Gujarat HC grants bail in GST fraud case involving fake Input Tax Credit despite economic offence charges

Gujarat HC granted regular bail to applicant charged with fraudulent Input Tax Credit transfer, procuring invoices without receiving goods, and GST evasion. Court noted case relies on documentary evidence in department custody, no show cause notice issued post-complaint filing, and applicant's willingness to deposit Rs.2 crore. Citing SC precedent in P. Chidambaram case, court held grave economic offences don't automatically warrant bail denial, requiring case-by-case analysis. Bail granted with conditions including deposit and appearance requirements.

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Issues:
Regular bail application under Section 439 of the Cr.P.C. in connection with offenses under GST Act and CGST Act.

Analysis:
The applicant, an administrator of a trading business, was arrested for alleged fraudulent activities related to Input Tax Credit (ITC) under the GST Act and CGST Act. The respondent department accused the applicant of defrauding the State Exchequer of Rs.37.95 crores through illicit ITC claims and fake transactions involving fictitious firms. The department seized incriminating material during a search at the business premises, supporting their allegations. The applicant's counsel argued that the arrest was against guidelines and that no show cause notice was issued after the complaint, questioning the necessity of further custody.

The applicant's defense included contentions that the allegations were false, and he was willing to deposit Rs.2 crores as a statutory right of appeal against the assessment order. The defense emphasized the constitutional right of liberty and the principle that bail is a rule, not an exception. The prosecution argued that the economic offense was grave, posing a risk of evidence manipulation, and detrimental to the nation's economy. The court considered the arguments and evidence presented by both sides.

The court noted that the department failed to establish the necessity of further custody, especially after the filing of the complaint without issuing a show cause notice. Considering the observations of the Apex Court regarding bail in cases of grave economic offenses, the court decided to grant bail to the applicant. The court imposed conditions, including the deposit of Rs.2 crores within six months, to secure the presence of the accused for trial. Failure to comply with the conditions would result in automatic cancellation of bail.

The court ordered the release of the applicant on regular bail upon executing a personal bond and surety, subject to various conditions to ensure compliance and proper conduct. The authorities were directed to release the applicant if not required for any other offense and to take appropriate action in case of condition breaches. The sessions judge had the discretion to modify or relax the conditions as per the law. The judgment did not express any opinion on the merits of the case, and direct service was permitted for the ruling to take effect.

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