2021 (3) TMI 346 - DSC - GST

Accused granted bail under CrPC 439 due to limited liability under GST Act 2017. Defense stressed cooperation and financial aspects.

The court granted bail to the accused under section 439 CrPC, considering the defense's arguments that the accused's liability under section 132 of GST ... Seeking grant of Regular Bail - availment of fraudulent ITC - section 132 of GST Act 2017 - HELD THAT:- There has not been any allegation that he has been habitual evader of the GST, adjudication in the present case is yet to be carried out in order to fix the exact liability of the accused. He is already in custody since 13.02.2021, accused is stated to be an old aged person of 60 years suffering from several ailments, who is also having the responsibility of taking care of his old parents. The reversal deposit of the amount which has not been disputed by the Ld. SPP for the department. Determination of the exact liability as well as the loss to the exchequer is not averred, no reasonable apprehension of tampering with the evidence or hampering the investigation has been shown, accused is no more required for any custodial investigation, therefore, no purpose would be served to keep the accused behind bar. Considering all the facts and circumstances accused Mohinder Kumar be released on bail on furnishing personal bond in the sum of ₹ 5 lacs with one surety in the like amount to the satisfaction of Ld. MM/Duty MM concerned subject to the conditions imposed - application disposed off. Issues Involved:Grant of regular bail under section 439 CrPC, Liability of accused under section 132 of GST Act 2017, Adjudication of liability, Accused's alleged involvement in fraudulent ITC claims, Jurisprudence on arrest and prosecution under GST Act, Determination of tax liability as a prerequisite for recovery, Applicability of judicial pronouncements in bail applications, Conditions for releasing accused on bail.Grant of Regular Bail:The accused sought regular bail under section 439 CrPC, contending that he was falsely implicated and his liability under section 132 of GST Act 2017 was less than Rs. 5 crores. The defense argued that the accused's role was that of a conduit passing on ITC without retaining any benefit for himself. It was highlighted that the accused had already deposited a significant sum towards GST reversal, and there was no loss to the government exchequer during the transactions. The defense emphasized the accused's age and health conditions as grounds for bail.Liability of Accused under Section 132 of GST Act:The defense counsel argued that the accused's liability was less than Rs. 5 crores as per section 132(5) of the CGST Act, making the offense bailable. Reference was made to judicial precedents like Akhil Krishan Maggu case and Make My Trip case to support the contention that adjudication of liability had not been conducted by the department, rendering the accused's arrest wrongful. The defense stressed that the accused had not retained any ITC benefit for himself, further justifying the grant of bail.Adjudication of Liability:The department failed to specify the exact liability of the accused in the alleged fraudulent ITC claims. Despite claims of tax evasion and loss to the exchequer, the department had not initiated adjudication proceedings to determine the accused's exact liability. The defense argued that without such determination, the accused's arrest and the alleged amount involved lacked verifiable material, citing relevant case laws to support this position.Accused's Alleged Involvement in Fraudulent ITC Claims:The accused was alleged to be the proprietor of firms involved in availing and passing on ineligible ITC, with major suppliers being non-existent bogus firms. The accused was accused of being part of a chain passing on fraudulent ITC through paper invoices without actual supply of goods. The department highlighted the accused's involvement in availing Rs. 57.39 crores and passing on Rs. 54.53 crores of ineligible ITC, emphasizing the non-existence of major suppliers.Jurisprudence on Arrest and Prosecution under GST Act:The defense and prosecution presented conflicting views on the necessity of adjudication for initiating prosecution in GST cases. While the defense relied on judgments emphasizing the need for adjudication before fixing liability, the prosecution cited cases supporting arrest without adjudication. The prosecution argued that adjudication was not a prerequisite for prosecution in GST cases, citing relevant judgments to support this stance.Determination of Tax Liability as a Prerequisite for Recovery:The defense highlighted the requirement for determining the exact tax liability before recovery could be initiated. Reference was made to a Madras High Court judgment emphasizing that recovery should follow quantification and determination of excess credit through assessment procedures. The defense argued that punishment under section 132 of the CGST Act should only be imposed post-determination of the demand due from the accused.Applicability of Judicial Pronouncements in Bail Applications:Both sides relied on various judicial pronouncements to support their arguments regarding the accused's liability, arrest, and prosecution under the GST Act. The defense emphasized the need for adjudication before fixing liability, while the prosecution argued for arrest powers without such determination. The court considered these precedents in determining the grant of bail to the accused.Conditions for Releasing Accused on Bail:After considering the arguments and legal principles, the court granted bail to the accused on certain conditions, including joining the investigation as directed, surrendering the passport, and refraining from tampering with evidence. The court emphasized the accused's age, health conditions, and lack of reasonable apprehension of fleeing from justice as factors supporting the bail decision.