2019 (2) TMI 1898 - HC - GST

Denial of Anticipatory Bail in CGST Fraud Case

The Court dismissed the anticipatory bail petitions in a case involving alleged offenses under Section 132 of the Central Goods and Services Act, 2017 ... Grant of Anticipatory Bail - fraudulent availment of input tax credit - fake invoices without actual supply of Goods/Services - According to Department the petitioners are adopting a modus operandi whereby they make payment to the suppliers of invoices without movement of goods/services through banking channel and get back such amount after payment of agreed commission to the supplier of fake invoices - Section 132 of the Central Goods and Services Act, 2017 - HELD THAT:- The enactment in question has come into force very recently with a laudable object of one country one tax. Therefore wherever the department finds that certain provisions in the Act is misused by creating fake invoices and input tax credit is being availed without any movement of goods, the same has to be curbed and nipped in the bud to ensure that it does not grow into another mega scam having a direct impact on the economy of this nation. Since the department has collected some prima facie materials , they want to act fast before it becomes a huge racket, failing which the entire economy of this country would weaken and collapse - If the petitioners are conducting genuine business through the above said companies, they can easily prove during the investigation the actual movement of goods, which will all be borne out by documents. If the department is satisfied regarding the same, the department will leave out the companies belonging to the petitioners and proceed further with the investigation. In the considered view of this Court, in matters of this nature, the department must be given the complete independence to investigate the cases since it involves the national interest. This Court by entertaining an Anticipatory Bail Petition and by imposing certain conditions, should not tie the hands of the department in proceeding further with the investigation since what has been unearthed till now is only the tip of the iceberg and there is a long way to go for the department to find out how long this fake invoices have extended their tentacles. As argued by the learned counsel for the petitioners, it is true that the entire issue is borne out by documents and once the petitioners co-operate for the investigation by submitting all the relevant documents, they should not be unnecessarily arrested. However, it is a settled proposition of law that this Court while considering a petition for Anticipatory Bail has to necessarily taking into consideration the nature and gravity of the accusation in a given case. When a case involves serious offences, grant of Anticipatory Bail by itself will cause prejudice to the investigation. Where the accused persons are charged of violation of CGST Act, involving colossal loss of revenue to the exchequer and the investigation is at a very nascent stage, prudence demands that this Court should lay of its hands from the investigation and allow complete independence to the prosecuting agency to proceed further with the investigation. This Court is not inclined to entertain these Anticipatory Bail Petitions - Application dismissed. Issues:Petitioners seeking anticipatory bail for alleged offences under Section 132 of the Central Goods and Services Act, 2017 involving fake invoices and input tax credit fraud.Analysis:1. The prosecution accuses various companies of issuing fake invoices without actual supply of goods/services and availing input tax credit, causing substantial losses to the exchequer. The accused face charges under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017, impacting the country's economy negatively.2. The defense argues that the registered traders followed the Act's provisions by issuing invoices and claiming input tax credit legitimately. They contend that the prosecution's assumptions lack merit, as the accused have provided evidence of goods movement and compliance with invoicing regulations.3. The Special Public Prosecutor asserts that the case reveals a significant scandal involving multiple companies issuing and receiving fake invoices to exploit input tax credit provisions, leading to substantial revenue losses. Several individuals, including directors of implicated companies, have been arrested for their involvement.4. The prosecution highlights the seriousness of the offences under the Act, emphasizing the imprisonment and fines prescribed for violations exceeding a specified amount. The Act provides for cognizable and non-bailable offences, allowing for arrests in cases of substantial tax evasion or fraudulent practices.5. The Court acknowledges the importance of preventing misuse of the Act to safeguard the national economy. Considering the gravity of the accusations, the Court declines to grant anticipatory bail, emphasizing the need for thorough investigation and the prosecution's independence to address the alleged offences effectively.6. The Court emphasizes that cooperation with the investigation, including providing relevant documents, is crucial for establishing innocence. Granting anticipatory bail in such cases could impede investigations into significant revenue losses and potential economic repercussions, necessitating a hands-off approach by the Court.7. Ultimately, the Court dismisses the anticipatory bail petitions, urging the petitioners to cooperate fully with the investigation and submit all relevant documents to the authorities. The decision aims to allow the prosecution to proceed with the case in accordance with the law, considering the serious nature of the accusations and the early stage of the investigation.