2022 (2) TMI 948 - HC - GST

Bail granted to petitioners charged with GST evasion through bogus input tax credit claims under OGST Act Sections 132(1)(c)(b)(i)

HC granted bail to petitioners charged with GST evasion through bogus input tax credit claims using fraudulent invoices without actual goods receipt under ... Seeking grant of bail - availment and utilization of bogus input tax credit on the strength of fraudulent purchase invoices without any physical receipt or actual purchase of goods - evasion of tax - offences under Sections 132(1) (c), 132(1)(b) and 132(1)(i) of the OGST Act, 2017 - HELD THAT:- Bail, as it has been held in a catena of decisions, is not to be withheld as a punishment. Bail cannot be refused as an indirect method of punishing the accused person before he is convicted. Furthermore, it has to be borne in mind that there is as such no justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. It cannot, therefore, be said that bail should invariably be refused in cases involving serious economic offences. It is not in the interest of justice that the Petitioners should be in jail for an indefinite period. No doubt, the offence alleged against the Petitioners is a serious one in terms of alleged huge loss to the State exchequer, that, by itself, however, should not deter this Court from enlarging the Petitioners on bail when there is no serious contention of the Respondent that the Petitioners, if released on bail, would interfere with the trial or tamper with evidence. Having regard to the entire facts and circumstances of the case, especially the fact that both the bread earning sons of a family have been in custody for over a year now, there are no justification for detaining the Petitioners in custody for any longer. As a side note it observed that more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trail upstream and bring the “upstream” parties who are the ultimate beneficiaries who are the gainers in these evil machinations. It is directed that the Petitioners in both the BLAPLs be released on bail on such terms and conditions as deemed fit and proper by him/ her with the conditions imposed - application allowed. Issues Involved:1. Bail application under Section 439 of Cr.P.C.2. Allegations of tax evasion under OGST Act, 2017.3. Petitioners' defense and circumstances.4. Legal principles and precedents regarding bail.5. Court's decision on bail application.Issue-wise Detailed Analysis:1. Bail Application under Section 439 of Cr.P.C.:The Petitioners, in custody since 21.12.2020, filed for bail under Section 439 of Cr.P.C. related to 2(C)CC Case No.03 of 2020, pending in the court of the Learned J.M.F.C(R), Cuttack. They were accused of offenses under Sections 132(1)(c), 132(1)(b), and 132(1)(i) of the OGST Act, 2017. Their previous bail application was rejected on 25.01.2021 by the learned District and Sessions Judge, Cuttack.2. Allegations of Tax Evasion under OGST Act, 2017:The prosecution alleged that the Petitioners, along with other accused, created and operated 12 fictitious firms using the identity proofs of unconnected persons. This was done to avail and utilize bogus input tax credit amounting to Rs. 20.45 crores based on fraudulent purchase invoices without actual receipt or purchase of goods. They were part of a collusion to evade taxes approximating Rs. 42.00 crores, making them liable under Section 132 of the OGST Act, 2017.3. Petitioners' Defense and Circumstances:The Petitioners contended that the allegations were baseless and false. Petitioner No. 1 claimed to be a mere employee following orders, while Petitioner No. 2, a paan shop owner, was allegedly involved only because he is the brother of Petitioner No. 1. They argued that they were scapegoats and had cooperated with the authorities. They highlighted their family circumstances, with dependent wives, children, and a widowed mother, and the hardships faced due to their prolonged custody during the pandemic.4. Legal Principles and Precedents Regarding Bail:The court discussed the philosophy of bail, emphasizing that it is a mechanism for conditional liberty and not a punishment. The principles from various Supreme Court judgments, including Vaman Narain Ghiya v. State of Rajasthan (2009) and Moti Ram v. State of M.P. (1978), were cited, stressing the balance between personal liberty and community security. The court highlighted that bail should not be withheld as a punishment and that pretrial detention should be minimized. The Delhi High Court's elucidation in Anil Mahajan v. Commissioner of Customs and H.B. Chaturvedi v. CBI was also referenced, summarizing that personal liberty is a precious constitutional value and bail is the rule, not the exception.5. Court's Decision on Bail Application:The court noted that the Petitioners had been in custody for over a year and there was no serious contention that they would interfere with the trial or tamper with evidence if released. The court acknowledged the serious nature of the alleged offense but emphasized that indefinite detention was not justified. The court directed the release of the Petitioners on bail, subject to conditions including cooperation with the trial, non-inducement of prosecution witnesses, submission of passports, and non-involvement in similar offenses.Conclusion:The bail applications were allowed with specific conditions to ensure the Petitioners' cooperation with the trial and prevent any interference with the judicial process. The court's decision balanced the Petitioners' personal liberty with the need for a fair trial and the larger interest of the public. The assessment of the Petitioners' tax liability was to be carried out strictly as per applicable law. The applications were disposed of along with any pending applications.