2024 (5) TMI 916 - HC - GST

Fake GST credit fraud accused gets bail despite confessing to creating 77 bogus firms

Mohit Kumar Versus Union Of India Thru. Deptt. Revenue Directorate GST. Intelligence Lko

Allahabad HC granted bail to applicant in fake input tax credit case involving Rs. 144.14 crore fraud. Despite applicant's confessional statements (later ... Seeking grant of bail - claiming fake input tax credits, without actually supplying goods - admission by statements given by applicant, which was subsequently retracted - HELD THAT:- Statement of the applicant is shown to have been recorded on 21st, 22nd, 23rd and 27th March, 2024 and he is shown to have confessed his guilt in the process of issuance of fake invoices to obtain input tax credits without supplying any goods. Initially, the applicant is shown to have confessed his involvement in registration of 20 firms for Deepanshu Srivastava, but during the course of investigation, it was found that the applicant was actively involved in selling of as many as 77 fake firms and creating other 20 firms for Deepanshu Srivastava which have been used by Deepanshu Srivastava for issuing fake invoices to avail illegal input tax credits without supplying any goods. The illegal input tax credits obtained by the applicant for Deepanshu Srivastava amounts to Rs. 144.14 Crore. The admission of the applicant, which according to learned Senior Advocate appearing for the applicant has been retracted, would show that shelf-companies have been created by the applicant using someone else’s KYC documents and were sold to the main accused- Deepanshu Srivastava at the cost of Rs. 35000-50000 each for a commission of Rs. 2000-3000. The allegations which are emerging in the confessional statements of the applicant are also showing him in close association with the co-accused- Deepanshu Srivastava so as to help him in sharing ID password of the firms and also in issuing fake invoices/bills and creation of supply chain. The role of the instant applicant in the alleged crime is much lesser than the role of co-accused- Deepanshu Srivastava who has already been enlarged on bail by this court. Nothing has been canvassed by the Department before this court which may suggest the necessity of the further detention of applicant in the prison in the background that no request for custodial interrogation has been made by the Department at the time of remand of the applicant, before Magistrate. Keeping in view the fact that the applicant had appeared before the Department and his statements had been recorded on 21st, 22nd, 23rd and 27th March, 2024 and thereafter he was arrested on 28th March, 2024 and was produced before the Magistrate and no request for custodial interrogation was made by the Department at that point of time and also keeping in view the fact that the applicant is in jail in this case since 29.03.2024 and investigation appears to have reached at an advanced stage and nothing has been shown before this court which may justify the further detention of the applicant in prison, a case of bail is emerging in favour of the applicant - apprehension of the Department pertaining to non-cooperation of the applicant in investigation while on bail may be taken care of by placing adequate conditions upon the applicant. Let the accused/applicant- Mohit Kumar, involved in above-mentioned case, be released on bail on his furnishing a personal bond with two sureties in the like amount to the satisfaction of the court concerned subject to fulfilment of conditions imposed - bail application allowed. Issues Involved:1. False implication and lack of sufficient basis/material for arrest.2. Legality of arrest without assessing tax liability.3. Allegations of involvement in creating fake firms and claiming false input tax credit.4. Necessity of further detention and custodial interrogation.5. Comparative role of the applicant and co-accused in the alleged crime.6. Conditions for granting bail.Summary:False Implication and Lack of Sufficient Basis/Material for Arrest:The applicant, Mohit Kumar, contends that he has been falsely implicated without sufficient basis or material. The arrest was made without assessing any tax liability, which is against the scheme of the Central Goods and Services Tax Act, 2017 (the 'Act of 2017'). The arrest memo did not justify the arrest, and the applicant was cooperating with the investigation.Legality of Arrest Without Assessing Tax Liability:The applicant's counsel argued that the arrest was made without recording any satisfaction or opinion by the Principal Commissioner/Commissioner, CGST, as required by law. The arrest violated the law laid down by the Supreme Court in Arnesh Kumar Vs. State of Bihar and another (2014) 8 SCC 273 and Satender Kumar Antil Vs. Central Bureau of Investigation and another (2021) 10 SCC 773.Allegations of Involvement in Creating Fake Firms and Claiming False Input Tax Credit:The Department alleged that the applicant was involved in creating 97 fake firms and selling them to the main accused, Deepanshu Srivastava, who used these firms to generate false invoices and claim fake input tax credits. The applicant's counsel denied these allegations, stating that no incriminating documents or devices were recovered from the applicant's possession.Necessity of Further Detention and Custodial Interrogation:The applicant was produced before the Special Chief Judicial Magistrate (Custom), Lucknow, and no further custodial interrogation was sought by the Department. The applicant has been in jail since 29.03.2024, and no formal complaint or FIR has been lodged. The applicant undertakes to cooperate with the investigation and trial.Comparative Role of the Applicant and Co-Accused in the Alleged Crime:The applicant's role in the alleged crime is argued to be much lesser than that of the co-accused, Deepanshu Srivastava, who has already been granted bail. The applicant's involvement was limited to creating and selling fake firms, while the main accused used these firms to claim fake input tax credits.Conditions for Granting Bail:The court allowed the bail application, subject to conditions including depositing the passport, not selling any property under investigation, not tampering with prosecution evidence, cooperating with the investigation and trial, and not indulging in any criminal activity. Breach of any conditions would be grounds for cancellation of bail.Conclusion:The bail application was allowed, and the applicant was granted bail on furnishing a personal bond with two sureties, subject to specific conditions to ensure cooperation with the investigation and trial. The observations made were solely for the purpose of disposing of the bail application and not on the merits of the case.