2023 (10) TMI 411 - HC - GST

Applicants granted absolute bail in Rs. 7.74 crore fake Input Tax Credit case through entities

The Bombay HC granted absolute interim bail to applicants accused of wrongfully availing Input Tax Credit worth Rs. 7.74 crores through fake entities. The ... Seeking grant of Interim Bail - Input Tax Credit - creation of fake entities to avail Input Tax Credit, without actual supply of goods - HELD THAT:- The order of cancellation of registration was passed on 11 November 2022, to take effect from 26 November 2020. Resultantly, the alleged availment of Input Tax Credit cannot be said to be from the very entity whose registration had already been cancelled. Since the major component of the wrongfully availed Input Tax Credit to the tune of Rs. 7.74 Crores is attributed to M/s. Sunshine Traders, the order of restoration of the registration does bear upon the Respondent’s case against the applicants. Secondly, the applicants have appeared before the Investigating Officer, as directed. As many as seven statements of the applicant No. 1 have been recorded. Relevant documents appear to have been collected. It cannot be, thus, urged that the applicants have not co-operated with the investigation. As the applicants have been protected since December 2022 and the sustainability of allegation of wrongful availment of Input Tax credit in respect of a major component (Rs. 7.74 Crores) become debatable, at this length of time, no custodial interrogation of the applicants is warranted for further investigation. The applicants also appears to have roots in society. The possibility of fleeing away from justice appears to be remote - the order of interim bail made absolute - application disposed off. Issues involved:The judgment involves issues related to apprehension of arrest in connection with alleged offences under the Central Goods and Services Tax Act, 2017, wrongful availment of input tax credit, cancellation of registration of a trading entity, and the necessity of custodial interrogation for effective investigation.Issue 1: Apprehension of ArrestThe Applicants feared arrest based on notices issued by the Inspector, CGST, for alleged offences punishable under Sections 132(1)(b) and (c) of the CGST Act, 2017. The Applicants approached the Court seeking relief from potential arrest.Issue 2: Wrongful Availment of Input Tax CreditAllegations were made against the Applicants for availing input tax credit without actual supply of goods, leading to offences under the CGST Act, 2017. The Applicants cooperated with the investigation, and substantial amounts were paid, partly in cash and partly in reverse credit, to address the allegations.Issue 3: Cancellation of RegistrationThe Applicants were accused of availing and utilizing input tax credit from a trading entity, M/s. Sunshine Traders, whose registration had been cancelled. The cancellation of registration was later challenged in court and subsequently set aside, impacting the allegations against the Applicants.Issue 4: Custodial InterrogationThe necessity of custodial interrogation was debated, with the prosecution arguing for it to unearth fraud in availing wrongful input tax credit. However, the Court considered the Applicants' cooperation with the investigation, the substantial passage of time, and the debatable nature of the allegations, leading to the decision that custodial interrogation was not warranted.Separate Judgment by the Judge:The Judge, after considering the developments in the investigation and the impact of the cancellation of registration of M/s. Sunshine Traders, made the order of interim bail absolute. The Applicants were directed to cooperate with the investigation, attend court proceedings, and provide their contact details to the Respondent No. 2, thereby disposing of the application.