2025 (1) TMI 400 - HC - GST

Seeking grant of bail - accused petitioner has created fake firms and has issued goods/ invoices and has pass on the input tax credit - offence under section 132 of the Central Goods and Service Tax Act, 2017 - HELD THAT - It is found that the present case has been registered by the Department on the basis of the statements of one Mr. Ashutosh Garg and the Department has relied upon the statements of Mr. Ravi Kumar, Mr. Jatin Gupta, Sanket Gupta and Mr. Anil Kumar. Along-with the complaint, the prosecution has submitted the list of witnesses (Annex.A), where only 5 Officers of the Department have been made witnesses and none of the persons named above, whose statements recorded under section 70 of the Act of 2017, have been incorporated as witnesses to the matter - It is a settled law that until and unless these above- named persons are made witnesses or accused, their statements cannot be relied upon because it is the right of the accused to cross-examine the witnesses to prove the trustworthiness of their version. The allegation against the accused petitioner is that he has issued fake invoices so as to pass on the input tax credit which has caused huge loss to the economy by evasion of GST - The investigation is continuing for the last more than one year and the complaint has already been filed against the accused petitioner. The Department has not been even able to find out that how much input tax credit has been claimed by which of the beneficiaries. During the course of arguments, on a query put- forth by the Court, the learned Public Prosecutor on instructions stated that in cases registered under section 132 of the Act of 2017, the Competent Authority can continue the investigation for a maximum period of five years. He on instructions of the Department Officers also stated that in the present case, they will conclude the investigation within maximum further one year. Once a complaint has been filed on the basis of investigation made by the prosecution, in a criminal jurisprudence no further evidence collected, can be used against such an accused person. Conclusion - The present case was registered on the basis of statement of Mr. Ashutosh Garg, who is also said to have been involved in the evasion of GST by creating fake invoices in the names of fake firms to pass on input tax credit. The amount of alleged input tax credit wherein Mr. Ashutosh Garg is found involved, is more than the alleged input tax credit. The maximum punishment for the offence alleged against the accused petitioner is five years and presently the accused petitioner has already suffered the custody of five months. This Court without expressing any opinion on the merits and demerits of the case deems just and proper to release the accused-petitioner on bail - bail application allowed subject to fulfilment of conditions imposed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the accused petitioner is liable for creating fake firms and issuing fake invoices to fraudulently avail input tax credit under Section 132 of the Central Goods and Services Tax Act, 2017.
Whether the accused petitioner is entitled to bail despite the allegations of economic offenses involving substantial amounts of tax evasion.
The jurisdiction and procedural issues concerning the filing and continuation of the complaint under the Central Goods and Services Tax Act and the Code of Criminal Procedure, 1973.
The sufficiency and reliability of the evidence presented against the accused petitioner, including statements from witnesses and documentary evidence.
Whether the accused petitioner can influence or tamper with evidence or witnesses if released on bail.
The applicability of the principle of parity in granting bail, considering the release of co-accused on bail by higher courts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability under Section 132 of the Central Goods and Services Tax Act, 2017

Relevant Legal Framework and Precedents: Section 132 of the CGST Act outlines offenses related to tax evasion through fake invoices and fraudulent input tax credit claims. The section prescribes penalties, including imprisonment and fines, for such offenses.
Court's Interpretation and Reasoning: The court examined the allegations that the petitioner created fake firms and issued invoices without actual transactions to pass on input tax credit. The court noted that the prosecution failed to identify the beneficiaries of the input tax credit or quantify the alleged tax evasion.
Key Evidence and Findings: The prosecution relied on witness statements and documents recovered during searches. However, the court found the evidence insufficient as the witnesses were not made part of the complaint, denying the accused the opportunity for cross-examination.
Application of Law to Facts: The court highlighted that while the allegations were serious, the prosecution's inability to present concrete evidence of the beneficiaries and the exact amount of tax evaded weakened their case.
Treatment of Competing Arguments: The defense argued that the accused was only involved in financial transactions, not in supplying goods or services. The defense also pointed out procedural lapses in the investigation and the filing of complaints.
Conclusions: The court concluded that the prosecution did not provide sufficient evidence to deny bail, especially given the accused's right to cross-examine witnesses and the lack of clarity on the alleged tax evasion amount.

Issue 2: Entitlement to Bail

Relevant Legal Framework and Precedents: The court considered the principles of bail, including the nature of the offense, the evidence against the accused, and the potential for the accused to tamper with evidence or influence witnesses.
Court's Interpretation and Reasoning: The court noted that the maximum punishment for the alleged offense is five years, and the accused had already been in custody for five months. The offenses are compoundable, and co-accused had been granted bail by higher courts.
Key Evidence and Findings: The court found no substantive evidence to suggest that the accused would tamper with evidence or influence witnesses, as all witnesses were government officers.
Application of Law to Facts: The court applied the principle of parity, considering the bail granted to co-accused, and emphasized the accused's right to a fair trial and presumption of innocence.
Treatment of Competing Arguments: The prosecution's concerns about the accused influencing witnesses were deemed speculative without concrete evidence.
Conclusions: The court granted bail to the accused, subject to conditions, emphasizing the need for a fair trial and the lack of substantial evidence to justify continued detention.

3. SIGNIFICANT HOLDINGS

The court held that "until and unless these above-named persons are made witnesses or accused, their statements cannot be relied upon because it is the right of the accused to cross-examine the witnesses to prove the trustworthiness of their version."
The court emphasized the principle of parity, noting that "the present case was registered on the basis of statement of Mr. Ashutosh Garg, who is also said to have been involved in the evasion of GST... Mr. Ashutosh Garg has been ordered to be released on bail by the Hon'ble Apex Court."
The court concluded that "taking into consideration over all the facts and circumstances of the case and the findings and the observations stated above, this Court without expressing any opinion on the merits and demerits of the case deems just and proper to release the accused-petitioner on bail."
The court directed that the accused be released on bail with conditions, including furnishing a personal bond and sureties, and not leaving India without prior permission.

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