2024 (9) TMI 1584 - HC - GST

Bail granted for fake firms and Rs. 54.33 crore ITC fraud under CGST Act sections 132(1)(b), 132(1)(c), 132(5)

The HC granted bail to the petitioner charged under sections 132(1)(b), 132(1)(c), and 132(5) of the CGST Act, 2017 for allegedly creating fake firms and ... Seeking grant of bail - creation of fake firms for availing and utilizing the ITC - offence u/s 132(1)(b), 132(1)(c), and 132(5) of the CGST Act, 2017 - HELD THAT:- From perusal of the complaint and also the prosecution report filed in this case, it is found that the allegations made against the petitioner are based on the statement of witnesses. In regard to creating the fake firms, availing and utilizing the ITC to the tune of Rs.54.33 crore, no documentary evidence has been adduced on behalf of the prosecution in support of the allegations made in the complaint and prosecution report as well against the petitioner. Although, on behalf of the prosecution in Annexure-B of counter affidavit in list of documents/ RUD is given, wherein at Sr. No.37 i.e. RUD-37, details summaries of GSTR-3B of fake firms is mentioned; yet any document relied upon has not been made annexure in proof of same. The petitioner has been languishing in jail since 25.06.2024 and the offence alleged against the petitioner is punishable for five years. Taking into consideration that the trial of this case is not likely to be concluded in near future and also the fact that the prosecution has not shown any apprehension of tampering the evidence or any flight risk of the petitioner - the bail application is allowed. Let the petitioner be released on bail on furnishing bail bond of Rs.1,00,000/-(Rupees One Lakh) with two sureties of the like amount to the satisfaction of the court concerned in aforesaid case with fulfilment of conditions imposed - bail application allowed. Issues Involved:1. Legitimacy of the allegations against the petitioner under Sections 132(1)(b), 132(1)(c), and 132(5) of the CGST Act, 2017.2. Validity of the arrest and prosecution of the petitioner.3. Consideration of bail application based on the alleged offenses and the petitioner's circumstances.Issue-wise Detailed Analysis:1. Legitimacy of the Allegations:The prosecution case centers on the claim that M/s Jai Bhole Enterprises, a firm allegedly created by the petitioner, had engaged in fraudulent activities to avail and pass on inadmissible Input Tax Credit (ITC). The firm had obtained a GST registration number and filed GSTR-3B returns indicating taxable supplies amounting to Rs.1,24,86,01,948/- with a GST liability of Rs.22,45,92,868/-, which was almost entirely set off through ITC. Investigations revealed that the firm's principal place of business was non-existent, and the proprietor was an employee of another company. The investigation extended to other firms that had availed ITC from M/s Jai Bhole Enterprises, which were also found to be fake. Statements from various individuals corroborated the non-existence of the business operations and the involvement of the petitioner in creating the fake firm to pass on bogus ITC.2. Validity of the Arrest and Prosecution:The defense argued that the prosecution lacked documentary evidence to substantiate the allegations. They contended that the petitioner could not be arrested or prosecuted under Section 132 of the CGST Act based on the guidelines issued by the Apex Court in Satyendra Kumar Antil Vs. CBI and a circular from the Central Board of Indirect Taxes and Customs. The defense highlighted that the petitioner was not a director or held any position in M/s Kedarnath Trexim Private Limited and did not pose a flight risk, as he had no criminal antecedents and was a permanent resident of Jamshedpur.3. Consideration of Bail Application:The court considered the petitioner's bail application, noting that the allegations were primarily based on witness statements without substantial documentary evidence. The petitioner had been in judicial custody since 25.06.2024, and the maximum punishment for the alleged offense was five years. Given the lack of evidence of tampering or flight risk, and the unlikelihood of the trial concluding soon, the court decided to grant bail.Conclusion:The court allowed the bail application, setting conditions for the petitioner to cooperate with the investigation, surrender his passport, not leave India without court permission, and refrain from threatening witnesses or tampering with evidence. The bail was granted on furnishing a bond of Rs.1,00,000/- with two sureties of the like amount. The court emphasized that any breach of these conditions could lead to the cancellation of bail by the trial court.