence of material indicating the accused petitioner as the manager of the three firms is not essential. The Court below did not assess the consequence and spirit of the provision under section 132 of the CGST Act. The Court completely ignored the incriminating material collected against the petitioner. The Court below while considering the bail application of respondent, did not consider the gravity of the offences and enlarged the respondent on bail misconstruing the facts and the legal position. It is also pertinent to mention here that while considering the bail application, it is not desirable for the Court to enter into the question of legality of the arrest, the legality of the arrest can be questioned only if there is a gross violation of any provision of the Act. In the present case, before arresting the respondent, the respondent was duly informed regarding grounds of arrest. The application for cancellation of bail is allowed and the order granting bail dated 03.11.2023 passed by learned Additional Sessions Judge No.2, Jaipur Metropolitan-II is cancelled accordingly.

Issues Involved:
1. Error in granting bail.
2. Evidence against the respondent.
3. Admissibility of statements under Section 70 of CGST Act.
4. Legal provisions and precedents regarding bail in economic offences.
5. Grounds for bail cancellation.

Detailed Analysis:

1. Error in Granting Bail:
The petitioner argued that the lower court erred in granting bail to the respondent under Section 132 (1) (c) & (f) of the CGST Act, 2017. The court below observed that the respondent's statement was not recorded under normal circumstances, no evidence was found linking the respondent to the firms, and the GST evasion amount was only Rs. 7.48 crores. The lower court relied on a judgment from the Allahabad High Court to grant bail.

2. Evidence Against the Respondent:
The petitioner highlighted that the respondent, in his statement under Section 70 of the GST Act, admitted to collecting fake bills from non-existent firms without supplying any goods. During a search, Rs. 4.00 lacs were found at the respondent's residence. Additional evidence, such as pre-signed chequebooks, weighbridge receipts, purchase invoices, and WhatsApp group messages, indicated GST evasion by the firms associated with the respondent.

3. Admissibility of Statements Under Section 70 of CGST Act:
The petitioner contended that statements under Section 70 of the CGST Act are admissible as evidence. The investigation revealed that the respondent availed ITC amounting to Rs. 8.59 crores based on fake bills. The petitioner argued that granting bail was incorrect, citing the judgment in P. V. Ramana Reddy Vs. Union of India, which clarified that the reasons for arrest need not be disclosed in the authorization for arrest under Section 69 (1) of the CGST Act.

4. Legal Provisions and Precedents Regarding Bail in Economic Offences:
The petitioner referenced multiple judgments, including Y. S. Jagmohan Reddy Vs. Central Bureau of Investigation, emphasizing that economic offences require a different approach in bail matters. The court must consider the nature of the accusation, evidence, severity of punishment, and the accused's character. The lower court failed to consider these aspects and wrongly granted bail.

5. Grounds for Bail Cancellation:
The court outlined the principles for bail cancellation, including serious allegations, misuse of bail, risk to public safety, nonappearance in court, and interference with the legal process. The lower court's analysis was deemed perverse as it ignored incriminating material and the spirit of Section 132 of the CGST Act. The court emphasized that the absence of evidence showing the respondent as the manager of the firms was not essential for prosecution under the CGST Act.

Conclusion:
The court concluded that the lower court's decision to grant bail was flawed and ignored relevant evidence. The bail order dated 03.11.2023 was cancelled, and the respondent was directed to surrender within 30 days. The trial court was instructed to ensure the respondent's presence. The application for bail cancellation was allowed, emphasizing the gravity of economic offences and the need for a judicious approach in bail matters.

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