2021 (10) TMI 141 - HC - GST

Seeking grant of Regular Bail - fraudulently availing and passing on ineligible/ fake Input Tax Credit - non-existent firms - Sections 132(1)(b) (c) of the Central Goods and Services Tax Act 2017 - HELD THAT - Considering the fact that petitioners have been in custody now for 70 days, complaint qua them have already been filed by the respondent and hence their custodial interrogation is not required and the evidence is documentary in nature, this Court deems it fit to release the petitioners on interim bail on their furnishing a personal bond in the sum of ₹1 lakh each with two sureties each of the like amount to the satisfaction of the Trial Court/ Duty Magistrate, further subject to the condition that petitioners will cooperate with the respondents and will join the investigation/ inquiry as and when required by the respondents and will not leave the country without the prior permission of this Court. List these petitions on 11th November, 2021.

Summary

Issues:
Petitioners seeking regular bail in investigation under CGST Act for fraudulent ITC availing and passing, existence of fake firms, non-payment to suppliers, non-cooperation in investigation, legality of complaint filing, liability of company directors, documentary evidence validity, arrest without assessment, necessity of custodial interrogation, bail conditions.

Analysis:
1. The petitioners sought regular bail in an investigation under the CGST Act for allegedly fraudulently availing and passing on ineligible ITC. The respondent alleged involvement in creating fake invoices, non-existent suppliers, and passing on ITC to non-existent firms, causing substantial revenue loss.

2. The investigation revealed discrepancies in transactions involving M/s. Jetibai Grandsons Services India Pvt. Ltd. (JGSIPL) and M/s. Urja Global Limited, where ineligible ITC amounting to crores was allegedly availed and passed on. The petitioners were implicated in utilizing the fraudulent ITC for tax liabilities.

3. The petitioners, including directors of M/s. Urja and M/s. Microlyte Energy Pvt. Ltd., were accused of fraudulent ITC claims and passing, with statements admitting to issuing invoices without goods transactions. The investigation highlighted non-existent transporters and suppliers, raising concerns about the authenticity of transactions.

4. The petitioners challenged the investigation process, timing of complaint filing, and absence of company liability in the complaint. Legal counsels argued against the rushed complaint filing and disputed findings, emphasizing the documentary nature of evidence and disputable claims by the respondent.

5. Legal representatives contended that the petitioners cannot be solely liable for ITC usage by buyers, emphasizing the legality of transactions through banks and the need for post-assessment proceedings. They cited relevant case laws to support their arguments against the arrest and assessment procedures followed in the case.

6. The respondent defended the investigation, highlighting the creation of fake invoices through non-existent firms and non-cooperation in the inquiry. The respondent stressed the substantial amounts owed to suppliers by the companies, supporting the arrest and investigation based on the alleged fraudulent activities.

7. The Court directed the parties to submit written submissions, considering the complex legal arguments and disputed facts presented. Interim bail was granted to the petitioners due to the documentary nature of evidence, lack of custodial interrogation necessity, and the filing of complaints against them, with conditions for cooperation and travel restrictions.