2020 (11) TMI 747 - DSC - GST

Grant of Bail - creation of bogus firms in the name of various persons - vicarious liability - case of applicant is that he has been falsely implicated in this matter and has also been illegally arrested - HELD THAT - It is a case where the allegation against the present applicant/accused is that he, being the mastermind behind establishing and registering bogus firms in the name of various persons, was also involved in the issuance of invoices without the actual movement of the goods. In this manner, such transactions were carried out to earn commission out of them. The investigation so far points out that such transactions have caused loss to the tune of ₹ 13.08 Crores to the Government Exchequer. The contention of the applicant that there is nothing on record to show that he had received or obtained any kind of benefit from the aforesaid bogus firms is not sustainable at this stage because not only the investigation is pending but the investigating team has received documents/records showing cash entries in the name of the applicant. It is a matter of common understanding that no prudent person would derive any benefit directly from a bogus firm/entity as it would easily bring out his guilt. Such transactions are naturally done in a clandestine and discreet manner, and, therefore, discovering the direct/tangible evidence may not be possible in each and every case. Since the transactions in questions have been carried out for the last few years, it is natural that investigating agency needs more time to dig out all the relevant record in the case. The entire manner of commission of offence clearly points towards an economic offence squarely covered under Section 132 of CGST Act. The investigation is still pending and, there, has been material recovered reflecting connivance/participation of the accused in the commission of offence and receiving cash from the bogus firms in the form of cash entries in the record. In these circumstances, this court is of the opinion that granting concession of bail to the accused at this stage will definitely prejudice the fair investigation into the matter.

Summary

Issues:
Bail application of accused Satinder Kumar falsely implicated in economic offences under CGST Act, alleged involvement in establishing bogus firms, issuance of invoices without goods movement, and causing loss to Government exchequer.

Analysis:
The accused, Satinder Kumar, filed a bail application contending false implication and illegal arrest in economic offences under the CGST Act. The primary incriminating evidence against the applicant was the statement of a witness, Hanuman Singh. The defense argued that the accused was roped in vicariously for offenses committed by others, emphasizing the absence of vicarious liability under the Goods and Services Tax Act. Additionally, it was highlighted that the witness, Hanuman Singh, was also accused in a separate case for running a bogus firm, suggesting the applicant had no direct benefits from the alleged firms.

The respondent countered the bail application, alleging the accused acted as a mastermind in establishing bogus firms, issuing invoices without actual goods movement to earn commission, causing a substantial loss to the Government exchequer. The prosecution presented evidence indicating the accused's involvement in transactions amounting to ?75 Crores without goods movement, passing of ITC worth ?13.08 Crores, resulting in a loss of ?13.08 Crores to the Government exchequer. The economic nature of the offenses was emphasized, affecting society at large, and the respondent opposed bail, citing ongoing investigation and the accused's alleged involvement in the offenses.

The court carefully considered arguments from both sides and analyzed the case in detail. It noted the allegations against the accused as the mastermind behind establishing bogus firms, issuing invoices without goods movement for personal gain. The court highlighted the substantial loss of ?13.08 Crores to the Government exchequer due to the accused's actions. Referring to the Supreme Court's stance on economic offenses, the court emphasized the seriousness of such crimes and the need for stringent measures in dealing with them.

The court concluded that granting bail to the accused at this stage could prejudice the ongoing investigation, especially considering the material evidence indicating the accused's participation in the offenses. Despite the maximum punishment for the offenses being 5 years, the court dismissed the bail application, stating that the accused did not deserve concession based on the gravity of the case and its impact on society. The accused was ordered to be produced on a specified date, emphasizing that the Covid-19 pandemic situation did not automatically warrant bail in all cases.