2021 (8) TMI 402 - HC - GST

Seeking grant of Bail - it is alleged that the company received payment from its customers, but failed to remit the tax to the Government - section 132 (1) (d) of the Central Goods and Service Tax Act, 2017 - HELD THAT - This Court, after hearing the parties to the lis, in order to give an opportunity to the petitioner to absolve himself of the tax liability by producing the accounts and tax payment made to the government on the payment received by the petitioner to the tune of ₹ 93 Crores, granted interim bail to the petitioner till 8.4.2021, which was thereafter extended up to 16.6.2021 and last of all, the matter was directed to be listed on 20.7.2021. An undertaking affidavit has been filed by the petitioner dated 22.07.2021 in which the petitioner has submitted that the security given to the bank for the loans and LC availed to the tune of about ₹ 75 Crores, security of property and machineries of the petitioner to the tune of about ₹ 200 crores has been given and the petitioner has undertaken that the properties are put up for sale by the bank and after adjusting the amount that is due and payable to the bank on account of the loans and LCs availed by the petitioner, the surplus proceeds may be utilised for payment of the amount of GST calculated after taking into account the input tax credits or other refund calculation eligibility and based on the advice of the consultants, a charge be created on the subject properties in favour of the Revenue to the extent of the outstanding GST dues, which shall rank in priority after the settlement of debts due to the Bank. The petitioner is ordered to be released on the basis of the bail bonds and sureties, which have been executed by the petitioner and the sureties while being enlarged on interim bail - Petition allowed.

Summary

Issues:
1. Bail application of the petitioner arrested under the Central Goods and Service Tax Act, 2017.
2. Allegation of making outward supplies without paying taxes.
3. Petitioner's submission of compliance with summons and readiness to produce accounts.
4. Claim of financial difficulties leading to company's takeover under SARFAESI Act.
5. Prosecution's argument on non-appearance despite summons and tax evasion.
6. Security offered by the petitioner for bail and respondent's no objection stance.
7. Conditions imposed for granting bail.

Analysis:
1. The petitioner, an Executive Director of a company engaged in supply, sought bail after being remanded for an offence under the Central Goods and Service Tax Act. The prosecution alleged the company made taxable supplies but failed to remit taxes to the Government, leading to the petitioner's arrest.

2. Petitioner's counsel argued that despite submitting returns and producing accounts, the complaint was filed without proper consideration. It was claimed that a significant sum was paid as input tax, not considered by the respondent, and the tax liability was disputed as hypothetical.

3. The defense highlighted the company's financial distress, resulting in its takeover under the SARFAESI Act. Emphasis was placed on the petitioner's willingness to cooperate, produce accounts, and address the tax liability issue, asserting the prosecution was unsustainable.

4. The prosecution contended the petitioner repeatedly failed to respond to summons and neglected tax remittance despite substantial receipts. Concerns were raised about potential evasion if bail was granted, suggesting the petitioner might not fulfill tax obligations.

5. The Court considered both parties' arguments and, after multiple hearings, granted interim bail to the petitioner to address the tax liability issue. Subsequently, the petitioner offered immovable property as security, which was accepted by the respondent, leading to the granting of bail with specified conditions.

6. The conditions for bail included providing security for tax liability, appearing before the respondent, refraining from similar offenses, and complying with legal procedures. Breach of conditions could result in appropriate legal actions, as outlined by the Supreme Court, ensuring accountability and compliance with the terms of bail.