2022 (1) TMI 973 - HC - Service Tax

Seeking grant of Regular Bail - shell/defunct companies - issuance of invoices without providing any services - formation of cartel to siphon the public funds running into crores of rupees - As per the prosecution case, the petitioner never held any position in the management of M/s. Skillar Enterprises India Pvt. Limited. and not involved in day to day affairs of the company - HELD THAT - FIR was registered after considering the findings of the DGGST investigation, SIEMENS Internal investigation, and Forensic audit report. In all the reports it is conclusively established that the petitioner in connivance with the other accused played an active role in getting fake invoices and in routing the diverted amount back to the DesignTech and others assigned by it. Finally considering all the aforesaid facts and circumstances and huge magnitude of the fraud running into several crores of rupees, the IO is still in the process of securing various incriminating documents/records from various Central and State Government Agencies including Income Tax Authorities, GST officials, ROC authorities, Bank officials to correlate and verify the nature and quantum of fraud and modus operandi adopted for incorporating shell companies, raising of fake invoices, routing back the amount through various associated shell companies. Hence petitioner, does not deserve for bail. The object of bail is to secure appearance of the accused person at his trial by a reasonable amount of bail. Unless it can be required to ensure that an accused person will stand his trial where called upon. As observed by the Hon ble Apex Court in catena of judgments, the basic principle of our criminal justice system is bail, not jail. Considering the specific contentions of the learned Additional Advocate General that the investigating agency requires couple of weeks to conclude the investigation and after that there is no necessity of judicial custody of the petitioners and also in view of the rejection of the petition filed by the CID in the Court below for police custody of the petitioners herein and the same was unchallenged by the respondents - there is no necessity to grant of police custody of the petitioners - this Court is inclined to enlarge the petitioners on bail, but with some conditions - petition allowed.

Summary

Issues Involved:
1. Allegations of financial scam and fraud involving APSSDC, SIEMENS, and DesignTech.
2. Role and involvement of the petitioners (A10, A6, A8) in the alleged offenses.
3. Examination of the evidence and investigation reports.
4. Consideration of bail applications and relevant legal principles.

Issue-wise Detailed Analysis:

1. Allegations of Financial Scam and Fraud:
The case involves allegations that the Andhra Pradesh State Skill Development Corporation (APSSDC) funds were misappropriated through a scheme involving SIEMENS Industry Software India Private Limited and DesignTech Systems Private Limited. The project aimed to establish skill development centers, with 90% funding from SIEMENS and DesignTech and 10% from the state government. However, investigations revealed that shell companies were used to issue fake invoices and siphon off funds without providing actual services.

2. Role and Involvement of the Petitioners:
- Petitioner A10: Allegedly served as Chief Operating Officer of Skillar Enterprises India Pvt. Ltd., a company implicated in the scheme. However, A10 contended he was merely a financial advisor and had left the company due to health reasons in December 2017. The defense argued that A10 was not involved in managerial decisions and was not a director or shareholder.
- Petitioner A6: Served as Managing Director of SIEMENS and was the project head for the Siemens-APSSDC project. He was accused of facilitating the release of ?371 crores in government funds without executing any work and diverting funds through shell companies. The defense argued that there were no specific allegations of personal financial gain.
- Petitioner A8: Associated with DesignTech and alleged to have played a role in subcontracting work to Skillar Enterprises and other shell companies. The defense argued that the project was still ongoing, and there was no evidence of personal misappropriation of funds.

3. Examination of Evidence and Investigation Reports:
The investigation involved multiple reports, including:
- Tax Investigation by DGGI, Pune: Revealed contradictory claims by service providers and receivers, indicating the use of shell companies to issue fake invoices.
- Forensic Audit Report: Conducted by Sharath and Associates, highlighted flaws in policies, systems, and utilization of funds, pointing to financial irregularities.
- Internal Investigation by SIEMENS: Concluded that funds were diverted through fake invoices and shell companies.
The evidence suggested a coordinated effort to misappropriate funds, involving multiple parties and complex financial transactions.

4. Consideration of Bail Applications and Legal Principles:
The court considered the bail applications of the petitioners based on several factors, including:
- Health Conditions: Petitioner A10 cited severe health issues requiring medical supervision.
- Lack of Direct Evidence: The defense argued that there was no direct evidence linking the petitioners to personal financial gain or direct involvement in the fraud.
- Legal Precedents: The court referenced judgments emphasizing the principle of "bail, not jail" and the need to preserve the presumption of innocence.
- Investigation Status: The court noted that the investigation was ongoing, and the petitioners had already cooperated with the investigation.

Judgment:
The court granted bail to the petitioners (A10, A6, A8) with conditions, including:
- Execution of self-bonds for ?10,00,000/- each with two sureties.
- Appearance before the investigating officer twice a week.
- Prohibition from leaving India without prior permission.
The court emphasized the need for the petitioners to cooperate with the ongoing investigation.

Conclusion:
The judgment addressed the complex financial scam involving APSSDC, SIEMENS, and DesignTech, considering the roles and defenses of the petitioners. The court balanced the principles of justice, the presumption of innocence, and the need for a thorough investigation, ultimately granting bail with stringent conditions to ensure continued cooperation with the investigation.