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TMI Blog2020 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... different parts of the country, where such persons, with vested interests, have created a host of unscrupulous and bogus entities. These fake entities are then used for the purpose of indulging in issuances of false and fabricated invoices, without actual movement or supply of goods and services and without payment of any GST to the public exchequer, but for the purpose of claiming ITC, by defrauding the Revenue. This Court is well aware of the complications thrown in by the new GST regime and the problems posed in its implementation. It seems a countrywide cartel specializing in defrauding the GST system is operating to bring the economy to its knees. These complications created by the unscrupulous fraudsters, one would fear, could lead to arrest of innocent businessmen and traders. However, a reading of the GST code would make it abundantly clear that it is rooted with several checks and balances to ensure that the initiation of prosecution or an arrest is to be made only after following due and elaborate process - One cannot lose sight of the fact that the Governments are making their best efforts to enhance the ease of doing business, to reduce the burden on the tax payers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concern for the authorities. They were predominantly engaged in passing bogus input tax credit, secured on the strength of fake and fabricated invoices, without supply of any physical goods to such other existing and non-existing firms, thereby enabling the recipients to avail and utilize the same while discharging tax liabilities. These fake and fraudulent transactions have, among others, caused huge loss to the State exchequer at least to the tune of ₹ 122.67 crores. 4. After intensive analysis of data from GSTN/e-way bill portal and inputs from various sources, the Joint Commissioner of State Tax, CT GST Enforcement Range, Sambalpur detected the fraud committed by the Accused. After being satisfied that M/s GS Unitrade is engaged in such fraudulent business activities, the Authority issued INS-01 for conducting inspection and search of his business premises and residence. 5. As seen from the records, during the search, several incriminating documents, containing business transactions of such business entities, were unearthed and seized with due acknowledgement. The Petitioner was subsequently summoned by the Authorities. The Petitioner was subjected to interro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the name of many daily labourers, private tutors, housewives etc., with the help of their identity documents like PAN, Aadhaar Card, Mobile phone, Voter Card, etc.. The said documents, it appears, were obtained on the pretext of offering them employment. The records also reveal that the accused has raised bogus input tax credit to the tune of ₹ 71 Crores, by utilizing such fake invoices and has passed on that bogus ITC The petitioner has thus spearheaded the tax fraud of massive proportions and defrauded the Revenue of about ₹ 98.91 crores (₹ 94.73 Cr. +4.18 Cr.) thereby causing losses to the public exchequer. The accused is thereby alleged to have committed offences under Section 132(1)(i) read with Section 132(5) of the OGST Act, 2017, which are a non-bailable and cognizable. 9. Learned counsel appearing for the petitioner, Mr S. Mohanty submits that the present petitioner is no way involved in the commission of the offences alleged and that he has been arrested on frivolous grounds, in violation of the guidelines laid down in D.K.Basu Vs State of West Bengal. (1997) 1 SCC 416. He further submits that the proceeding in the instant case has been drawn a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the proceeding has been rightly initiated against the present petitioner and after complying with the all formalities relating to arrest, he has been arrested. The petitioner is engaged in choreographing a complex variant of GST fraud. The provision of Section 41 and 41(A) of the Cr.P.C. is not applicable to the facts involved in the present case. He made detailed submissions regarding the economic perspective of the fraud, the nature and modus operandi of the crime, the relevant provisions of GST regime and its abuse by employing such fraud and forgery. It was further submitted that under the OGST Act, the acts of commission and omission, as enumerated thereunder, provides for both Criminal Prosecution U/s 132 of the Act as well as civil proceedings in terms of Sec. 73 and Sec. 74 of the Act. He has placed reliance of the judgments in Sanjay Dhigar Vs D.G Goods and Service Tax, 2020(2) TMI 428(Punjab Haryana HC), YS. Jagan Mohan Reddy Vs CBI (2013) 7 SCC 439, Nimmagadda Prasad Vrs. Central Bureau of Investigation (2013) 7 SCC 466, Bharat Raj Punj vs. Commissioner of Central Goods and Services Tax, Criminal Writ No. 76/2019, dated 12.03.2019(Raj. HC) 19 Criminal Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest. The threat posed by grave economic offences to the financial health of the country is further elaborated by the Hon ble Supreme Court in Nimmagadda Prasad vs. Central Bureau of Investigation (2013) 7 SCC 466 2017. 