2024 (12) TMI 400 - HC - GST

HC cancels bail in GST evasion case involving fake bills under Section 439(2) Cr.P.C and Section 132 CGST Act

Union Of India Through Pr. Additional Director General Of GST Intelligence Jaipur. Versus Gautam Garg

Union Of India Through Pr. Additional Director General Of GST Intelligence Jaipur. Versus Gautam Garg - 2024:RJ - JP:49561, 2025 (93) G.S.T.L. 144 (Raj.) Issues Involved:1. Application for cancellation of bail under Section 439(2) of Cr.P.C.2. Alleged GST evasion and fraudulent activities under the CGST Act.3. Evaluation of evidence and statements under Section 70 of the CGST Act.4. Legal interpretation of Section 132 of the CGST Act concerning fraudulent ITC claims.5. Consideration of economic offences in bail matters.Issue-wise Detailed Analysis:1. Application for Cancellation of Bail:The petitioner, Union of India, filed an application under Section 439(2) of the Cr.P.C. seeking cancellation of bail granted to the respondent by the Additional Sessions Judge, Jaipur, under Section 132(1)(c) and (f) of the CGST Act. The High Court reviewed whether the lower court erred in granting bail, considering the absence of sufficient grounds for arrest as per the arrest memo.2. Alleged GST Evasion and Fraudulent Activities:The petitioner argued that the respondent was involved in GST evasion amounting to Rs. 8.59 crores by generating fake bills from non-existent firms without supplying goods. Evidence included pre-signed chequebooks, weighbridge receipts, and electronic data from WhatsApp groups indicating GST evasion activities. The court analyzed whether the respondent's actions constituted a violation of the CGST Act, specifically Section 132, which penalizes fraudulent ITC claims.3. Evaluation of Evidence and Statements under Section 70 of the CGST Act:The petitioner contended that the respondent's statement under Section 70 of the CGST Act was admissible evidence, revealing his involvement in fraudulent activities. The court considered whether these statements could be used against the respondent, noting that the authority recording the statement is not a police officer, thus not restricted by Section 25 of the Evidence Act. The court also discussed the admissibility of such statements under Section 136(2) of the CGST Act.4. Legal Interpretation of Section 132 of the CGST Act:The court examined the applicability of Section 132 of the CGST Act, which penalizes individuals who commit or facilitate fraudulent ITC claims. The petitioner argued that the respondent's actions fell under this provision, and the court agreed, noting that the absence of evidence showing the respondent as a manager was irrelevant. The court emphasized that the amended Section 132 targets individuals who enable fraudulent activities, even if they are not directly managing the firms involved.5. Consideration of Economic Offences in Bail Matters:The court reiterated the principle that economic offences require a different approach in bail matters due to their impact on society. The court found that the lower court failed to consider the gravity of the offence and the substantial evidence against the respondent, leading to an erroneous grant of bail. The court noted that economic offences, such as GST evasion, are serious and warrant careful consideration before granting bail.Conclusion:The High Court concluded that the trial court's decision to grant bail was flawed due to its failure to consider the gravity of the offence and the substantial evidence against the respondent. The court emphasized the seriousness of economic offences and the need for a judicious approach in bail matters. Consequently, the court allowed the application for cancellation of bail, directing the respondent to surrender before the trial court by a specified date.