2022 (10) TMI 311 - HC - GST

Accused granted regular bail in fraudulent input tax credit case under CGST Act sections 132 and 69

VARUN RAKESH BANSAL Versus STATE OF GUJARAT

The Gujarat HC granted regular bail to an accused charged under sections 132(1)(c) and 69 of the CGST Act for allegedly availing fraudulent input tax ... Seeking grant of Regular Bail - provisional attachment of the plant, machinery, vehicles and stock of the company on the ground that input tax credit was availed by the company by showing fake purchases from bogus/suspicious entities - offence under section 132(1)(c) of the GGST Act & CGST Act - section 69 of the CGST Act, 2017 - HELD THAT:- Pre-charge evidence is required to be recorded. It is true that fraudulent ITC claim has created huge liability for the government, but equally it is necessary that the accused gets an opportunity to defend his case. The department during the course of judicial custody of the present applicant has made necessary investigation and collected documentary evidence through the applicant himself and those supported documents has been produced with the complaint before the Chief Judicial Magistrate - The department has already attached the property under section 83 which is valued as Rs.6,17,21,463/-. Further the amount of Rs.50 Lakhs has been paid by the applicant and if necessary under sub- section (1) of section 138 of the Act, the Commissioner would have all the authority to compound the offence on payment being made by the alleged accused. The details of all the fake companies have been recorded. 138 transactions have been found to be suspicious and against that the applicant claims the said to be actual transfer against the payment by RTGS. Both the sides would get an opportunity to prove their case. The applicant is ordered to be released on regular bail on executing a personal bond of Rs.1,00,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed - application allowed. Issues Involved:1. Regular bail application under section 439 of the Code of Criminal Procedure.2. Allegations under section 132(1)(c) of the CGST and GST Act.3. Compliance with procedural requirements under section 69 of the CGST Act.4. Validity of evidence and allegations regarding fake invoices and input tax credit.5. Provisional attachment of property under section 83 of the GST Act.6. Consideration of bail in light of the seriousness of the offense and judicial precedents.Detailed Analysis:1. Regular Bail Application Under Section 439 of the Code of Criminal Procedure:The application was filed for regular bail in connection with an arrest memo issued under section 69(1) read with section 132(1)(c) of the CGST and GST Act. The applicant was the former director of a company until October 2019 and was later appointed as an authorized representative to handle GST matters.2. Allegations Under Section 132(1)(c) of the CGST and GST Act:The applicant was accused of availing input tax credit (ITC) of Rs. 10.71 crores through fictitious transactions amounting to Rs. 59.55 crores. The department alleged that the company showed fake purchases from bogus entities, leading to wrongful ITC claims.3. Compliance with Procedural Requirements Under Section 69 of the CGST Act:The defense argued that the mandatory procedure under section 69 was not followed, as the authorization from the Commissioner was not provided to the applicant. This was claimed to be a blatant violation of the procedure.4. Validity of Evidence and Allegations Regarding Fake Invoices and Input Tax Credit:The defense submitted that the allegations were based on documentary evidence, which included transportation details and payments made through RTGS. They argued that the transactions were genuine and that section 132(1)(c) was not applicable. The defense also pointed out that the department's witness list did not include any transporters, which weakened the case against the applicant.5. Provisional Attachment of Property Under Section 83 of the GST Act:The defense highlighted that the provisional attachment included plant, machinery, vehicles, and stock valued at Rs. 6,17,21,463/-. The applicant had also made a payment of Rs. 50 lakhs. The defense argued that the complaint was filed without considering these payments and attachments.6. Consideration of Bail in Light of the Seriousness of the Offense and Judicial Precedents:The court referred to several precedents, including P. Chidambaram v. Directorate of Enforcement and Sanjay Chandra v. CBI, to emphasize that bail is the rule and refusal is the exception. The seriousness of the offense, the severity of the punishment, and the need for a fair trial were considered. The court noted that the trial would take considerable time and that prolonged judicial custody could exceed the statutory period of punishment.Judgment:The court allowed the bail application, ordering the applicant's release on a personal bond of Rs. 1,00,000 with one surety of the like amount. Conditions were imposed, including surrendering the passport, not leaving India without permission, and not taking undue advantage of liberty. The court emphasized that the department had sufficient time for investigation and that further custody was unnecessary. The rule was made absolute to the extent of granting bail, with specific conditions to ensure compliance and prevent misuse of liberty.