2023 (2) TMI 978 - HC - GST

Bail Granted in Major GST Fraud Case: Accused Released After Depositing Rs. 3 Crores with Strict Conditional Terms

Gaurav Kakkar S/o Shri Kishan Lal Kakkar Versus Directorate General Of Gst Intelligence, Jaipur Zonal Unit

HC granted bail to accused in GST fraud case under Section 439 Cr.P.C. involving allegations of creating fake firms and availing ineligible Input Tax ... Seeking grant of bail - creation of fake firms for availing and passing of fake/ ineligible Input Tax Credit (ITC) to facilitate existing beneficiary firms - HELD THAT:- It is an admitted fact that petitioner was arrested on 04.11.2022 and since then, he is in judicial custody. The challan of the case has already been presented and no investigation is pending. Section 132(1)(i) of the Act provides for punishment that “in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine”. Taking into consideration the investigation and evidence so collected, the trial will take considerable time and it may happen, if denied bail, the judicial custody be prolonged beyond the statutory period of punishment which is for five years. In the case of Vinay Kant Ameta [2022 (7) TMI 1106 - SC ORDER], the Hon’ble Apex Court directed the accused to deposit Rs. 200 crores as a condition for grant of bail, therefore, having regard to the totality of the facts and circumstances of the present case, without expressing any opinion on the merits of the case, it is deemed just and proper to grant bail to the accused petitioner under Section 439 Cr.P.C with a condition to deposit Rs. 3 crores by the petitioner before the respondent Department under protest. Bail application allowed. Issues involved:Arrest under Section 132(1)(c)(f)(k) and (l) of CGST Act, 2017 for creating fake firms and availing ineligible Input Tax Credit (ITC). Bail application filed directly before Additional Sessions Judge without approaching trial court first. Allegation of creating fake firms passing inadmissible ITC, defrauding Government exchequer of Rs. 19.65 crores. Request for bail based on lack of involvement in alleged offences, prolonged judicial custody, and reference to previous judgments.Analysis:1. Arrest under Section 132(1)(c)(f)(k) and (l) of CGST Act, 2017:The petitioner was arrested in connection with the offence under Section 132(1)(c)(f)(k) and (l) of the Central Goods and Service Tax Act, 2017. The prosecution alleges that fake firms were created to avail and pass fake/ineligible Input Tax Credit (ITC) amounting to Rs. 19.65 crores based on goodsless invoices, which is deemed ineligible under Section 16(2)(b) of the CGST Act, 2017. The petitioner denies involvement and challenges the arrest as wrongful, citing violation of guidelines laid down in the case of D.K. Basu Vs. State of West Bengal.2. Bail application procedure:The bail application was directly filed before the Additional Sessions Judge under Section 439 Cr.P.C. without approaching the trial court first under Section 437 Cr.P.C. The counsel for CGST opposed the bail application on procedural grounds, referencing a decision of the Hon'ble Allahabad High Court. However, the High Court considered the totality of facts and circumstances, including the prolonged judicial custody since the arrest on 04.11.2022, and decided to grant bail to the accused petitioner under Section 439 Cr.P.C.3. Allegation of creating fake firms and defrauding Government exchequer:The prosecution contends that the petitioner is the mastermind behind creating fake firms that defrauded the Government exchequer of Rs. 19.65 crores by passing inadmissible ITC through goodsless invoices. The evidence collected suggests the petitioner's involvement in the alleged offences. The counsel for the respondent opposed the bail application, citing previous judgments where the accused were directed to deposit substantial amounts as a condition for bail.4. Grant of bail and conditions:Considering the investigation, evidence collected, and the potential prolonged judicial custody, the High Court decided to grant bail to the accused petitioner under Section 439 Cr.P.C. with a condition to deposit Rs. 3 crores before the respondent Department under protest. The petitioner was directed to execute a personal bond and provide sureties for his appearance before the trial court on each hearing date until the completion of the trial. The trial court was instructed to record the deposition of Rs. 3 crores before attesting the bail bonds.This detailed analysis covers the issues involved in the legal judgment, including the arrest under the CGST Act, procedural aspects of the bail application, allegations of fraud, and the conditions for granting bail to the accused petitioner.