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 court noted that the registration of the main entity (M/s. Sunshine Traders) was cancelled retrospectively, making the major component of alleged wrongful availment debatable. Since applicants had cooperated with investigation through seven recorded statements, appeared before investigating officers, and had societal roots with remote flight risk, custodial interrogation was deemed unwarranted. The interim bail was made absolute and application disposed of.

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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 Arrest
The 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 Credit
Allegations 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 Registration
The 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 Interrogation
The 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.

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