2024 (10) TMI 1532 - HC - GST

Seeking grant of bail - fraudulent availment of Input Tax Credit (ITC) - criminal conspiracy under Section 120-B IPC - existence of evidence to establish conspiracy or not - economis offences involving large-scale fraud and money laundering - HELD THAT - The principal of bail is the rule, jail is the exception is a fundamental concept in criminal law, where the criminal justice system recognizes the importance of personal liberty and the presumption of innocence until proven guilty. This principal emphasizes that an accused should ordinarily be granted bail unless there are compelling reasons to detain him in custody. But there are exceptions to the aforesaid principal. While, the general rule favours granting bail, there are several exceptions where courts may deny bail due to specific circumstances. The present case relates to economic offences. Such offence like large scale fraud, money laundering and corruption, are often viewed seriously because they affect the economic fabric of the society. The Courts may deny bail in such cases especially if the accused holds a position of influence or power. In the present case, money trail of crores, which affects the society at large scale, is involved which started from registration of fake firms by using Aadhaar and PAN Cards of the informant who had not applied for such registration. The Apex Court in the case of Manish Sisodia v. Central Bureau of Investigation, 2023 (11) TMI 63 - SUPREME COURT , has discussed about the constitutional mandate which is higher law and accordingly it is the basic right of person charged of offence and not convicted be ensured and given a speedy trial, thus, where the trial is not proceeding for the reasons not attributed to the accused, the Court unless there are good reasons may well be guided by exercising power to grant bail. This would be true, the trial would take years. From the report also it is clear that the discharge application of one of the accused has been rejected and it shows that the charges are proved and once on the basis of material collected chargesheet has been submitted, discharge is rejected, the case of bail is not made out in economic offence where money trail of crores has been found which is a result of registration of fake firms. Offence under the IPC is made out and such accused cannot be dealt with easy hands. Hon'ble Apex Court in the case of Directorate of Enforcement v. M. Gopal Reddy and another, 2023 (2) TMI 1045 - SUPREME COURT has held that in the economic offences which are having great impact on the society, the court must be slow in exercising discretion under Section 438 of Cr.P.C. Law on consideration of the Court to grant or refusal of bail has been settled by the Apex Court in a catena of decisions. In the case of Kalyan Chandra Sarkar v. Rajesh Ranjan 2004 (3) TMI 763 - SUPREME COURT , the Supreme Court has held that the court granting bail should exercise its discretion in a judicious manner and not as a matter of course. The Apex Court has, in the case of P. Chidambaram v. Directorate of Enforcement 2019 (12) TMI 186 - SUPREME COURT , held that precedent of another case alone will not be the basis for either grant or refusal of bail though it may have bearing on principle and the consideration will have to be on caseto-case basis on facts involved therein and securing the presence of the accused to stand trial. Having gone through the submissions of learned counsel for the parties, nature of accusation of offence, role of the applicants as well as reasons given in judgements, this is not found to be a fit case for granting bail - bail application rejected.

Summary

Issues Involved:
1. Misuse of PAN and Aadhaar Cards for fraudulent GST registrations.
2. Allegations of forming a syndicate for illegal activities related to GST.
3. Bail considerations in economic offences involving large-scale fraud and money laundering.
4. Application of GST Act provisions versus IPC provisions for the alleged offences.

Issue-wise Detailed Analysis:

1. Misuse of PAN and Aadhaar Cards for Fraudulent GST Registrations:
The judgment addresses the misuse of PAN and Aadhaar cards by unknown individuals to register fake GST firms, as reported in three separate FIRs. The informants alleged that their personal identification documents were used without consent to create fraudulent GST registrations. The prosecution argued that these actions constituted forgery and fraud under Sections 420, 467, 468, 471, and 120-B of the IPC. The court noted the significance of PAN and Aadhaar as critical identifiers in financial transactions and emphasized the detrimental impact of their misuse on both individuals and national interests.

2. Allegations of Forming a Syndicate for Illegal Activities Related to GST:
The prosecution contended that the accused formed a syndicate to engage in fraudulent activities, including the creation of fake firms to avail input tax credit (ITC) fraudulently. The modus operandi involved collecting SIM cards and personal data, using this data to register fake firms, and conducting monetary transactions through these entities to claim ITC without actual supply of goods or services. The court highlighted the organized nature of the crime, involving multiple accused and substantial financial transactions, which suggested a deep-rooted conspiracy.

3. Bail Considerations in Economic Offences Involving Large-scale Fraud and Money Laundering:
The court considered the principles governing bail in economic offences, emphasizing the serious nature of such crimes due to their impact on the economic fabric of society. The judgment referenced several Supreme Court decisions underscoring the need for a cautious approach in granting bail for economic offences, particularly when involving significant public funds and organized crime. The court concluded that the gravity of the accusations, the potential risk of tampering with evidence, and the substantial money trail justified denying bail to the applicants.

4. Application of GST Act Provisions Versus IPC Provisions for the Alleged Offences:
The defense argued that the offences should be prosecuted under the GST Act rather than the IPC. However, the prosecution maintained that the fraudulent activities fell squarely under the IPC provisions due to the nature of the forgery and fraud involved. The court agreed with the prosecution, noting that the core issue was the creation of fake GST firms using forged documents, which constituted offences under the IPC. The court also referenced the broader implications of such fraud on public interest and national economic integrity.

Conclusion:
The court, after examining the facts and legal arguments, rejected the bail applications of the accused, emphasizing the organized and serious nature of the economic offences involved. The judgment highlighted the need for a stringent approach in dealing with large-scale fraud and money laundering cases, considering their potential impact on society and the economy.