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2025 (4) TMI 1466 - HC - GSTSeeking grant of regular bail - offence under Sections 132(1)(b) 132(1)(c) 132(1)(i) of Central Goods and Services Tax Act 2017 - availing ineligible Input Tax Credit on the basis of invoices issued by non-existent firms and without receipt of concomitant goods the fake Input Tax Credit was further passed on to various buyers - Admissibility of Applicant s Statement under Section 70 CGST Act - HELD THAT - This Court finds that the prosecution case is primarily based upon the documentary evidence relating to alleged involvement of M/s Aadya Trading Company in availing ineligible Input Tax Credit and further passing it on to three other beneficiary firms noticed above. During the course of hearing it is fairly stated by learned Counsel that as per records of M/s. Aadya Trading Company Ghanshyam Aggarwal is the proprietor of the said firm but according to him the applicant is the person who is actually managing the affairs of the said firm. Learned counsel for the opposite party has also not disputed this fact that the applicant is at least not involved in creation of the alleged 21 non-existent firms which were utilized for availment and further passing on ineligible Input Tax Credit. As far as the statement of applicant recorded under Section 70 CGST Act 2017 is concerned its admissibility or evidentiary value would be tested during trial. A perusal of the zimni orders passed by the trial court would show that after filing of the charge-sheet in January 2025 the case is being adjourned for recording pre-charge evidence and no witness has been examined so far by the prosecution. Thus it is evident that the trial has not yet started. Conclusion - Admittedly the alleged offences are triable by Magistrate and provide for a maximum punishment of five years imprisonment and trial is likely to consume considerable time to conclude therefore this Court has no hesitation in holding that the further detention of the applicant behind the bars would not serve any useful purpose who has already spent more than five months in judicial custody since his arrest on 19.11.2024. Further the prosecution witnesses are official witnesses and presently there does not appear to be any possibility of their being won over therefore considering the nature of the trial as well as period of more than five months undergone by the applicant as an undertrial this Court deems it appropriate to extend the concession of regular bail to the applicant. It is ordered that the applicant- Ankur Garg be released on regular - Bail application allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to Regular Bail under Section 439 Cr.P.C. Relevant Legal Framework and Precedents: Section 439 Cr.P.C. grants the High Court or Sessions Court the discretion to grant bail to an accused during trial. The Court must balance the nature and gravity of the offence, the evidence against the accused, the likelihood of the accused absconding or tampering with evidence, and the stage of the trial. The offences under Sections 132(1)(b), (c), and (i) of the CGST Act, 2017 relate to fraudulent availment and utilization of ITC, punishable with imprisonment up to five years. Court's Interpretation and Reasoning: The Court noted that the trial has not yet commenced in earnest, with no prosecution witnesses examined so far and the charge-sheet filed only recently. The offences are triable by Magistrate with maximum punishment of five years, indicating they are not of the highest severity. The Court recognized that the applicant has been in custody for over five months since arrest. Application of Law to Facts: Considering the stage of trial, the nature of the offences, and the period of custody already undergone, the Court concluded that further detention would not serve any useful purpose. The Court emphasized that the applicant's continued incarceration was not necessary to ensure trial fairness or prevent interference with evidence, especially since the witnesses are official and unlikely to be influenced. Treatment of Competing Arguments: The prosecution argued the gravity of the offence and the large amount involved (over Rs. 36 crores) warranted denial of bail. The defense argued that investigation was complete, no direct documentary evidence linked the applicant to the firm M/s Aadya Trading Company, and the applicant was not involved in creating the fake firms. The Court balanced these arguments, giving weight to the procedural posture and custodial period. Conclusion: Bail was granted, subject to furnishing of bail bonds and compliance with conditions imposed by the trial court. Issue 2: Sufficiency of Evidence Connecting Applicant to the Crime Relevant Legal Framework and Precedents: For bail considerations, the Court examines prima facie evidence to determine if there is a reasonable ground for prosecution. The evidentiary value of statements under Section 70 of the CGST Act is subject to trial scrutiny. Court's Interpretation and Reasoning: The Court acknowledged that the complaint and investigation revealed involvement of M/s Aadya Trading Company in availing fake ITC through invoices from 21 non-existent firms. The proprietor Ghanshyam Aggarwal's statement implicated the applicant in managing the firm's affairs and involvement in the crime. Other employees and directors of beneficiary companies also implicated the applicant. However, the Court noted that no direct documentary evidence was collected linking the applicant to the creation of fake firms or the issuance of fake invoices. The applicant's statement under Section 70 CGST Act was recorded but its evidentiary value remains to be tested during trial. Application of Law to Facts: The Court found that while there is prima facie material against the applicant, the evidence is largely documentary and testimonial, requiring detailed trial examination. The applicant's role as manager of the firm was accepted by the prosecution, but the extent of culpability is to be determined at trial. Treatment of Competing Arguments: The defense highlighted the absence of direct evidence connecting the applicant to the fake firms and invoices. The prosecution relied on statements and the applicant's admitted involvement in managing the firm. The Court refrained from making any conclusive findings on the merits at the bail stage. Conclusion: The Court held that the evidence against the applicant is sufficient to proceed with prosecution but does not justify continued detention pending trial. Issue 3: Admissibility and Evidentiary Value of Applicant's Statement under Section 70 CGST Act Relevant Legal Framework and Precedents: Statements under Section 70 of the CGST Act are recorded during investigation and can be used as evidence subject to trial procedures. Their admissibility and weight are to be determined during trial. Court's Interpretation and Reasoning: The Court observed that the applicant's statement was recorded but declined to assess its evidentiary value at the bail stage, noting that such assessment is premature before trial examination. Application of Law to Facts: The Court emphasized that the statement's evidentiary value will be tested during trial and cannot be the sole basis to deny bail. Conclusion: The Court did not rely on the statement alone to reject bail and left the question of admissibility to the trial process. Issue 4: Impact of Gravity of Offence and Amount Involved on Bail Relevant Legal Framework and Precedents: The seriousness of the offence and the quantum of loss or gain involved are relevant factors in bail decisions but are not determinative. Courts balance these against other factors such as stage of trial and custodial period. Court's Interpretation and Reasoning: The Court acknowledged that the alleged amount involved in fake ITC transactions exceeds Rs. 36 crores, indicating significant economic impact. However, it also noted that the offences carry a maximum punishment of five years and are triable by Magistrate, which moderates the gravity assessment. Application of Law to Facts: The Court found that despite the large amount involved, the procedural posture and lack of trial progress weighed in favor of bail. The Court also considered that the applicant had already spent substantial time in custody. Treatment of Competing Arguments: The prosecution stressed the high amount and seriousness to oppose bail. The defense argued that the applicant's continued detention was unwarranted given the stage of proceedings. The Court balanced these factors. Conclusion: The gravity of offence and amount involved did not outweigh the applicant's right to bail under the circumstances. 3. SIGNIFICANT HOLDINGS The Court held:
Core principles established include the recognition that the stage of trial and custodial period are critical considerations in bail applications, especially for economic offences triable by Magistrate with moderate maximum punishment. The Court emphasized that prima facie evidence suffices for prosecution but does not justify continued incarceration absent other compelling factors. Final determination was to grant regular bail to the applicant subject to furnishing bail bonds and compliance with conditions imposed by the trial court, thereby balancing the interests of justice and liberty pending trial.
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