2022 (9) TMI 119 - HC - GST

Seeking grant of Regular Bail - availment of fraudulent Input tax Credit - non-existence firms - cheating and dishonestly inducing delivery of property - forgery for the purpose of cheating using as genuine a forged document - extent of punishment - existence of serious charge - Section 132(1) (a), (b) (c) of Central Goods Services Tax Act, 2017 and Punjab Goods Services Tax Act, 2017 - HELD THAT - It would be contrary to the concept of personal liberty enshrined in the constitution that any person should be punished in respect of any matter upon which he has not yet been convicted or that in any circumstances he should be deprived of his liberty only upon the belief that he will tamper with the witnesses/evidence, if granted bail except in the most extraordinary circumstances. Undoubtedly, the seriousness of the charges against the accused are no doubt one of the relevant considerations while considering the bail application but it would not be the only factor. The other relevant factor would be the sentence that could be imposed upon the said accused after trial and conviction. If seriousness of the charge was the only test then it would not be balancing the constitutional rights. Further, while considering the grant of bail, the triple/tripod test would also be a relevant consideration. The three factors as set out in the said test are - (i) Whether the accused is a flight risk; (ii) Whether the accused will tamper with the evidence, if granted bail (iii) whether the accused could influence the witnesses, if granted bail. Since the grant or refusal of bail lies in the discretion of the Court the discretion is to be exercised with regard to the facts and circumstances of each case. However, bail is not to be denied to satisfy the collective sentiments of a community or as a punitive measure. Coming back to the facts of the present case, it may be pertinent to mention here that the petitioners were arrested on 13.03.2021 and the complaint came to be filed on 12.05.2021. Therefore, as on date they have undergone a total custody period of approximately 01 year and 06 months. The maximum sentence that could be awarded would be 05 years. As yet, even the charges have not been framed and as many as 66 prosecution witnesses are yet to be examined. Therefore, at any rate, the trial cannot be concluded any time soon. Further no serious apprehension has been expressed by the prosecution of the petitioners being flight risks, or that they would tamper with the evidence or influence witnesses in case bail was granted to them. Even otherwise the evidence is primarily documentary in nature and in custody of the State. Without commenting on the merits of the case, the petitions are allowed and the petitioner- Maninder Sharma son of Sh. Satya Varat Rattan, petitioner-Vinod Kumar son of Sh. Om Parkash, Sunny Mehta son of Sh. Kuldeep Mehta and Sandeep Singh son of Sh. Ikbal Singh are ordered to be released on bail subject to the satisfaction of the Trial Court, concerned which is at liberty to impose any stringent conditions that it deems appropriate. Petition disposed off.

Issues Involved:
1. Fraudulent Input Tax Credit (ITC) availing.
2. Misuse of PAN numbers and documents.
3. Determination of bail eligibility under GST Act.
4. Length of custody and stage of trial.
5. Judicial discretion in granting bail.

Issue-wise Detailed Analysis:

1. Fraudulent Input Tax Credit (ITC) Availing:
The investigation revealed that a group of individuals created a network of fake firms to defraud the state exchequer, evading taxes amounting to Rs.122.28 Crores. These firms used common Email-ids, Phone numbers, and PAN cards for registration and passed on fraudulent ITC to various beneficiary firms. No tax was paid in the inward supply chain, and fake invoices were used to avail fraudulent ITC against output tax liability. Parallel and fake bank accounts were also opened to withdraw cash.

2. Misuse of PAN Numbers and Documents:
The Counsel for petitioner Vinod Kumar argued that the firms were fraudulently opened in his name by misusing his PAN number, and the bank account uploaded on the GST portal did not belong to him. He claimed that specific OTPs and PINs generated for transactions were not part of the investigation. Similarly, Counsel for petitioner Sandeep Singh contended that his documents were misused by an accountant named Satnam Singh for obtaining a gold loan, and he was working at a cloth shop earning Rs.7,000/- per month.

3. Determination of Bail Eligibility Under GST Act:
The Counsel for petitioner Maninder Sharma contended that the petitioner would be liable for punishment for fraudulently availing ITC of Rs.3,32,17,761/-, which amounts to a bailable offense under Section 132(5) of GST Act. He argued that the respondent arbitrarily alleged wrong ITC to make the offense non-bailable and that no demand had been determined under Sections 73 or 74 of the GST Act, making it premature to allege fraudulent ITC availment. The Counsel for petitioner Sunny Mehta argued that no show cause notice was issued to him, and his documents were misused, making him a victim of fraud.

4. Length of Custody and Stage of Trial:
The petitioners argued that they had been in custody since March 2021, and pre-charge evidence was still ongoing with many witnesses yet to be examined. The maximum sentence prescribed was 05 years, and further incarceration was not required as they had already undergone a significant portion of their potential sentence. The Counsel for petitioner Sandeep Singh also argued that the complaint did not specify which firms were registered in different states, making the complaint beyond jurisdiction.

5. Judicial Discretion in Granting Bail:
The court examined various judgments regarding the grant of bail, emphasizing that the object of bail is to secure the appearance of the accused at trial and not to punish. The court noted that the seriousness of the charge and the severity of the punishment should be considered, but bail should not be denied merely because of community sentiments. The court also considered the length of custody and the stage of the trial, noting that prolonged pre-trial detention violates Article 21 of the Constitution.

Conclusion:
The court granted bail to the petitioners, emphasizing that further incarceration was unnecessary given the length of custody and the stage of the trial. The court directed the petitioners to surrender their passports or furnish an affidavit if they did not possess any passport and warned that any attempt to contact or intimidate witnesses would result in the cancellation of bail.

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