2020 (9) TMI 1231 - HC - GST

Director accused of tax fraud granted bail due to lengthy custody, lack of evidence, and health issues.

Prakash Bihari Lal Dadhichi S/o Bihari Lal Dadhichi Versus Union Of India Through Director General Of GST, Intelligence, Chhattisgarh

Prakash Bihari Lal Dadhichi S/o Bihari Lal Dadhichi Versus Union Of India Through Director General Of GST, Intelligence, Chhattisgarh - TMI Issues Involved:1. Wrongful Availment of Input Tax Credit (ITC)2. Legality of Arrest and Prosecution3. Necessity and Justification for Continued Detention4. Grounds for Grant of BailIssue-wise Detailed Analysis:1. Wrongful Availment of Input Tax Credit (ITC)The applicant, a director of M/s. Dadhichi Iron and Steel Pvt. Ltd., was accused of availing ITC on the basis of fake transactions. Allegations included uploading false invoices and e-way bills on the GST portal, indicating non-existent sales and transportation of goods. The GST Intelligence authorities, upon scrutiny and physical verification, found no actual sale or transportation of goods, leading to a fraudulent claim of Rs. 62 crores as ITC.2. Legality of Arrest and ProsecutionThe applicant argued that the arrest and prosecution were premature, as no prior scrutiny or assessment was conducted by the GST authorities as required under Section 61 of the CGST Act. The applicant's counsel contended that the authorities should have first determined the correctness of the transactions and provided an opportunity for explanation before initiating criminal proceedings. The respondent, however, maintained that a prima facie case was established based on extensive scrutiny of invoices and e-way bills, revealing no actual transactions or movement of goods.3. Necessity and Justification for Continued DetentionThe applicant had been in custody for 30 days before being granted interim bail. The counsel argued that further detention was unnecessary as all relevant documents had been seized and no further interrogation was conducted during the applicant's custody. The applicant's cooperation during the investigation and absence of any misuse of liberty while on interim bail were highlighted. The respondent countered that the applicant was not cooperating with the investigation, citing instances where the applicant allegedly refused to accept summons.4. Grounds for Grant of BailThe applicant's counsel emphasized that the maximum sentence for the alleged offence is five years, and the offence is compoundable, indicating it is not of the gravest nature. The principles laid down by the Supreme Court in cases like P. Chidambaram v. Directorate of Enforcement and Sanjay Chandra v. CBI, which stress that bail is the rule and jail is the exception, were cited. The respondent argued that the economic offence was grave, involving a substantial loss to the public exchequer, and granting bail could potentially hinder the investigation.Judgment Summary:The court acknowledged the gravity of the allegations but noted that the applicant had already been in custody for a significant period without further interrogation. The court found no substantial evidence of the applicant misusing his liberty or tampering with witnesses. Considering the maximum sentence, the compoundable nature of the offence, and the applicant's health conditions, the court granted bail with specific conditions to ensure the applicant's presence during the trial and prevent tampering with evidence or witnesses. The conditions included furnishing a personal bond of Rs. 10 lakhs, two local sureties, regular court appearances, and the deposit of the applicant's passport. The interim bail was extended until the applicant fulfilled these conditions.