2024 (4) TMI 769 - HC - GST

Anticipatory bail denied in Rs 10.38 crore GST fraud case involving fake Input Tax Credit claims under Sections 16(2) and 155

Prakash Kumar Rameshbhai Patel Versus State Of Maharashtra, Superintendent of CGST & CX, Anti-Evasion, Mumbai.

The Bombay HC dismissed a writ petition seeking anticipatory bail and release of attached bank accounts in a GST case involving fraudulent Input Tax ... Seeking grant for Anticipatory Bail - Input Tax Credit - Prayer to release the attached bank account - non-existent at the given registered addresses - purchase invoices issued by the non-existent/ bogus suppliers without any actual supply of goods - Violation to Section 16(2) of the CGST Act, 2017, read with section 155 of the Act - burden to Prove - Summon issued - Petitioner failed to participate in the proceedings on various occasions - HELD THAT:- It is pertinent to note that, the petitioner’s firm, is not in existence on the three addresses given as the registered addresses, but even the suppliers, from whom the petitioner has claimed to have purchased the goods, are non-existent at their given address. The petitioner has not come before this Court with clean hands. The petitioner has been time and again issued various summons adhering to the provisions of law, in order to provide an opportunity to the petitioner, to participate in the investigation and put forth his case. He has failed to participate in the proceedings on various occasions. The fake addresses of the petitioner’s firm as well as suppliers do not make him eligible for any protection from this Court. The conduct of the petitioner is availing ineligible ITC of Rs. 10.38 Crores, amounts to playing fraud on the Public Exchequer. The case of the petitioner would prima facie be covered by Section 132(1)(c) read with Section 132(5) of the CGST Act, 2017. Considering that the Appeal of the petitioner regarding the cancellation of registration is already sub-judice before the appropriate authority, and the allegations made by the petitioner in the present writ petition, prima-facie, do not appear to be correct, therefore, we do not think that the petitioner should be granted any order of protection. After going through the petition along with the annexures, and the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a case for grant of any protection. Prima facie, it appears that the petitioner, has in fact, availed the ITC, from non-existent entities. The burden of proof on the contrary is on the petitioner, as per Section 155 of CGST Act, 2017 to prove he is eligible for ITC. The petitioner has been granted several opportunities. The petitioner was summoned, to participate in the investigation and submit documents/information regarding the ongoing investigation as provided u/s 70 of the CGST Act, 2017. The petitioner has failed to show to the respondents, the existence of the entities. Hence, there is no merit in the contention of the petitioner that principles of natural justice have not been followed. The petitioner has placed reliance on the Judgment of the Hon’ble Apex Court, in the case of State of Gujrat V/s. Choodamani Parmeshwaran Iyer [2023 (7) TMI 1008 - SUPREME COURT], in order to demonstrate that a person summoned under the CGST Act, 2017, cannot invoke Section 438 of the Cr. P.C., for Anticipatory Bail. The petitioner therefore claims to have approached this Court seeking protection Orders. However, after going through the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a prima-facie case for grant of any protection to the petitioner. Thus, we are not inclined to grant protection to the petitioner. Hence, the writ petition stands dismissed. As a result, the interim protection stands vacated. Petition stands disposed of accordingly. Issues Involved:1. Pre-arrest bail under Section 69 of the CGST Act, 2017.2. Reversal of Input Tax Credit (ITC).3. Cancellation of GST registration.4. Attachment of bank account under Section 83 of the CGST Act, 2017.5. Summons under Section 70 of the CGST Act, 2017.6. Alleged non-cooperation during investigation.7. Validity of protection orders based on precedents.Summary:1. Pre-arrest bail under Section 69 of the CGST Act, 2017:The petitioner sought pre-arrest bail pending investigation by respondent No. 2 and requested that the respondent be restrained from exercising arrest powers u/s 69 of the CGST Act, 2017, before determining tax and providing grounds of arrest.2. Reversal of Input Tax Credit (ITC):The petitioner contended that despite following the procedure for availing ITC, the respondent No. 2 forced the petitioner to reverse the ITC passed on by the supplier, M/s. Mahaveer Bullion, and issued a show cause notice for cancellation of registration.3. Cancellation of GST registration:A show cause notice was issued on 3rd November 2022, and the petitioner's registration was canceled on 12th January 2023. The petitioner claimed that these actions were arbitrary and without following principles of natural justice, causing heavy business losses.4. Attachment of bank account under Section 83 of the CGST Act, 2017:The petitioner's bank account was attached u/s 83 of the CGST Act, 2017, without a show cause notice, which the petitioner argued was done arbitrarily and in a high-handed manner.5. Summons under Section 70 of the CGST Act, 2017:The petitioner was summoned under Section 70 of the CGST Act, 2017, to give evidence or produce documents. The petitioner apprehended arrest u/s 69 of the CGST Act, 2017, in violation of Article 20(3) of the Constitution of India.6. Alleged non-cooperation during investigation:Respondent No. 2 alleged that the petitioner availed fake ITC from non-existent entities and was non-cooperative during the investigation. Summons were issued multiple times, but the petitioner remained elusive.7. Validity of protection orders based on precedents:The petitioner relied on the Supreme Court judgment in State of Gujarat V/s. Choodamani Parmeshwaran Iyer, arguing that he could seek protection orders fearing curtailment of liberty. However, the court found no merit in the petitioner's case for protection as the petitioner and suppliers were found to be non-existent.Conclusion:The court concluded that the petitioner did not make out a case for protection. The petitioner's conduct of availing ineligible ITC amounted to fraud on the Public Exchequer. The petition was dismissed, and interim protection was vacated. The court emphasized that the petitioner failed to prove eligibility for ITC and did not cooperate with the investigation. The petition stood disposed of accordingly.