2023 (10) TMI 1330 - HC - GST

Applicant granted regular bail in illegal Input Tax Credit case with Rs. 10,000 personal bond and surety

Gujarat HC granted regular bail to applicant charged with obtaining illegal Input Tax Credit through large-scale financial transactions and cheating the ... Seeking grant of Regular Bail - obtaining illegal Input Tax Credit by entering into large scale financial transactions and thereby cheating the State exchequer - HELD THAT:- In the facts and circumstances of the case and considering the nature of allegations, this Court is of the opinion that, discretion is required to be exercised to enlarge the applicant on regular bail. This Court, prima facie, is of the opinion that, this is a fit case to exercise the discretion and enlarge the applicant on regular bail. Hence, present application is allowed and the applicant is ordered to be released on regular bail in connection with the FIR being C.R. No. 11210015220162 of 2022 registered with DCB Police Station, Dist. Surat on executing personal bond of Rs. 10,000/- (Rupees Ten thousand only) with one surety of the like amount to the satisfaction of the learned Trial Court and subject to the conditions imposed - application allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the applicant is entitled to regular bail under Section 439 Cr.P.C. in respect of offences under Sections 409, 419, 465, 467, 468, 471, 120B and 34 IPC where the charge-sheet is filed and investigation is complete. 2. Whether the materials on record (including the FIR and charge-sheet) prima facie disclose involvement of the applicant in forgery, cheating by personation, criminal breach of trust or in evasion of GST by availing and passing on illegal input tax credit. 3. What weight should be accorded to the absence of any GST departmental proceedings (show-cause notices under GST statutes) against the applicant in considering bail. 4. Whether parity with co-accused who have been released on bail is a relevant factor in exercising discretion to grant bail. 5. What conditions are appropriate to impose while enlarging the applicant on regular bail in a case involving alleged large-scale tax evasion affecting public exchequer. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to regular bail under Section 439 Cr.P.C. after completion of investigation and filing of charge-sheet. Legal framework: Section 439 Cr.P.C. confers discretion on the High Court to grant bail even after arrest and charge-sheeting; discretion must consider nature and gravity of offence, period of custody, status of investigation and prospects of misuse of liberty. Precedent Treatment: The Court relied on the principles laid down in the Apex Court decision in Sanjay Chandra v. CBI (referred to), treating its guidelines as applicable to exercise of discretion under Section 439 Cr.P.C. Interpretation and reasoning: The Court applied the established discretionary test, balancing gravity of allegations against custody period, completion of investigation, absence of compelling prima facie evidence against the applicant and other relevant circumstances. The fact that investigation was complete and charge-sheet filed weighed in favour of bail, together with other mitigating factors examined below. Ratio vs. Obiter: Ratio - It is a fit case for exercise of discretion under Section 439 Cr.P.C. to grant bail where investigation is complete and the charge-sheet does not prima facie implicate the applicant strongly, subject to adequate conditions. (Followed precedent: Sanjay Chandra). Conclusion: Discretion exercised to grant regular bail subject to conditions. Issue 2: Sufficiency of materials in FIR/charge-sheet to prima facie implicate the applicant in forgery, cheating by personation, criminal breach of trust or GST evasion. Legal framework: For denying bail, prosecution must show prima facie materials justifying continued detention; allegations in charge-sheet must indicate offense elements such as forgery, dishonest inducement, mens rea for criminal breach of trust, and specific acts constituting evasion of tax. Precedent Treatment: Applied established requirement that charge-sheet and FIR materials must prima facie make out the offense to deny bail; no novel precedent overruled or distinguished beyond reliance on general principles. Interpretation and reasoning: The Court examined charge-sheet allegations (pages specified) and noted that the charges primarily reflect banking transaction figures and bank statements without supporting documents showing: (a) forged documents attributed to the applicant; (b) tax invoices or e-way bills evidencing purchase/sale attracting 18% GST; (c) identification of suppliers from whom input tax credit was availed or recipients to whom such credit was passed; (d) any discovery or recovery linked to the applicant. The panchnama timing and location also raised credibility questions. Cheating by personation (a bailable offence) and lack