2022 (7) TMI 1276 - HC - GST

Bail granted to applicant charged with wrongful Input Tax Credit through dealings with non-existent firms under Section 138

The Allahabad HC granted bail to an applicant charged with wrongful availment of Input Tax Credit through dealings with 18 non-existent firms. The court ... Seeking grant of Bail - wrongful availment of Input Tax Credit - fake firms or not - Compounding of Offences - HELD THAT:- This court finds that documentary evidences collected by the department has already been placed before the court. Applicant has been found to be dealing with 18 non existent firms and their details have been furnished in the complaint. Their registrations have already been cancelled. The applicant's case is that at the time of business with the aforesaid firms they were duly registered and allegation that firms were fake is yet to be proved.It has not been explained how applicant will tamper with the evidence or influence the witnesses. Merely because of seriousness and magnitude economic affect the bail cannot be denied to the accused. Applicant is not stated to have any criminal antecedents. He is not shown to be habitual offender. Section 138 of the Act makes provision for compounding of offences under the Act, even after the institution of prosecution, on payment by the person accused of the offence, such compounding amount in such manner as may be prescribed. The compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences, on payment of compounding amount as may be determined by the commissioner, the criminal proceeding already initiated in respect of the said offence shall stand abated - the Commissioner is empowered to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant. Keeping in view of evidence on record regarding complicity of the accused, larger mandate of the Article 21 of the Constitution of India and the dictum of Apex Court in the case of DATARAM SINGH VERSUS STATE OF UTTAR PRADESH AND ANR. [2018 (2) TMI 410 - SUPREME COURT] and without expressing any opinion on the merits of the case, the Court is of the view that the applicant has made out a case for bail. Let the applicant be released on bail on his furnishing a personal bond and two sureties each in the like amount to the satisfaction of the court concerned subject to conditions imposed - The bail application is allowed. Issues Involved:1. Bail application for the applicant under Section 132(1)(c) of the Central Goods and Service Tax Act, 2017.2. Allegations of availing Input Tax Credit (ITC) from non-existent firms.3. Consideration of the applicant's health and age.4. Legal precedents and principles regarding bail in economic offences.5. Conditions imposed for granting bail.Detailed Analysis:1. Bail Application under Section 132(1)(c) of the CGST Act, 2017:The applicant sought bail in a case involving alleged offences under Section 132(1)(c) of the CGST Act, 2017, which pertains to availing ITC fraudulently. The applicant, a proprietor of a trading firm, was accused of availing ITC worth Rs. 8.76 crores from non-existent firms. The court noted that the applicant had been arrested without a formal complaint and was in judicial custody for further investigation.2. Allegations of Availing ITC from Non-Existent Firms:The prosecution alleged that the applicant's firm took credit from 21 non-existent firms, whose GST registrations were obtained using false documents. The applicant contended that at the time of transactions, the firms were duly registered, and their subsequent deregistration should not affect his liability. The court acknowledged that the applicant's case rested on the validity of transactions at the time they occurred and that the firms' registrations were canceled retrospectively.3. Consideration of Applicant's Health and Age:The applicant, aged 56 and suffering from various ailments, argued that his health condition warranted bail. The court took into account the applicant's age and health, noting that prolonged judicial custody could be detrimental, especially given the potential delay in concluding the trial.4. Legal Precedents and Principles Regarding Bail in Economic Offences:The court referred to several legal precedents, including the Calcutta High Court's decision in M/s LGW Industries Ltd. Vs. Union of India and the Supreme Court's ruling in Sanjay Chandra Vs. CBI. These cases highlighted that ITC could not be denied if the supplier's registration was canceled after the transaction date and emphasized the importance of balancing the right to liberty with the seriousness of the offence. The court noted that denial of bail solely based on the seriousness of the charge would be contrary to the principles of justice.5. Conditions Imposed for Granting Bail:The court granted bail to the applicant, imposing several conditions to ensure compliance and prevent tampering with evidence:- Surrender of passport and prohibition from leaving the country without court permission.- Furnishing a bank guarantee of Rs. 50 lacs, which would be forfeited in case of any violation.- Prohibition from tampering with prosecution evidence or intimidating witnesses.- Prohibition from engaging in any criminal activity.- Undertaking not to seek adjournments during trial dates.The court concluded that the applicant had made a case for bail, considering the legal provisions, the applicant's health, and the potential delay in trial proceedings. The bail application was allowed with strict conditions to ensure the applicant's compliance and integrity during the trial.