2020 (11) TMI 877 - DSC - GST

Grant of Anticipatory Bail - allegation of illegal input tax credit taken by the M/s Milk Food Ltd. - fake form created for passing fake credit by issuing Bogus invoices - It is contended by Ld. Defence counsel that despite the fact that adjudication in this case is yet to be carried out despite that accused persons are ready to deposit 10% of the total tentative liability which has been allegedby the department by way of its reply. In support of his averment Ld. Counsel has also relied on the judgment of Hon'ble Supreme Court in C. Pradeeep Petitioners(s) v. The Commissioner of GST and central Excise, Selam and Anr. 2019 (11) TMI 659 - SUPREME COURT HELD THAT - Admittedly the total amount as liability of the of the applicants is yet to be adjudicated and assessed. Liability which has been raised by the department is the tentative where show cause notice is yet to be issued and adjudication is still due. Such proceeding will take considerable period of time. The firm involved in this case is stated to be a 50 years old firm and applicants are responsible for the running the firm being it s employees at senior positions. Lability is yet to be ascertained, only a tentative availment of ITC of GST has been averred, even as on today it is not sure that the entire amount of ICT has been availed by the accused firm alone as involvement of other firms also been averred. Apart from this, there is nothing on record to show that applicant has been a habitual offender. It has also not been contended that there is any likelihood of their absconding from the country, investigation in this case still at the initial stage and the evidence which is required to be collected during the course of investigation is primarily documentary in nature. The presence of accused can be secured by imposing stringent condition upon the applicant, so that, they may not flee from the investigation and cooperate in the same as and when directed by the department. A sum of Rs ₹ 4.5 crores already deposited out of total sum of Rs ₹ 85.4 crores. Moreover, the purpose of investigation and fixing the liability of the petitioner is to secure the payment of GST, and also to deprecate the false claim of ITC and the object of statute can be secured by directing the applicant to deposit the amount in terms of the liability - The applicants shall deposit a total sum of ₹ 10 crores, out of the total liability, within 10 days from today to the commissioner CGST/ competent Authority In these circumstances, it is directed that in the event of arrest of the applicants namely Naval Kumar, Sanjeev Kothiala, Harmesh Mohan Sood and Sudhir Awasthi, they be released on bail on furnishing personal bond in the sum of ₹ 2 lacs each with surety of like amount to the satisfaction of IO/Commissioner, GST subject to the conditions imposed.

Summary

Issues Involved:
1. Allegations of generating and passing on fake input tax credit (ITC).
2. Application for anticipatory bail under Section 438 CrPC.
3. Arguments regarding the seriousness of the offense and the stage of investigation.
4. Conditions for granting anticipatory bail including deposit requirements.

Issue-wise Detailed Analysis:

1. Allegations of Generating and Passing on Fake Input Tax Credit (ITC):
The accused firms were alleged to have engaged in generating and passing on fake ITC by issuing bogus invoices without actual supply of goods. M/s Milk Food Pvt. Ltd. was specifically accused of availing fake ITC amounting to ?54.86 crores from various fictitious firms operated by Ashish Agarwal and an additional ?30.54 crores from M/s Devyaani Agro Industries, totaling ?85.4 crores. The investigation revealed that these firms were non-existent and operated fictitiously to pass on fake ITC.

2. Application for Anticipatory Bail Under Section 438 CrPC:
The accused persons filed an application for anticipatory bail under Section 438 CrPC. The defense argued that there was an apprehension of arrest despite the accused having joined the investigation. They highlighted that the prime accused, Ashish Agarwal and Sanjay Kumar Garg, had already been arrested and one had been released on bail.

3. Arguments Regarding the Seriousness of the Offense and the Stage of Investigation:
The prosecution opposed the bail on the grounds that the offense was serious, involving a significant tax evasion liability, and the investigation was at an initial stage. They cited judgments from the Hon’ble Telangana High Court and the Supreme Court discouraging pre-arrest bail in such cases. The defense countered by citing other judgments where anticipatory bail was granted upon the deposit of a portion of the alleged liability.

4. Conditions for Granting Anticipatory Bail Including Deposit Requirements:
The court considered the arguments and noted that the total liability was yet to be adjudicated and assessed. It was acknowledged that the applicants had already deposited ?4.5 crores under protest. The court referenced the Supreme Court's judgment in C. Pradeep, which allowed anticipatory bail upon depositing 10% of the alleged liability. The court directed the applicants to deposit ?10 crores within 10 days and imposed several conditions for granting bail, including furnishing a personal bond, joining the investigation, not leaving the country, depositing passports, and not tampering with evidence.

Conclusion:
The court granted anticipatory bail to the applicants with stringent conditions to ensure their cooperation with the investigation and secure the alleged tax liability. The order emphasized the balance between preventing harassment and ensuring a fair investigation.