2021 (9) TMI 549 - HC - GST

Court denies anticipatory bail due to suspicious transactions & tax evasion. Custodial interrogation deemed necessary for thorough investigation.

The court rejected the application for anticipatory bail, finding sufficient evidence of suspicious transactions and tax evasion by the applicant's firms. ... Grant of anticipatory bail - availment and utilization of inadmissible Input Tax Credit - availment of fraudulent export benefits - Fake firm - dummy proprietor - evidence of legal commercial contract - Section 132(1)(b), 132(1(c) and Section 132 (e)(e) of CGST Act - HELD THAT:- The complicity of the applicant is established during the course of investigation. It is pertinent to note that the case of the respondent is that all accused had acted in connivance with each other. The applicant had admitted that the applicant is partner in four firms. Statement of Sachin Gaikwad shows that, he does not own any firm by name M/s. Neha Impex. Jaghish Chauhan had approached him and requested him to meet his friend Mourya, who in turn introduced him to Sameer Sayeed Patel for the purpose of opening bank account with ICICI Bank. He provided blank cheque of Kotak Mahindra Bank. According to Sachin Gaikwad he did not obtain any GST registration number. Blank cheques were provided according to Sameer Patel. He had not obtained any registration number. Prima facie there is sufficient evidence against the applicant/accused. It is apparent that the goods worth ₹ 2.47 Crores were allegedly purchased from M/s. Neha Impex and M/s. Rohini Impex. They had in turn purchased the goods from M/s. Mahalaxmi Traders. As per the investigation, M/s. Mahalaxmi Traders is not in existence. The firms and the companies of the applicant which are conducted by him along with his father and brother had according to respondent evaded tax. Sachin Gaikwad has stated that he is not owner or proprietor of M/s. Neha Impex. Statement of Jagdish Chauhan also transpired that he is dummy proprietor of M/s. Rohini Impax. Owners of M/s. Neha Impex and M/s. Rohini Impex have stated that they have not provided any goods to applicant. Payment to Neha Impex & M/s. Rohini Impex - evidence of legal commercial contract or not - HELD THAT:- The submission about payment to M/s. Neha Impex & M/s. Rohini Impex cannot be considered to be evidence of legal commercial contract since they have never conducted any business. They have not sold goods. There is no infirmity or illegality in summons issued by respondents. No case for grant of anticipatory bail is made out - Bail application dismissed. Issues Involved:1. Application for anticipatory bail.2. Allegations of fraudulent transactions and tax evasion.3. Legitimacy of transactions and evidence provided.4. Legal precedents and their applicability.5. Necessity of custodial interrogation.Issue-wise Detailed Analysis:1. Application for Anticipatory Bail:The applicant sought anticipatory bail in connection with Summons No. CBIC-DIN-20201267VR000000DFES dated 2nd December 2020 issued under Section 70 of the Central Goods and Services Tax Act, 2017 ('CGST Act'). The applicant was summoned to provide evidence and produce documents related to transactions involving multiple firms.2. Allegations of Fraudulent Transactions and Tax Evasion:The respondent alleged that the applicant, along with his father and brother, engaged in the business of exporting ready-made garments and imitation jewellery through nine companies. They purportedly purchased goods from M/s. Neha Impex and M/s. Rohini Impex, which in turn procured goods from the non-existent Mahalaxmi Traders. These firms were allegedly created to avail inadmissible Input Tax Credit and export benefits using false documents. The father and brother were arrested under Section 132 of the CGST Act.3. Legitimacy of Transactions and Evidence Provided:The applicant contended that the transactions were legitimate, supported by bank statements, lorry receipts, and shipping bills. The applicant claimed to have cooperated with the investigation and provided all necessary documents. The applicant's counsel argued that the transactions were genuine and that the applicant should not be subjected to custodial interrogation.4. Legal Precedents and Their Applicability:The applicant's counsel cited several legal precedents, including decisions from the High Courts of Delhi, Karnataka, Telangana, and Bombay, to argue that anticipatory bail should be granted. The counsel emphasized that the maximum punishment for the alleged offense is five years and that the offense is compoundable. The respondent, however, relied on different precedents to argue against granting bail, highlighting the necessity of custodial interrogation for proper investigation.5. Necessity of Custodial Interrogation:The respondent argued that the transactions were bogus and that the applicant failed to cooperate during the investigation. Statements from the proprietors of M/s. Neha Impex and M/s. Rohini Impex indicated that they did not conduct any business with the applicant's firms. The respondent emphasized that custodial interrogation was necessary to prevent the applicant from tampering with evidence and to ensure a thorough investigation.Conclusion:The court found sufficient evidence against the applicant, indicating that the transactions were suspicious and that the applicant's firms had evaded tax. Statements from key individuals supported the respondent's case that the firms involved were created to facilitate fraudulent activities. The court concluded that there was no illegality in the summons issued and that custodial interrogation was necessary. Consequently, the application for anticipatory bail was rejected.Order:Anticipatory Bail Application No. 450 of 2021 is rejected and stands disposed of accordingly.