2024 (8) TMI 837 - HC - GST

Bail Granted in GST Tax Evasion Case: No Direct Evidence Supports Detention Despite Alleged Fraudulent Firm Creation

The HC granted bail in a GST tax evasion case involving alleged creation of fake firms and fraudulent Input Tax Credit. Despite prosecution's objections ... Grant of bail - release on furnishing personal bond and sureties - Input Tax Credit fraud - bogus invoices and non-supply of goods - confessional statement recorded during remand - absence of device for creation of fake firms - compoundability of offence - non-quantification of tax liability - conditions of bail (non-tampering, surrender of passport) - trial court's independence from interim observationsGrant of bail - Input Tax Credit fraud - confessional statement recorded during remand - absence of device for creation of fake firms - compoundability of offence - release on furnishing personal bond and sureties - Bail application of the applicant was allowed subject to conditions - HELD THAT: - The Court considered the nature of the alleged offence of passing fraudulent Input Tax Credit through creation of non-existent firms, the material on record including confessional statements recorded while in judicial remand, and the fact that nothing was recovered from the applicant. It observed that no device by which the fake firms were created is available on record and that tax liability or penalty has not yet been ascertained. The Court also noted that the offences alleged are punishable up to five years and are compoundable and that a co-accused with a more serious role had been granted bail by a coordinate Bench. Balancing these factors, and without expressing any opinion on merits, the Court found that the applicant had made out a case for bail. Bail was ordered to be granted on furnishing a personal bond and two heavy sureties, subject to enumerated conditions including non-tampering with evidence, non-intimidation of witnesses, appearance at trial, prohibition against committing similar offences, surrender of passport and other usual conditions; breach of conditions would permit prosecution to move for cancellation of bail. [Paras 9, 10, 11, 12]Bail allowed on furnishing personal bond and two heavy sureties each, subject to specified conditions; trial court not to be influenced by interim observations.Final Conclusion: The bail application is allowed and the applicant is directed to be released on bail on furnishing the prescribed bond and sureties subject to the conditions imposed; breach of conditions may invite cancellation and the trial court remains free to decide the case on merits. Issues: Bail application under Sections 132(1)(b), 132(1)(c), 132(1)(f), 132(1)(1) and 132(1)(i) of C.G.S.T. Act, 2017In this case, the applicant filed a bail application seeking relief in a matter related to tax evasion under the C.G.S.T. Act, 2017. The case involved the creation of fake firms and issuance of bogus invoices without actual supply of goods or services, resulting in a significant amount of fraudulent Input Tax Credit (ITC) being passed on. The applicant, along with other accused persons, was arrested by the police, and their roles in the scheme were disclosed during the investigation. A criminal complaint was filed under Sections 132(1)(b)(c)(f) of the Act, naming certain individuals as masterminds and the applicant as someone who actively assisted in the commission of the offenses.The applicant's counsel argued that no recoveries were made from the applicant, and the case relied solely on alleged confessions by other accused individuals. It was contended that the source of registration of the fake firms and passing of ITC remained unknown. The counsel also highlighted that no liability for GST had been assessed, penalties or taxes determined, and the offenses were compoundable and punishable with imprisonment up to five years. It was emphasized that the applicant had no criminal history, had been in custody without liability being established, and was willing to cooperate in the trial. Reference was made to a co-accused being granted bail by another Bench of the Court.The D.G.G.I. opposed the bail plea, alleging that the applicant operated a racket for evading Input Tax Credit through fake firms. They pointed to a confessional statement by the applicant and the risk of the applicant repeating similar activities if released on bail. The Court considered the arguments from both sides, the seriousness of the offenses, the absence of evidence regarding the creation of fake firms, and the fact that a co-accused with a more significant role had been granted bail. Without delving into the case's merits, the Court granted bail to the applicant under specific conditions to ensure compliance and prevent interference with the trial process.The Court ordered the applicant's release on bail upon furnishing a personal bond and sureties, subject to conditions such as non-tampering with evidence, appearance before the trial court, refraining from criminal activities, surrendering the passport, and not influencing witnesses. The prosecution was granted the right to move for bail cancellation in case of any breach of the conditions. It was clarified that the observations made in the bail order were solely for that purpose and should not influence the trial court's final decision.