2022 (7) TMI 1022 - HC - GST

Accused denied bail in Rs. 5 crore fake input tax credit fraud case involving suspicious suppliers

The HC dismissed the regular bail application of an accused charged with fraudulent input tax credit availment exceeding Rs. 5 crores. The applicant ... Seeking Grant of Regular Bail - availment of fraudulent Input Tax Credit - purchase of iron scrap from M/s Kalodia Traders and M/s S.R. Enterprises and eight others firms whose GST registration have already been cancelled - HELD THAT:- A bare perusal of case diary goes to show that initially on the basis of two Alert Letters C. No.IV(6)13/AE/RKL/2022/1056-A and F.No.DGGI/BbZU/INV/123/GST/2019/2539 issued by Assistant Commissioner (AE), Rourkela and Additional Director, DGGI, Bhubaneswar respectively, regarding sharing of information in case of non-existent business entity, the business premises of the applicant from where the business activities were being performed, searched out and upon scrutiny of document it is found that the applicant has illegally availed Input Tax Credit of more than Rs.5,00,00,000/- by purchasing the goods from several suspicious and fake suppliers whose registration had already been cancelled. During search, it also came to the forefront that more than 700 vehicles, against which invoices were submitted by the applicant wherein only vehicle numbers were mentioned, have not fount to be passed through the relevant toll gate. From the documents adduced, role of the applicant prima-facie appears to be serious in nature and as per the prosecution, further investigation is going on to find out more suspicious and fake suppliers with whom the applicant alleged to have made transactions in order to avail Input Tax Credit illegally. In the instant case, charge sheet has been filed against the applicant, however, further investigation is going on and as per respondent, there is much more probability of detecting more fake and suspicious firms. The economic offences having deep rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. Economic offence is always committed with calculated design profiting himself regardless of the consequence to the community. Considering the facts and circumstances of the case, the allegations made against the applicant, the evidence collected by the prosecution, seriousness of the offence the applicant cannot be released on bail. Bail application dismissed. Issues:1. Bail application under Section 439 of the Code of Criminal Procedure for grant of regular bail in connection with the offence punishable under Section 132(1)(C) of the Goods and Service Tax Act, 2017.2. Allegations of GST evasion, fraudulent availing of Input Tax Credit, and passing on illegal benefits by the applicant.3. Arguments by applicant's counsel claiming innocence, lack of credible evidence, and bailable nature of the alleged offence.4. Arguments by respondent's counsel highlighting the seriousness of the offence, ongoing investigation, and potential interference by the applicant.5. Judicial analysis based on evidence, nature of accusations, severity of punishment, and public interest considerations.Analysis:1. The applicant filed a bail application under Section 439 of the Cr.P.C. seeking release in connection with a GST evasion case. The prosecution alleged that the applicant, as the proprietor of a firm, engaged in fraudulent activities resulting in evasion of GST amounting to over Rs.5 Crore. The applicant was arrested following a search that revealed suspicious transactions with firms whose GST registrations were cancelled, leading to the offence under Section 132(1)(C) of the GST Act.2. The applicant's counsel argued vehemently for innocence, citing lack of concrete evidence, genuine trade intentions, and compliance with GST regulations. They emphasized that the alleged offence falls under bailable category, and the applicant, being a senior citizen, poses no flight risk. Various legal precedents were cited to support the bail application.3. In contrast, the respondent's counsel contended that the applicant habitually engaged in obtaining fake invoices, availing illegal Input Tax Credit, and passing on such benefits to other suppliers, causing substantial loss to the Government. The ongoing investigation revealed a complex network of fraudulent transactions involving multiple suspicious suppliers and vehicles with discrepancies in toll data.4. The court, after considering the evidence, seriousness of the offence, and the ongoing investigation, rejected the bail application. Citing the Supreme Court's guidance on bail considerations, the judge emphasized the gravity of economic offences, the potential for evidence tampering, and the need to prevent interference with the investigation.5. The decision to deny bail was based on the nature of accusations, evidence collected, severity of the offence, and public interest considerations. The court highlighted the need to address economic offences seriously due to their impact on public funds and the economy as a whole, concluding that releasing the applicant on bail was not appropriate given the circumstances and legal principles outlined in relevant case law.