2021 (6) TMI 407 - HC - GST

Bail granted under Section 439 CrPC for Ramesh Jain and Sanjeev Jain

Sanjeev Jain S/o Ramesh Jain, Ramesh Jain S/o Shri Bhimasain Jain Versus Union of India

The bail applications of the petitioners, Ramesh Jain and Sanjeev Jain, were allowed under Section 439 CrPC. They were directed to be released on bail ... Seeking Bail - fake / bogus ITC without any purchase or sale of goods - compounding of offences - Section 132 of the Act of 2017 - HELD THAT:- In view of the fact that the petitioners have already remained in custody for about 5 1/2 months, whereas the maximum punishment provided under the Act of 2017 is five years and also considering the fact that investigation is already complete and charge-sheet has been filed and also considering the age of petitioner Ramesh Jain and the fact that the petitioners have no criminal antecedents. Also in view of the present pandemic of COVID-19 situation in the State of Rajasthan, but without expressing any opinion on the merits of the case, it is deemed just and proper to enlarge the petitioners on bail. The bail applications are allowed. Issues Involved:1. Wrongful availing and passing of Input Tax Credit (ITC).2. Bail application under Section 439 CrPC.3. Applicability of Section 132 and Section 137 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017).4. Compounding of offences under Section 138 of the CGST Act, 2017.5. Considerations for granting bail in economic offences.Detailed Analysis:1. Wrongful Availing and Passing of Input Tax Credit (ITC):The case involves allegations against the petitioners for availing wrongful ITC and passing on fake/bogus ITC without any actual purchase or sale of goods. The Assistant Commissioner, CGST Division-C, Bhiwadi, and the Deputy Commissioner, State Tax, Jaipur, reported that M/s. Veto Merchandise, which issued the invoices, was non-existent at its principal place of business, leading to the conclusion that the invoices were fake. The petitioners Ramesh Jain and Sanjeev Jain were alleged to have availed wrongful ITC to the tune of Rs. 47,91,05,784 and Rs. 13,35,44,893 respectively and passed on fake ITC amounting to Rs. 48,40,60,293 and Rs. 12,64,19,263 respectively.2. Bail Application under Section 439 CrPC:The petitioners filed bail applications after their arrest on 19.12.2020. The trial court had dismissed their initial bail applications. The petitioners argued that the maximum sentence for the alleged offence under Section 132 of the CGST Act, 2017, is five years, which makes the offence bailable. They emphasized their cooperation with the investigation, their status as employees rather than directors of the companies involved, and their prolonged custody without any requirement for further investigation or interrogation.3. Applicability of Section 132 and Section 137 of the CGST Act, 2017:Section 132 of the CGST Act, 2017, deals with the punishment for various offences related to tax evasion. The petitioners were charged under clauses (b), (c), and (l) of sub-section (1) of Section 132, which include issuing invoices without supply of goods/services and availing/utilizing wrongful ITC. The petitioners contended that the company should be held liable under Section 137, which states that every person in charge of the business at the time of the offence shall be deemed guilty. The petitioners argued that no prosecution sanction or action had been initiated against the company, which is a taxable person under Section 122 of the Act.4. Compounding of Offences under Section 138 of the CGST Act, 2017:The petitioners argued that the alleged offence is compoundable by the Commissioner under Section 138 of the CGST Act, 2017. The respondent countered that compounding can only be allowed after the payment of tax, interest, and penalty involved. The petitioners highlighted that they were employees and had been falsely implicated, while the actual directors had not been arrested.5. Considerations for Granting Bail in Economic Offences:The court considered various precedents and the nature of the offence. The petitioners cited judgments emphasizing the right to bail, especially when the accused have been in custody for a significant period, the investigation is complete, and there is no risk of tampering with evidence. The respondent, however, stressed the seriousness of economic offences and the need for a different approach in granting bail. The court noted that the petitioners had been in custody for about 5.5 months, the maximum punishment is five years, and the investigation was complete. Given the petitioners' age, lack of criminal antecedents, and the COVID-19 pandemic, the court deemed it appropriate to grant bail.Conclusion:The bail applications were allowed, and the petitioners were directed to be released on bail under Section 439 CrPC, provided they furnish a personal bond of Rs. 5,00,000 each with two sureties of Rs. 2,50,000 each to the satisfaction of the trial court. The petitioners are required to appear before the trial court on all subsequent dates of hearing and as and when called upon to do so.