2024 (12) TMI 400 - HC - GST

Application for cancellation of bail under Section 439(2) of Cr.P.C. - evasion of GST - collection of fake bills from fake and non-existent firms based in Sirsa Haryana without supplying any goods - statement is admissible evidence or not - HELD THAT - The Court analysed that no material is available on the record to suggest that the accused petitioner, the manager of the three companies, generated fake and goodless invoices for claiming input credit tax. 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 legislature purportedly amended section 132 of the CGST Act in the Finance Act, 2020 after adding the phraseology causes to commit just after Whoever commits to take hold of the actual offender who enables the company or companies by generating fake invoices or aiding such companies in availing the input credit illegally. The earlier provisions lacked the provision regarding catching hold of the persons behind the curtains, enabling the companies to avail of the input credit by falsifying and manoeuvring the documents. Such unethical offenders were free from the clutches of the law-enforcing agencies. The arguments raised by the respondent's counsel are misconceived and against the express provisions of section 132 of the CGST Act. The arguments that only the individuals engaged in the company's management are accountable for the prosecution are unsustainable - 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. This Court deems it appropriate to cancel the bail granted to respondent-Gautam Garg S/o Shri Rajesh Garg, the same stands cancelled. 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. Application allowed.

Issues Involved:

1. Application for cancellation of bail under Section 439(2) of Cr.P.C.
2. Alleged GST evasion and fraudulent activities under the CGST Act.
3. Evaluation of evidence and statements under Section 70 of the CGST Act.
4. Legal interpretation of Section 132 of the CGST Act concerning fraudulent ITC claims.
5. Consideration of economic offences in bail matters.

Issue-wise Detailed Analysis:

1. Application for Cancellation of Bail:

The petitioner, Union of India, filed an application under Section 439(2) of the Cr.P.C. seeking cancellation of bail granted to the respondent by the Additional Sessions Judge, Jaipur, under Section 132(1)(c) and (f) of the CGST Act. The High Court reviewed whether the lower court erred in granting bail, considering the absence of sufficient grounds for arrest as per the arrest memo.

2. Alleged GST Evasion and Fraudulent Activities:

The petitioner argued that the respondent was involved in GST evasion amounting to Rs. 8.59 crores by generating fake bills from non-existent firms without supplying goods. Evidence included pre-signed chequebooks, weighbridge receipts, and electronic data from WhatsApp groups indicating GST evasion activities. The court analyzed whether the respondent's actions constituted a violation of the CGST Act, specifically Section 132, which penalizes fraudulent ITC claims.

3. Evaluation of Evidence and Statements under Section 70 of the CGST Act:

The petitioner contended that the respondent's statement under Section 70 of the CGST Act was admissible evidence, revealing his involvement in fraudulent activities. The court considered whether these statements could be used against the respondent, noting that the authority recording the statement is not a police officer, thus not restricted by Section 25 of the Evidence Act. The court also discussed the admissibility of such statements under Section 136(2) of the CGST Act.

4. Legal Interpretation of Section 132 of the CGST Act:

The court examined the applicability of Section 132 of the CGST Act, which penalizes individuals who commit or facilitate fraudulent ITC claims. The petitioner argued that the respondent's actions fell under this provision, and the court agreed, noting that the absence of evidence showing the respondent as a manager was irrelevant. The court emphasized that the amended Section 132 targets individuals who enable fraudulent activities, even if they are not directly managing the firms involved.

5. Consideration of Economic Offences in Bail Matters:

The court reiterated the principle that economic offences require a different approach in bail matters due to their impact on society. The court found that the lower court failed to consider the gravity of the offence and the substantial evidence against the respondent, leading to an erroneous grant of bail. The court noted that economic offences, such as GST evasion, are serious and warrant careful consideration before granting bail.

Conclusion:

The High Court concluded that the trial court's decision to grant bail was flawed due to its failure to consider the gravity of the offence and the substantial evidence against the respondent. The court emphasized the seriousness of economic offences and the need for a judicious approach in bail matters. Consequently, the court allowed the application for cancellation of bail, directing the respondent to surrender before the trial court by a specified date.

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