2020 (11) TMI 571 - DSC - GST

Court denies bail in economic offence case citing non-cooperation, seriousness of crime, and public fund protection

Directorate General of Goods & Services Tax Intelligence & Ors. Versus Rakesh Kumar Goyal

The court dismissed the bail application due to the accused's non-cooperation with the investigation, the gravity of the economic offence involving ... Grant of Bail - Input Tax Credit - presence of ground of parity - It is alleged that the companies owned and controlled by accused Rakesh Kumar Goyal have availed most of the amount of ITC from companies owned or controlled by said Rakesh Kumar Goyal himself - HELD THAT:- The law in regard to grant or refusal of bail is very well settled by Hon’ble Supreme Court and Hon’ble High Court in innumerable judgements. The court while granting bail should exercise its discretion in a judicious manner and not as a matter of course. Though at the stage of granting bail a detailed examination of evidence and elaborate documentation of the merit of the case need not be undertaken, there is a need to indicate in such orders reasons for prima facie concluding why bail was being granted particularly where the accused is charged of having committed a serious offence. Any order devoid of such reasons would suffer from non-application of mind. Here in this case as prayed on behalf of accused to grant bail on the ground of parity with the other co-accused persons, the ground of parity is not available here since accused, unlike the co-accused persons, despite his arrest in this case has not co-operated with the investigation and he even refused to give his statement. He even has not provided the Telly data in order to help in completing the investigation. There is nothing which accused has offered to deposit with the complainant in lieu of his evasion of GST - Parity also not available on the ground that accused firm has been most of the time falls under level 1 or level 2 but not paid any tax in cash but shown the same to have been paid in their returns. Furthermore, there are allegations against the accused that the total ITC passed on by the companies of R.K. Goyal is estimated to more than ₹ 180 Crore, including ITC passed/ circulated amongst his own companies. The gravity is to be judged by the impact, the offence has, on the society, economy and financial stability of the country. In the today’s time when country is fighting with corona virus pandemic and struggling all over on the economic front such evasion and false claims have further pushed the country towards poverty, unemployment and starving. Such offence are committed with cool mind and scrupulous planning. Therefore, in this case offence alleged against the accused is grave in nature considering the manner in which it committed and the amount involved in commission of the offence. As accused has not co-operated in investigation therefore, apprehension of tempering of witness as alleged against him is not unfounded. Ground of parity with the co-accused is not available to the applicant considering is role and involvement. Application dismissed. Issues Involved:1. Grant of bail on the ground of parity with co-accused.2. Allegations of fraudulent Input Tax Credit (ITC) claims.3. Non-cooperation with the investigation.4. Applicability of prior notice and adjudication before arrest.5. Economic offences and their impact on society and economy.Issue-wise Detailed Analysis:1. Grant of Bail on the Ground of Parity with Co-accused:The accused's counsel prayed for bail on the ground of parity with co-accused, arguing that the applicant's companies paid the duty amount to suppliers who deposited it with the government, availed input tax credit (ITC) as per GST laws, and discharged tax obligations on imported goods. The counsel cited the Jharkhand High Court's decision in *Nikit Mittal v. State of Jharkhand* granting anticipatory bail upon the accused's undertaking to join the investigation and reverse the fraudulently availed ITC. However, the court noted that the accused failed to cooperate with the investigation, did not provide necessary documents, and did not offer any deposit to the complainant in lieu of GST evasion. The accused's firms were involved in circular trading, creating confusion to avoid tax liability, and passing on ITC without actual manufacturing. Therefore, the ground of parity was not available.2. Allegations of Fraudulent Input Tax Credit (ITC) Claims:The respondent, DGGSI, alleged that the accused's companies availed ITC from companies owned or controlled by the accused himself through circular trading without actual payment of GST. The investigation revealed that the accused's companies issued invoices without corresponding supply of goods, passing on inadmissible ITC of approximately Rs. 61.02 Crores to other companies. The accused's firms were found to be non-existent or not engaged in genuine manufacturing, and vehicles shown for transporting goods were either non-existent or passenger vehicles. The accused's firms were involved in fraudulent ITC claims, causing significant losses to the government exchequer.3. Non-cooperation with the Investigation:The accused was alleged to have failed to join the investigation, provide necessary documents, and record his statement, thereby misleading the investigating agencies. The court emphasized the importance of cooperation in the investigation and noted that the accused did not provide Telly data or any deposit to the complainant. The accused's non-cooperation and the gravity of the offence made the ground of parity with co-accused inapplicable.4. Applicability of Prior Notice and Adjudication before Arrest:The accused's counsel argued that the principle of issuing notice prior to arrest, as upheld by the Supreme Court in *Union of India Vs. Makemytrip (India) Pvt. Ltd.*, should apply. However, the court referred to the Supreme Court's order in *Union of India v. Sapna Jain & Ors.*, which highlighted divergent views among High Courts and clarified that the Telangana High Court's view in *P.V. Ramana Reddy Vs. Union of India* (regarding arrest without prior notice in GST-related offences) should be considered. The Telangana High Court held that fraudulent ITC claims create a huge liability for the government and pose a threat to the implementation of GST law, justifying arrest without prior notice. The court found this applicable to the present case, distinguishing it from the *Makemytrip* case, which dealt with service tax evasion.5. Economic Offences and Their Impact on Society and Economy:The court emphasized that economic offences involving deep-rooted conspiracies and significant public fund losses should be viewed seriously. The Supreme Court in *Y.S. Jagan Mohan Reddy v. CBI* stated that economic offences pose a serious threat to the financial health of the country and should be considered grave. The court noted the severe impact of fraudulent ITC claims on the economy, especially during the ongoing pandemic, and the meticulous planning involved in such offences. The accused's non-cooperation and the gravity of the offence justified the denial of bail.Conclusion:The court dismissed the bail application, citing the accused's non-cooperation, the grave nature of the offence, and the significant financial impact on the government. The court found no merit in the ground of parity with co-accused and upheld the applicability of arrest without prior notice in GST-related offences. The detailed analysis and reliance on precedents underscored the seriousness of economic offences and the need for stringent measures to safeguard public funds.