of GST departmental action were also relevant. On this assessment, the Court found absence of prima facie material to sustain serious allegations at the bail stage. Ratio vs. Obiter: Ratio - Where charge-sheet lacks documentary or transactional linkage necessary to establish offenses of forgery, criminal breach of trust and GST evasion against an accused, bail should ordinarily be granted subject to safeguards. Obiter - Observations on the insufficiency of specific evidentiary items (e.g., lack of purchase invoices or e-way bills) are of preliminary nature and not determinative of trial. Conclusion: Prima facie materials are inadequate to justify continued detention of the applicant on the serious charges alleged; favors bail. Issue 3: Relevance of absence of GST departmental proceedings against the applicant in bail determination. Legal framework: Criminal prosecution for evasion of indirect taxes often coexists with departmental proceedings; absence of tax departmental action may be relevant to the assessment of seriousness/strength of prosecution case at bail stage but is not determinative. Precedent Treatment: The Court treated absence of GST show-cause notices and lack of initiation of GST proceedings as a material circumstance to be considered in exercise of discretion under Section 439 Cr.P.C., consistent with judicial practice of weighing available administrative action as indicia of prima facie culpability. Interpretation and reasoning: The Court reasoned that no show-cause notices under Sections 61/73/74 of the Gujarat or Central GST Acts were issued to the applicant and no reference in the chargesheet to any departmental findings was made; this lacuna reduced the plausibility of the prosecution's tax-evasion theory at the bail stage and supported exercise of discretion in favour of release. Ratio vs. Obiter: Ratio - Absence of concurrent departmental action under the GST statutes is a relevant factor militating in favour of bail when charge-sheet allegations do not otherwise prima facie establish the tax-evasion offense. Conclusion: The absence of GST proceedings against the applicant weighs in favour of granting bail. Issue 4: Parity with co-accused released on bail and its relevance in exercising discretion. Legal framework: Parity among similarly placed accused is a recognized consideration in bail jurisprudence; courts may exercise discretion to maintain consistency unless distinguishing facts exist. Precedent Treatment: The Court considered orders releasing co-accused by coordinate benches as relevant for parity and consistency in bail exercise. Interpretation and reasoning: The Court noted multiple coordinate-bench orders granting bail to co-accused and considered such releases as a factor supporting grant of bail to the applicant absent distinguishing features in the applicant's alleged role or stronger incriminating material. Ratio vs. Obiter: Ratio - Parity with co-accused granted bail is a legitimate and relevant factor in the exercise of judicial discretion under Section 439 Cr.P.C. where circumstances are comparable. Conclusion: Parity with released co-accused contributed to the decision to grant bail. Issue 5: Appropriate conditions to impose upon grant of regular bail in a case alleging large-scale tax evasion affecting the exchequer. Legal framework: Bail may be granted on conditions necessary to secure attendance, prevent tampering with evidence, and avoid misuse of liberty; conditions must be reasonable and related to the ends of justice. Precedent Treatment: The Court fashioned standard and case-specific conditions (personal bond, surety, surrender of passport, prohibition on leaving India, address disclosure, periodic police attendance) consistent with established practice for serious economic offences. Interpretation and reasoning: Considering seriousness of allegations and public interest, the Court imposed conditions: personal bond with surety (specified amounts), prohibition on misuse of liberty, surrender of passport within a week, leave-the-country restriction without permission of Sessions Judge, furnishing and not changing residence without leave, monthly police station attendance until trial completion. The Court left authority to the trial court to alter or relax conditions and clarified that trial court should not be influenced by preliminary observations made when granting bail. Ratio vs. Obiter: Ratio - Bail in serious economic offences may be granted subject to stringent but reasonable conditions aimed at preventing flight, tampering or misuse of liberty; trial court retains control to modify conditions. Obiter - Specific monetary amounts for bond and surety are administrative and may be varied by trial court. Conclusion: Bail granted on specified conditions; enforcement subject to applicant not being required for any other offence and trial court's jurisdiction to modify conditions; breach to invite appropriate action including warrants.