2019 (3) TMI 1914 - HC - GST

Denial of Bail Due to Fraudulent Scheme Risks: Safeguarding National Interests

The Court denied the bail application, considering the petitioner's alleged involvement in a substantial fraudulent scheme and the risk of interference ... Seeking grant of Bail - Input Tax Credit (ITC) availed on the invoices without receipt of goods and passing on the said credit through raising of invoices/E-way bills without supply of goods - bogus companies - offence u/s 133(1)(i) of CGST Act, 2017 - HELD THAT:- It is true that the petitioner has attended the enquiry conducted by the respondent and has also given his statements. It is also true that the petitioner has already suffered incarceration for more than 34 days. However, a reading of the entire counter affidavit and the case diary, reveals the fact that this petitioner is involved in a huge scam of creating fake Companies, creating fake invoices and taking advantage of input tax credit based on fake invoices. The respondent till now were able to deduct a total sum of ₹ 98 crores of fraudulent input tax credit which has been passed on/received by 15 bogus Companies. In a case involving moral turpitude of this magnitude, Courts must be very slow and careful before letting out a person on bail. The reason being that such persons are capable of tampering with the evidence and hamper the further course of investigation. Law is now well settled and apart from the other considerations, the Court has to keep in mind the nature of accusations, the nature of evidence in support there of, the character of the accused and the larger interest of the public/country. If these things are taken into consideration, this Court is of the considered view that this is not a fit case where bail can be granted in favour of the petitioner. Petition dismissed. Issues:Bail application under Section 132(1)(b) of CGST Act, 2017 for alleged offence of bill trading activity leading to wrongful availment of input tax credit without supply of goods.Analysis:Issue 1: Alleged Offence under Section 132(1)(b) of CGST Act, 2017The petitioner, a proprietor of a trading business, was arrested for allegedly issuing GST invoices without supply of goods and availing input tax credit without actual supply, amounting to nearly 98 crores of rupees. The prosecution presented evidence indicating the violation of Section 132 of the Act, highlighting the modus operandi of issuing fake invoices and bills. The defense argued that the prosecution failed to establish the intention to evade tax, a crucial element under Section 132(1)(b) of the Act. The defense emphasized the need for prima facie evidence linking the wrongful availment of input tax credit to the alleged offense.Issue 2: Prosecution's Argument and CounterThe Special Public Prosecutor contended that the petitioner orchestrated a large-scale fraud by utilizing fake invoices from multiple companies, resulting in substantial revenue loss to the exchequer. The prosecution demonstrated a sample case involving a fake company, revealing the petitioner's pattern of availing input tax credit without tax payment. The prosecutor highlighted the involvement of the petitioner's father and a team in the fraudulent activities, emphasizing the risk of evidence tampering and interference with the investigation if the petitioner is granted bail. The prosecution stressed the seriousness of the allegations and the detrimental impact of such fraudulent practices on the economy.Issue 3: Legal Precedent and Judicial ConsiderationThe Court referenced a previous case involving offenses under the Act to underscore the gravity of misusing provisions related to fake invoices and wrongful input tax credit. The judgment emphasized the importance of preventing such practices to safeguard the economy and national interests. Considering the magnitude of the alleged scam and the potential repercussions on the country's financial stability, the Court concluded that granting bail in cases of this nature could impede investigative efforts and risk evidence tampering. The judgment highlighted the necessity of considering the nature of accusations, evidence, and the accused's character in determining bail eligibility.ConclusionThe Court dismissed the bail application, citing the petitioner's involvement in a significant fraudulent scheme and the risk of interference with the ongoing investigation. The decision underscored the need to prioritize national interests and prevent economic harm caused by fraudulent practices. The judgment reflected a cautious approach in granting bail in cases involving substantial financial implications and potential evidence tampering.