Two accused granted bail in GST fraud case as individual liability under Rs. 5 crore threshold for bailable offenses under Section 132 CGST Act

DSC Gurugram granted bail to two accused in a GST fraud case involving ITC claims of Rs. 7,13,27,948. The court found accused were beneficiaries of only 25% and 7% respectively, making their individual liability under Rs. 5 crore threshold for bailable offenses under Section 132 CGST Act. Prosecution relied solely on confessional statements without concrete evidence like bank transactions or digital communications. Both accused had been in custody for 25 days without requirement for further interrogation or recovery. Court noted maximum punishment of 5 years for the offense and absence of previous criminal history. Bail granted with bonds of Rs. 50,000 each plus surety.

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ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• The legality of the arrest of the accused, considering alleged procedural lapses.
• The territorial jurisdiction of the complainant department concerning the investigation of M/s Cosmos International.
• The applicability of Section 132 of the Central Goods and Services Tax Act (CGST Act) concerning the bailable nature of the offense based on the amount of Input Tax Credit (ITC) involved.
• The sufficiency of evidence against the accused, particularly regarding their alleged involvement in fraudulent ITC activities.
• The consideration of medical grounds and personal circumstances in the decision to grant bail.
• The assessment of flight risk and the necessity of further custodial interrogation.

ISSUE-WISE DETAILED ANALYSIS

1. Legality of Arrest

The accused argued that their arrest was illegal due to procedural lapses, including failure to inform them of the grounds of arrest and improper documentation of the arrest memo. The Court found these arguments untenable, noting that the accused were produced before a magistrate who confirmed that all statutory and procedural mandates governing arrest were adhered to.

2. Territorial Jurisdiction

The defense contended that the complainant department lacked jurisdiction to investigate M/s Cosmos International, located in Delhi. However, the Court focused on the allegations related to M/s Kanvas and the ITC amount involved, which were within the jurisdiction of the complainant department in Gurugram.

3. Applicability of Section 132 of the CGST Act

The accused argued that the offense was bailable under Section 132 of the CGST Act since the ITC amount involved was below Rs. 5 crore. The Court acknowledged that the ITC amount was Rs. 7,13,27,948/-, but the accused's alleged benefit was below Rs. 5 crore, thus making the offense bailable.

4. Sufficiency of Evidence

The prosecution relied on statements recorded under coercion to establish the accused's involvement in fraudulent ITC activities. The Court noted the lack of concrete evidence such as bank transactions or communications, emphasizing that the truthfulness of the statements would be determined during the trial.

5. Medical Grounds and Personal Circumstances

The accused cited medical conditions and personal circumstances, such as family health issues, as grounds for bail. The Court considered these factors, noting the absence of a criminal history and the lack of evidence suggesting a flight risk or potential for evidence tampering.

6. Flight Risk and Custodial Interrogation

The Court found no specific evidence indicating a flight risk or the need for further custodial interrogation. The accused had cooperated with the investigation and were not required for further recovery or interrogation.

SIGNIFICANT HOLDINGS

The Court held that the procedural requirements for arrest were satisfied, dismissing the argument of illegality. It recognized the territorial jurisdiction of the complainant department concerning the allegations against M/s Kanvas.

The Court emphasized the bailable nature of the offense under Section 132 of the CGST Act, given the accused's alleged benefit was below the threshold. It highlighted the absence of concrete evidence and the reliance on statements whose truthfulness would be assessed during trial.

Addressing the medical and personal circumstances, the Court found these relevant in the decision to grant bail, noting the lack of prior criminal history and the absence of a flight risk.

In conclusion, the Court granted bail to the accused, requiring them to furnish bail bonds with sureties. The release orders were issued immediately, with the Court explicitly stating that the decision did not affect the merits of the ongoing case.

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