2022 (3) TMI 1155 - HC - GST

Seeking grant of Regular Bail - availment of illegal input tax credit - fictitious entities - fake purchases from 24 fictitious entities - allegation against the applicant is of committing offence under section 132(1)(c) of the GGST Act CGST Act - HELD THAT - The applicant is alleged to have fraudulently claimed input tax credit to the tune of ₹ 31.02 Crores by showing fake purchases from 24 fictitious entities to the tune of ₹ 172.36 Crores. In pursuance of the summons issued by the respondent tax authority in December 2021, the applicant appears to have supplied documentary evidence to the complainant-tax authority relating to the consignment of goods as also the vehicles used for transporting the goods. It is the say of the respondent-tax authority that it is seized with a list of fictitious firms from whom the applicant s firm is said to have made fake purchase transactions - in this petition filed under Section 439 of Cr.P.C., this Court is not required to go into the veracity of the claims made by either side. Whether or not the applicant has availed input tax credit by showing fake purchases from fictitious firms would be a matter of trial. The offence alleged against the applicant is economic offence, which has resulted in loss to the State exchequer. Of course, economic offences are grave in nature, being a class apart, which arises out of deep-rooted conspiracies and therefore, the effect on the community as a whole is to be kept in view while consideration for bail is made. But, at the same time, seriousness of charge is not the only relevant factor to be considered while dealing with bail applications. Considering the statutory limit provided under the GGST Act CGST Act for filing complaint as also the facts and circumstances of the case and without discussing the evidence in detail, this Court is inclined to grant regular bail to the applicant, subject to conditions imposed - bail application allowed.

Issues Involved:

1. Application for regular bail under Section 439 of the Code of Criminal Procedure.
2. Allegations of fraudulent Input Tax Credit (ITC) claims under the GGST Act and CGST Act.
3. Examination of documentary evidence and the legitimacy of transactions.
4. Consideration of the applicant's health condition.
5. Public Prosecutor's opposition based on the gravity of the economic offence.
6. Legal principles regarding bail in economic offences.

Issue-wise Detailed Analysis:

1. Application for Regular Bail:
The applicant filed an application under Section 439 of the Code of Criminal Procedure seeking regular bail in connection with the Memorandum of Arrest dated 30.11.2021. The alleged offences were under Section 132(1)(c) of the GGST Act and CGST Act, punishable under Section 132(1)(i) of both Acts.

2. Allegations of Fraudulent ITC Claims:
The applicant, a designated Partner of "Utkarsh Ispat LLP," was accused of showing fake purchases from 24 fictitious entities amounting to ?172.36 Crores, thereby availing illegal ITC of ?31.02 Crores. The respondent authority conducted a search and seizure operation, alleging that the applicant's firm had shown voluminous fake purchase transactions from fictitious entities to wrongfully avail ITC.

3. Examination of Documentary Evidence:
The applicant provided documentary evidence, including invoices, bills, vehicle registration numbers, and E-way bills, to substantiate the legitimacy of the transactions. The applicant contended that goods worth ?225 Crores were received with genuine legal documents and that the firm had paid ?40 Crores as GST through banking channels. The applicant argued that the firm had a complete system in place for every consignment of goods arriving at the factory premises.

4. Consideration of the Applicant's Health Condition:
The applicant was diagnosed with Prostate Cancer and was hospitalized. This health condition was presented as a factor for consideration in the bail application. The applicant had cooperated with the investigation and had already been in custody since November 2021.

5. Public Prosecutor's Opposition:
The Public Prosecutor opposed the bail application, highlighting that the applicant's firm had shown fake purchases from fictitious entities and indulged in a larger conspiracy to evade crores of rupees in tax. The prosecutor argued that the applicant was aware of dealing with shell companies and that his release could hamper the ongoing investigation. The prosecutor also referenced the Supreme Court's judgment in Nimmagadda Prasad v. C.B.I., emphasizing the gravity of economic offences and their detrimental impact on the financial health of the country.

6. Legal Principles Regarding Bail:
The court acknowledged that economic offences are grave and arise from deep-rooted conspiracies, but also noted that seriousness of the charge is not the sole factor in bail considerations. The court cited the Supreme Court's judgment in P. Chidambaram v. Directorate of Enforcement, which emphasized that bail is the rule and refusal the exception, even in economic offences. The court considered the statutory limit for filing complaints under the GGST Act and CGST Act, the applicant's health condition, and the fact that the respondent Department had already attached immovable property worth more than the alleged fraudulent claim.

Conclusion:
The court granted regular bail to the applicant, noting that the interest of the respondent Department was already protected by the attachment of the applicant's property. The applicant was ordered to be enlarged on regular bail on executing a personal bond of ?2,00,000/- with one surety of the like amount, subject to conditions including not misusing liberty, surrendering the passport, and not leaving India without prior permission. The court emphasized that the veracity of the claims would be a matter of trial and that the applicant's cooperation with the investigation and health condition warranted the grant of bail.

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