2022 (7) TMI 298 - DSC - GST

Anticipatory bail granted in Rs. 40 crore GST Input Tax Credit fraud case under Section 132(c)

Vikas Garg & Ors Versus DGGI, GST

The Patiala House Courts-DSC granted anticipatory bail to the applicant in a GST case involving wrongful availment of Input Tax Credit worth approximately ... Seeking grant of Bail - case of Department is that applicant have never been summoned for participating in the investigation and that the investigation in the present case is at the threshold - wrongful availment and utilisation of Input Tax Credit (ITC) claimed in the present case comes to about Rupees Forty Crores - HELD THAT:- Reliance can be placed in the case of TARUN JAIN VERSUS DIRECTORATE GENERAL OF GST INTELLIGENCE DGGI [2021 (12) TMI 135 - DELHI HIGH COURT] where it was held that Custodial interrogation in the instant matter is neither warranted nor provided for by the statute. Detaining the petition in Judicial Custody would serve no purpose rather would adversely impact the business of the petitioner. Since the present case is also u/s 132 (c) as was the case of Sh. Tarun Jain, the ratio of the said case applies on all fours to the present case. Needless to say that the evidence in the present case is also documentary. Thus, it cannot be said that the said accused persons cannot have any apprehension or that the stage of considering the grant of anticipatory bail has not yet arrived in the present case - considering the ratio of the case of Tarun Jain Vs. DGGI the accused persons are also entitled to anticipatory bail in the event of their arrest by the IO on furnishing of bail bonds and surety bonds in the sum of Rs. 50,000/, each, to the satisfaction of the officer making the arrest. Application disposed off. Issues Involved:1. Premature Bail Application2. Wrong Input Tax Credit (ITC) Claim3. Risk of Flight and Nature of Evidence4. Judicial Precedents and Legal ProvisionsIssue-wise Detailed Analysis:1. Premature Bail Application:The counsel for the department raised a preliminary objection that the bail application for applicant no. 1 and 2 is premature since they have not been summoned for investigation, and the investigation is at an initial stage. However, the department admitted that the names of applicant no. 3 and 4 have surfaced during the investigation. The counsel for the applicant countered this by pointing out that the department's reply was contradictory, as it simultaneously claimed that a prima facie case was established against the applicants. The court noted that summons were indeed issued to Sh. Chandan Kumar and Vikas Garg, indicating that the stage for considering anticipatory bail had arrived.2. Wrong Input Tax Credit (ITC) Claim:The department argued that the applicants claimed wrong ITC amounting to approximately Rupees Forty Crores, causing significant loss. They contended that higher courts have cautioned against granting interim protection to those accused of fiscal offences. The investigation revealed that at least 11 suppliers of the company were either nonexistent or not found at their registered offices, suggesting fabricated transactions. The applicants' counsel argued that purchases were made from registered firms with valid GST numbers and payments were made through cheque, thus no offence was committed if those firms ceased operations post-filing returns.3. Risk of Flight and Nature of Evidence:The applicants' counsel argued that the applicants are not flight risks as they are directors and CFOs of an MSME employing over 250 employees with substantial turnover. The evidence in the case is documentary, consisting of returns already furnished to the department. The court, referencing the Tarun Jain case, noted that the offences under the CGST Act are not grave enough to necessitate custodial interrogation and that the evidence is documentary.4. Judicial Precedents and Legal Provisions:The applicants' counsel cited several judgments, including Abdul Shaji Vs. Commissioner of Central Tax, Tarun Jain Vs. DGGI, C. Pradeep Vs. Commissioner of GST, CGST, Delhi East Vs. Naval Kumar, and Pawan Goel and Anr. Vs. DGGI, to support the contention that anticipatory bail can be granted even without being made an accused. The court referred to Section 138 of the CGST Act, which allows for the compounding of offences, and Sections 69 and 70, which deal with the power to arrest and summon persons. The court observed that economic offences, while grave, do not automatically necessitate custodial interrogation, especially when the evidence is documentary. The court concluded that the applicants are entitled to anticipatory bail on furnishing bail bonds and surety bonds of Rs. 50,000 each.Conclusion:The application for anticipatory bail was granted, with the court noting that the evidence is documentary and custodial interrogation is not warranted. The applicants were directed to furnish bail bonds and surety bonds in the sum of Rs. 50,000 each to the satisfaction of the arresting officer. The application was disposed of accordingly, with the order to be provided promptly (Order dasti).