2021 (11) TMI 643 - HC - GST

Bail denied in GST fraud case involving fake input tax credit claims worth Rs. 40.11 crores under Section 132(b) CGST Act

The HC dismissed the bail application in a GST fraud case involving fraudulent input tax credit claims. The applicant allegedly passed ITC worth Rs. ... Seeking grant of Bail - Input tax credit - issuance of invoices of bills or without supply of goods or services - retraction of statements - corroborative evidences or not - offence under Section 132(b) of CGST Act - HELD THAT:- It is apparent that the respondents had received information from CGST Jodhpur vide letter dated 16th March, 2021. M/s. Gajmukhi Bullion was found non existent at the registered place of business. The information was provided regarding recipients of M/s. Gajmukhi Bullion pertaining to jurisdiction of CGST and Cx. Mumbai that one of the supplier is M/s. Gajmukhi Bullion. The case of the respondents is that the applicant had passed ITC to the tune of ₹ 2,54,61,612/- to M/s. Gajmukhi Bullion. The information was received from Belgavi CGST and Cx. Commissionerate Mumbai that M/s. Gajmukhi Bullion being receiver of ITC to the tune of ₹ 15,22,02,368/- from one non-existence tax payer M/s. Karnataka Jewellers. The case of the respondents is that the applicant had fraudulently passed ITC to the tune of ₹ 2,54,61,612/- to M/s. Gajmukhi Bullion which is non-existent firm without actual receipt of goods and also availed the ITC. There is no reason to believe that the applicant is involved in availing ITC. There was no genuine transaction as claimed by the applicant. There was verification of supplier as per the GSTR-2A and it was revealed that M/s. Gajmukhi Bullion, Mumbai had availed ineligible ITC facilities from those companies. The investigation also revealed that 11 entities are non-existent. The total ITC availed by the suppliers was amount of ₹ 40.11 Crores approximately. The contention of the applicant that the statement was retracted and there is no corroborative material on record to support the claim of respondents. There sufficient material to deny pre-arrest bail to applicant. According to respondents during the statement recorded on 12th July, 2021 under Section 70 of CGST Act, the applicant has stated that statements dated 31st May, 2021, 16th June, 2021 and 21st June, 2021 have been correctly recorded. There is no retraction of statement dated 25th June, 2021. As per GSTR-2A of applicant the amount of ITC availed by applicant in respect to three firms is total taxable value in ₹ 990.17 Crores. The custodial interrogation of applicant is necessary. The applicant have not made out case for granting relief under Section 438 of Cr.P.C. - bail application dismissed. Issues Involved:1. Application for anticipatory bail under Section 438 of Cr.P.C.2. Allegations of fraudulent Input Tax Credit (ITC) under the CGST Act, 2017.3. Necessity of custodial interrogation.4. Legal provisions regarding arrest and prosecution under the CGST Act.Issue-wise Detailed Analysis:1. Application for anticipatory bail under Section 438 of Cr.P.C.:The applicant sought anticipatory bail in connection with an investigation by the Commissioner of Central GST (Mumbai South) under Section 70 of the CGST Act, 2017. The Sessions Court had previously rejected the applicant's anticipatory bail application, noting serious allegations of fraudulent transactions and ITC claims.2. Allegations of fraudulent Input Tax Credit (ITC) under the CGST Act, 2017:The prosecution alleged that the applicant was involved in fraudulent ITC claims amounting to Rs. 2.54 Crores to M/s. Gajmukhi Bullion, a non-existent firm. Further, the applicant allegedly made payments to M/s. Karnataka Jewellers but received invoices from other entities without corresponding goods. The applicant’s ex-employee confirmed the creation of fictitious firms to facilitate these transactions. The applicant retracted his statements but failed to provide substantial evidence to counter the allegations.3. Necessity of custodial interrogation:The respondents argued that custodial interrogation was necessary due to the serious nature of the economic offence and the need to uncover the full extent of the fraudulent activities. The investigation revealed that the applicant availed ITC from non-existent firms, and the total taxable value involved was approximately Rs. 990.17 Crores. The court found sufficient material to deny anticipatory bail, emphasizing the need for thorough investigation and custodial interrogation.4. Legal provisions regarding arrest and prosecution under the CGST Act:The court examined the provisions of Sections 69, 73, 74, and 132 of the CGST Act. It was noted that sanction for prosecution is mandatory under Section 134, but it does not preclude the registration of FIR or arrest. The court referred to various precedents, including decisions from the Supreme Court and High Courts, affirming the respondents' power to arrest under the CGST Act.Conclusion:The court concluded that the applicant had not made a case for relief under Section 438 of Cr.P.C. The anticipatory bail application was rejected. However, interim protection was extended by two weeks to allow the applicant to seek relief from the Apex Court.Order:Anticipatory Bail Application No. 2030 of 2020 is rejected and stands disposed of accordingly. Interim protection is extended by two weeks from the date of uploading of this order.