2024 (1) TMI 976 - HC - GST

Anticipatory bail denied for accused in Rs. 200 crore Input Tax Credit fraud involving fake cigarette bills

Directorate General of GST Intelligence Versus Chaman Goel and Chirag Goel

Delhi HC set aside lower court's anticipatory bail order for accused involved in Rs. 200 crore Input Tax Credit fraud. The accused created fake bills for ... Validity of grant of anticipatory bail by the lower court - fake bills were made for the purchase of the cigarettes - reversal of ITC - HELD THAT:- In Choodamani Parmeshwaran Iyer [2023 (7) TMI 1008 - SUPREME COURT], the Supreme Court has observed that if any person is summoned under Section 69 of the CGST Act for the purpose of recording his statement, provisions of Section 438 of the CrPC cannot be invoked. In the said case, the accused persons were not appearing before the authorities despite repeated summons being issued to them and had filed an application seeking anticipatory bail. In the present case, it has rightly been contended on behalf of Chirag Goel and Chaman Goel that one of the co-accused persons, Manish Goyal was arrested by the DGGI and therefore, there was a genuine apprehension of arrest. On the basis of the material on record, it appears in the present case that Input Tax Credit has been availed by M/s Radiant Traders on procurement of cigarettes which have been shown to be used as raw material to manufacture ‘smoking mixture’. It is hard to believe that tobacco from high value inputs i.e., cigarettes is used to manufacture a low value output i.e., ‘smoking mixture’. It appears that this was done only to fraudulently obtain Input Tax Credit - In the present case, the accused persons are involved in fraudulently obtaining Input Tax Credit worth Rs. 200 crores by projecting transactions only on paper and without the actual purchase or sale of goods. As a result, they have duped the government exchequer and the taxpayers of a huge amount of money. Considering the aforesaid facts and circumstances, including the fact that Chirag Goel and Chaman Goel are the beneficiaries in an economic fraud involving a large corpus and were evading summons until the grant of anticipatory bail, the accused Chirag Goel and Chaman Goel were not entitled to be admitted on anticipatory bail. The impugned order has been passed without appreciating the material on record and cannot be sustained and hence is set aside. Application disposed off. Issues Involved:1. Applicability of Section 438 of CrPC for anticipatory bail in CGST Act cases.2. Seriousness of the economic offence and evasion of GST.3. Validity of the CRCL report on the smoking mixture.4. Analysis of transactions and GST refunds.5. Role of accused as masterminds behind the fraud.6. Justification for cancellation of anticipatory bail.Summary:Issue 1: Applicability of Section 438 of CrPC for anticipatory bail in CGST Act casesThe DGGI argued that the Supreme Court's decision in *Choodamani Parmeshwaran Iyer* indicates that Section 438 of CrPC for anticipatory bail does not apply to CGST Act cases. However, the court found that this judgment was not applicable retrospectively and noted that the power under Article 226 of the Constitution allows for pre-arrest protection.Issue 2: Seriousness of the economic offence and evasion of GSTThe accused were involved in a significant economic offence involving GST evasion of Rs. 218 crores. The court noted that the accused were habitual offenders involved in fraudulent Input Tax Credit activities.Issue 3: Validity of the CRCL report on the smoking mixtureThe DGGI claimed the smoking mixtures were spurious and not fit for human consumption, supported by the CRCL report. The court, however, noted that the report was inconclusive due to a lack of testing facilities, which was a point of contention.Issue 4: Analysis of transactions and GST refundsThe court found that M/s Harsha International received Rs. 198 crores in GST refunds, which were transferred to M/s Radiant Traders and other entities controlled by the accused. It was noted that there was no actual business activity at the premises of these entities, indicating the transactions were merely on paper to fraudulently obtain Input Tax Credit.Issue 5: Role of accused as masterminds behind the fraudThe court identified Chirag Goel as the mastermind, having set up various companies to benefit from the fraudulent GST refunds. Chaman Goel was also implicated, with unaccounted cash found at his premises and involvement in the fraudulent transactions.Issue 6: Justification for cancellation of anticipatory bailThe court upheld the cancellation of anticipatory bail for Chaman Goel due to his attempt to flee the country and violation of bail conditions. The anticipatory bail granted to both Chirag and Chaman Goel was deemed inappropriate given the gravity of the economic offences and the material on record.Conclusion:The anticipatory bail granted to Chirag Goel and Chaman Goel was cancelled. The court emphasized that anticipatory bail should be granted only in exceptional cases, especially in economic offences, and noted that the accused were not entitled to such relief. All pending applications were disposed of accordingly.