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2022 (3) TMI 396 - HC - GSTSeeking grant for regular bail - issuance of invoices only, without any actual supply of goods - receiving and passing of fraudulent ITC to their buyers by way of creating a chain of bogus firms, without physical receipt and supply of goods - compounding of offences - section 138 of NI Act. HELD THAT - Section 132(1)(i) provides for punishment as that in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine; and section 132(2) provides that, where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine - Section 138 of the Act makes provision for compounding of offences under the Act, even after the institution of prosecution, on payment by the person accused of the offence, such compounding amount in such manner as may be prescribed. The compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences, on payment of compounding amount as may be determined by the commissioner, the criminal proceeding already initiated in respect of the said offence shall stand abated. The Commissioner is empower to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant - applicant is ordered to be released on regular bail on executing a personal bond of ₹ 1,00,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed. Application allowed.
Issues Involved:
1. Legality of arrest and detention under Section 69 of the CGST Act, 2017. 2. Allegations of fraudulent Input Tax Credit (ITC) availing and utilization. 3. Applicant's involvement and role in the alleged scam. 4. Prosecution's evidence and investigation findings. 5. Applicant's arguments for bail. 6. Prosecution's arguments against bail. 7. Legal precedents and their applicability. 8. Court’s discretion in granting bail. Detailed Analysis: 1. Legality of Arrest and Detention under Section 69 of the CGST Act, 2017: The applicant was arrested on 01.09.2021 under Section 69 of the CGST Act, 2017, for alleged fraudulent activities involving availing and utilizing ITC without actual receipt of goods. The applicant's counsel argued that the arrest was made without any basis or evidence, emphasizing that the applicant is a tax-paying citizen with valid GST registrations. 2. Allegations of Fraudulent ITC Availing and Utilization: The Directorate General of GST Intelligence (DGGI) conducted an investigation revealing that the applicant's firms, M/s. Alina Traders and M/s. Galaxy Traders, availed and utilized fraudulent ITC worth ?10.29 crore from non-existent firms like M/s. S.K. Traders and M/s. Ronak Traders. The investigation found no actual supply of goods, and the entire payment was made through ITC, which was not legally available. 3. Applicant's Involvement and Role in the Alleged Scam: The prosecution claimed that the applicant is the mastermind behind creating and operating multiple non-existent firms to defraud the government by issuing fake invoices and availing fraudulent ITC. The applicant's counsel, however, argued that the applicant was not involved in the administration or operation of the alleged bogus firms and that the transactions were supported by legal and valid documents. 4. Prosecution's Evidence and Investigation Findings: The prosecution presented evidence including statements from transporters, stock records, and the applicant's own statements recorded in judicial custody. The investigation revealed that the applicant's firms received ITC from non-existent firms and transferred funds to various entities without any business activity. The prosecution argued that the applicant never cooperated with the investigation and posed a risk of tampering with evidence if released on bail. 5. Applicant's Arguments for Bail: The applicant's counsel argued that the applicant has no prior antecedents, the offences are triable by a Judicial Magistrate with a maximum punishment of five years, and that the trial would take considerable time to conclude. They cited legal precedents emphasizing that bail should be granted when the trial is likely to be delayed, and the applicant is not a flight risk. 6. Prosecution's Arguments Against Bail: The prosecution argued that the applicant is a flight risk, may tamper with evidence, and influence witnesses. They emphasized the serious nature of economic offences and the substantial amount involved, arguing that the applicant's release on bail would hinder the ongoing investigation. They cited several legal precedents supporting the denial of bail in cases involving economic offences. 7. Legal Precedents and Their Applicability: Both parties cited multiple legal precedents. The applicant's counsel referred to cases like Arnesh Kumar Vs. State of Bihar and Sanjay Chandra Vs. CBI, which emphasize the necessity of arrest and the importance of considering trial delays in bail applications. The prosecution cited cases like Nimmagadda Prasad Vs. C.B.I, highlighting the serious nature of economic offences and the need for a different approach in granting bail. 8. Court’s Discretion in Granting Bail: The court considered the provisions of the CGST Act, the evidence collected, and the potential delay in concluding the trial. It noted that the applicant had been in custody since 01.09.2021, and the trial would take a considerable time to conclude. The court found it appropriate to exercise discretion in favor of the applicant, granting bail with specific conditions to ensure the applicant does not misuse the liberty or tamper with the investigation. Conclusion: The court allowed the bail application, ordering the applicant's release on a personal bond of ?1,00,000 with one surety of the like amount. The applicant was required to surrender his passport, not leave India without prior permission, and adhere to other conditions to ensure he does not misuse the liberty granted. The court emphasized the need for the prosecution to present their case uninfluenced by any hindrances created by the applicant.
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