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

The Patiala House Courts-DSC granted anticipatory bail to the applicant in a GST case involving wrongful availment of Input Tax Credit worth approximately Rs. 40 crores. The court relied on Tarun Jain v. DGGI precedent, holding that custodial interrogation was neither warranted nor statutorily provided for under Section 132(c). The court noted that evidence was documentary in nature and detention would adversely impact the petitioner's business without serving any purpose. Anticipatory bail was granted on furnishing bail bonds of Rs. 50,000 each with surety.

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Issues Involved:
1. Premature Bail Application
2. Wrong Input Tax Credit (ITC) Claim
3. Risk of Flight and Nature of Evidence
4. Judicial Precedents and Legal Provisions

Issue-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).

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