2021 (2) TMI 1048 - HC - GST

Seeking grant of Bail - GST Evasion - supplier's firms of plastic scrap not found in existence - offence under section 132 (1)(c) and 132(1)((i) of the C.G.S.T. Act, 2017 - harsh and unreasonable conditions imposed for granting bail - HELD THAT - This Court is of the view that conditions for grant of bail ought not to be so strict as to be incapable of compliance, thereby making a grant of bail illusory. The conditions while granting bail should be reasonable, so that it may not frustrate the very object of granting bail. Discretion exercised by the Court while imposing conditions should not be arbitrary, but it should be keeping in mind to strike balance between the accused and prosecution. In the present case, it is admitted facts to the counsel for the parties that as on date out of disputed amount of ₹ 9,51,00,000/-, the applicant has already deposited a sum of ₹ 5,00,00,000/- (rupees five crore only). Till date neither any criminal complaint has been filed, nor any proceedings under section 73 or 74 of the C.G.S.T. Act has been initiated against the applicant by the Department. The enquiry proceedings is still under process. The determination of input tax credit wrongly availed has not been finally made by the Department and no order under section 83 of the C.G.S.T. Act for provisional attachment of any property including the bank account belonging to the applicant has been made. The order granting bail to the applicant has also not been challenged by the Department. This Court is of the view that condition No. 4 imposed by Special Chief Judicial Magistrate, Meerut directing the applicant to deposit remaining amount of ITC ₹ 4,51,00,000/- before the Department within three months while granting bail to the applicant, is unsustainable, as it is too harsh and unreasonable, particularly in the situation where enquiry/investigation is still pending and applicant has already deposited ₹ 5,00,00,000/-, out of disputed amount of ₹ 9,51,00,000/- - in order to save the Government revenue, the interest of justice would be served in case, the condition No. 4 of bail order dated 24.11.2020 is modified directing the applicant to submit security equivalent to remaining disputed amount of ₹ 4,51,00,000/-, other than cash and bank guarantee along with his affidavit in place of deposit the remaining amount of ITC of IGST, before the Senior Intelligence Officer, DGGI, Regional Unit, Ghaziabad within three weeks from today, as per the undertaking given by the applicant before this Court. Bail application modified and then allowed.

Summary

Issues Involved:
1. Validity of condition No. 4 of the bail order dated 24.11.2020.
2. Alleged fraudulent availing of input tax credit (ITC).
3. Applicant's compliance with bail conditions and undertakings.
4. Legal precedents regarding onerous bail conditions.

Detailed Analysis:

1. Validity of Condition No. 4 of the Bail Order:
The applicant sought to set aside condition No. 4 of the bail order dated 24.11.2020, which required him to deposit the remaining disputed ITC amount of ?4,51,00,000/- within three months. The applicant argued that this condition was onerous and unreasonable, particularly since the investigation was still ongoing, and he had already deposited ?5,00,00,000/- under duress. The court agreed, stating that bail conditions should not be so strict as to make compliance impossible, thereby rendering the grant of bail illusory. The court modified the condition, allowing the applicant to submit security equivalent to the remaining disputed amount instead of cash or bank guarantee.

2. Alleged Fraudulent Availing of ITC:
The applicant was accused of fraudulently availing ITC amounting to ?9,51,00,000/- through firms that were not found in existence. The applicant had already deposited ?5,00,00,000/- and argued that no criminal complaint or proceedings under sections 73 or 74 of the CGST Act had been initiated against him. The court noted that the investigation was still pending, and no provisional attachment of property had been made under section 83 of the CGST Act.

3. Applicant's Compliance with Bail Conditions and Undertakings:
The applicant had given undertakings to deposit the disputed ITC amount and had complied by depositing ?5,00,00,000/-. He proposed to submit property papers worth approximately ?5,60,20,000/- as security for the remaining amount. The court found this proposal reasonable and modified the bail condition accordingly. The court emphasized that the applicant had already adhered to significant portions of the bail conditions and had shown willingness to comply further.

4. Legal Precedents Regarding Onerous Bail Conditions:
The applicant cited several Supreme Court judgments to argue that bail conditions should not be excessively harsh or onerous. The court referred to these judgments, including Sandeep Jain v. National Capital Territory of Delhi, Amarjit Singh v. State of NCT of Delhi, and Sumit Mehta v. State (N.C.T. of Delhi), which held that bail conditions should be reasonable and not frustrate the very object of granting bail. The court found that the condition imposed in the present case was too harsh and modified it to ensure a balance between the interests of the accused and the prosecution.

Conclusion:
The court concluded that condition No. 4 of the bail order was unsustainable as it was too harsh and unreasonable. The court modified the condition, allowing the applicant to submit security equivalent to the remaining disputed amount of ?4,51,00,000/- instead of cash or bank guarantee. The bail application was disposed of in these terms, with the provision that the opposite party could move for bail cancellation if the applicant failed to furnish the security as per his undertaking.