2022 (12) TMI 257 - HC - GST

Applicant granted regular bail in ITC fraud case after 2 years custody with no trial progress expected

Gujarat HC granted regular bail to applicant in ITC fraud case involving fraudulent transfer of Input Tax Credit without actual supply of goods. Court ... Regular bail in economic offences - Principle that bail is not to be denied as a rule in grave economic offences - Investigation virtually complete as a ground for bail - Seizure of incriminating material and cash during search - Conditional bail subject to deposit to safeguard revenue - Personal bond and surety conditions on grant of bailRegular bail in economic offences - Principle that bail is not to be denied as a rule in grave economic offences - Investigation virtually complete as a ground for bail - Seizure of incriminating material and cash during search - Whether the applicant should be enlarged on regular bail despite allegations of large-scale fraudulent availment and passing of Input Tax Credit by operating non-existent firms. - HELD THAT: - The Court applied the principle from P. Chidambaram that even in grave economic offences bail is not to be refused as a rule and must be considered on facts of each case. The material on record showed substantial seizure of incriminating documents and cash during searches, and the prosecution did not demonstrate necessity for further custodial interrogation of the applicant. The Court found that investigation qua the applicant was virtually complete, the case primarily depended on documentary evidence already seized, and there was no plausible explanation why continued detention would serve investigation. On this factual basis and in exercise of discretion, the Court held that bail ought to be granted. [Paras 9, 10]Applicant granted regular bail as investigation against him is virtually complete and continued custody is unnecessary.Conditional bail subject to deposit to safeguard revenue - Seizure of incriminating material and cash during search - Whether bail should be made subject to a monetary deposit and the terms of such deposit. - HELD THAT: - In view of the recovery of cash from the applicant and the revenue implication of the alleged offence, the Court exercised its discretion to impose a monetary condition to protect the interests of the revenue. The applicant was directed to deposit a specified sum before the office of the Department in four equal installments within four months of release; the Department was directed to accept the amount. The Court made clear that failure to comply with this condition would result in automatic cancellation of bail. These conditions were imposed as part of the exercise of bail jurisdiction to secure the prosecution's and revenue's interest while releasing the accused. [Paras 10, 11]Bail granted subject to deposit of the directed amount in instalments and automatic cancellation in case of non-compliance.Personal bond and surety conditions on grant of bail - Passport surrender and travel restriction conditions - What ancillary conditions should attach to the grant of bail (bond, surety, residence, passport and other restrictions). - HELD THAT: - The Court required execution of a personal bond with one surety of like amount to the satisfaction of the trial court, and imposed routine conditions to prevent misuse of liberty and ensure attendance at trial: not to act against prosecution interest, surrender passport within a week, not to leave India without prior permission of the Sessions Judge, and to furnish and not change residence without prior permission. The Court also directed that release is contingent on the applicant not being required in connection with any other offence and permitted the trial court to modify these conditions in accordance with law. The trial court was directed not to be influenced by the preliminary observations made while granting bail. [Paras 11, 12]Ancillary conditions imposed: personal bond and surety, surrender of passport, travel and residence restrictions, and usual supervisory directions to the trial court.Final Conclusion: The High Court allowed the bail application and ordered regular bail of the applicant on execution of a personal bond with surety and subject to specified conditions, including a directed deposit to safeguard revenue; non-compliance with the monetary condition will result in automatic cancellation of bail. Issues:Application for regular bail under Section 439 of the Code of Criminal Procedure for offences under CGST Act and GST Act.Analysis:1. The applicant sought regular bail for offences under Sections 132(1)(b) and 132(1)(c) of the CGST Act and GST Act. The applicant was arrested and his bail application before the Sessions Court was rejected. The complaint was filed on 22.04.2022. The applicant approached the High Court seeking bail after the lower court's refusal.2. The applicant, through his counsel, contended that the arrest lacked sufficient reasons and the investigation against him is almost complete. He offered to deposit 10% of the seized amount and argued that further custody is unnecessary. The applicant's counsel highlighted the delay in trial, the compoundable nature of the offence, and the potential violation of fundamental rights if kept in custody indefinitely.3. The respondent department argued that the applicant managed non-existing firms, generated fake invoices, and availed fraudulent ITC causing substantial loss to the government. They expressed concerns about evidence tampering if the applicant is granted bail, as some family members were still at large. The respondent emphasized the severity of economic offences and the need to ensure proper investigation by keeping the applicant in custody.4. The High Court referred to a Supreme Court judgment stating that bail decisions should be based on a case-to-case analysis, considering the gravity of the offence and ensuring the accused's presence for trial. The court observed that incriminating material had been seized during the search, the investigation against the applicant was almost complete, and there was no progress in the trial since the complaint was filed.5. Considering the circumstances, the High Court granted bail to the applicant on the condition of depositing Rs.38 lakhs within four months in installments, as a significant amount had already been recovered. The court imposed various conditions like executing a personal bond, surrendering passport, not leaving the country without permission, providing the latest address, and complying with other directives to ensure the applicant's presence and cooperation in the trial.6. The court warned that any breach of the bail conditions would lead to automatic cancellation of bail. It empowered the Sessions Judge to take appropriate action in case of violations. The court emphasized that the observations made while granting bail should not influence the trial court's decision based on the evidence presented during the trial.7. The High Court's ruling balanced the applicant's right to liberty with the need for proper investigation and trial in economic offences, setting conditions to secure the applicant's presence while ensuring justice is served.