15. The contention of the petitioner regarding the non-compliance of due procedure while arresting the petitioner, has been vehemently opposed by the Revenue by stating, among others, that the GST Intelligence had collected inputs regarding the involvement of the present petitioner along with the other coaccused persons for creating fake invoices and wrongf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmanent place of business, (ii) a person is not appearing in spite of repeated summons and is involved in huge amount of evasion of tax, (iii) a person is a habitual offender and he has been prosecuted or convicted on earlier occasion, (iv) a person is likely to flee from country, (v) a person is originator of fake invoices i.e. invoices without payment of tax, (vi) when direct documentary or otherwise concrete evidence is available on file/record of active involvement of a person in tax evasion. The reliance placed on the above case by counsel for the Petitioner is woefully misdirected, in the light of the factual aspects detailed hereinabove. In particular, it may be seen that the magnitude of evasion runs into several crores; voluminous documentary and other evidences have been unearthed by strenuous data mining, which prima facie show his involvement in generating the fake invoices and his active involvement of the Petitioner herein; the accused has not been fully co-operating with the investigation; and there is flight risk. 17. In so far as the jurisdictional question raised by the petition, the CGST authorities have already issued summons unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners is that the CGST Act, 2017 prescribes a procedure for assessment even in cases where the information furnished in the returns is found to have discrepancies and that unless a summary assessment or special audit is conducted determining the liability, no offence can be made out under the Act. Therefore, it is their contention that even a prosecution cannot be launched without an assessment and that therefore, there is no question of any arrest. 51. It is true that CGST Act, 2017 provides for (i) self assessment, under Section 59, (ii) provisional assessment, under Section 60, (iii) scrutiny of returns, under Section 61, (iv) assessment of persons who do not file returns, under Section 62, (v) assessment of unregistered persons, under Section 63, (vi) summary assessment in special cases, under Section 64 and (vii) audit under Sections 65 and 66. 52. But, to say that a prosecution can be launched only after the completion of the assessment, goes contrary to Section 132 of the CGST Act, 2017. The list of offences included in sub-Section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities have made a prayer before the trial court for issuance of NBW against the absconding co-accused. Further, there flight risk of the petitioner herein cannot be ruled out. 21. There is no hard and fast rule regarding grant or refusal to grant bail. Each case has to be considered on the touchstone of its own generic facts and individual merits. However, the discretion of the court has to be exercised judiciously sans any element of arbitrariness. Even if the bail is the rule and jail is the exception -- the basic bail jurisprudence remains unaltered, but in the instant case, the alleged GST fraud committed by the petitioner is having humongous ramification on the revenue collection by the State. At this backdrop, the possibility of the accused tampering the evidence and/or influencing/intimidating the witnesses also cannot be ruled out. 22. Moreover, the courts cannot lose sight of the adverse impact such activities would have in the economy. It appears that a large number of cases have now emerged in different parts of the country, where such persons, with vested interests, have created a host of unscrupulous and bogus entities. These fake entities are then us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suing the Standard Operating Procedure (SOP) Office Memorandum dated 12.05.2019 issued by GST Investigation Wing, Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance for utilizing the fake invoice issuers dataset by SGST authorities. In particular, it was observed that: Large number of GST fraud cases involving the use of fake invoices for wrong availment of input tax credit (ITC), which is further used to pay GST on outward supply have been detected since the rollout of GST by the Central GST authorities as well as the State GST authorities. Whereas the mens rea for the use of such fake invoices appears to be fraudulent availament/encashment of ITC credit, the unscrupulous entities engaged in this also defraud other authorities such as Banks by inflating turnovers, laundering of money etc. 26. At this juncture, it may be apposite to note that in the year 2018-19, 1620 cases involving a sum of ₹ 11251.23 crores, were registered with respect to fake invoice(s) involving fraudulent Input Tax Credit in GST by the Central GST alone Answer by the Minister of Finance to the Unstarred Question No.1385 (on 1.07.2019) in the Lok Sabh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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