TaxTMI 
TaxTMI 
2022 (3) TMI 1155
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....nd Mr. Rahul Dholakia for the applicant, submitted that the applicant herein is a designated Partner of one "Utkarsh Ispat LLP", which is engaged in the business of purchasing mild steel scrap and thereafter, converting it into mild steel Billet. On 19.11.2021 the respondent No.2 conducted a search and seizure operation at the factory and office premises of the LLP as also at the residence of the applicant on the ground that several purchase transactions had been made from fictitious entities. It was alleged that the applicant had shown fake purchases from 24 fictitious entities to the tune of Rs. 172.36 Crores and had thereby, availed illegal Input Tax Credit to the tune of Rs. 31.02 Crores. 2.1 It was submitted by the learned Senior Advocate that the applicant is the Managing Director of the firm and is looking after its day-to-day affairs. The Office of respondent No.2 authority had issued summons to the firm in the month of December 2021 and in response thereof, the firm gave its reply along with all necessary documents. The applicant was questioned on 19.11.2021 and 20.11.2021 and was, thereafter, served with the arrest memo dated 30.11.2021. In the interregnum, the applicant....
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....he applicant cannot be held liable for any fraudulent act committed by any of the dealers (sellers) from whom he has purchased the goods. While relying upon the purport and object of the GGST Act and CGST Act, it was submitted that the Act has envisaged the need to restrict the denial of Input Tax Credit only to the selling dealers who have failed to deposit the tax collected by them and not to punish the bona fide purchasing dealers. The Act nowhere envisages imposing any penalty either directly or vicariously where a person is not connected with any such fraudulent act or event. In the absence of any malafide intention, connivance or wrongful association of the applicant with the selling dealer or any dealer earlier thereto, no liability can be imposed on the applicant on the principle of vicarious liability. If it is held that the person who does not deposit or is required to deposit the tax would be put in an advantageous position and whereas the person who has paid the tax would be worse, the interpretation would give result to an absurdity and such a construction has to be avoided. It was, accordingly, urged that this is a fit case where discretion may be exercised in favour ....
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....e applicant is reported to be suffering from Prostrate Cancer and is, presently, hospitalized. 3. Mr. Mitesh Amin, learned Public Prosecutor, relied upon the Affidavit-in-reply filed on behalf of original complainanttax authority and submitted that during the recent investigations carried out by the State GST Department, several entities, which were never in existence, had shown their outward supply to various beneficiaries, including "Utkarsh Ispat LLP", which is the firm belonging to the applicant herein. Therefore, discreet inquiry was carried out on all the purchases of "Utkarsh Ispat LLP" and it was found that the said firm had shown voluminous purchase transactions from fictitious entities. Search operations were carried out, which revealed the creation of numerous fictitious firms issuing fake invoices to "Utkarsh Ispat LLP" and subsequently, search u/s.67(2) of the said Act was carried out. From a primary scrutiny of the books of accounts and the evidence collected from the search operations, it was found that "Utkarsh Ispat LLP" had indulged in the activity of showing fake purchase transactions in its books of accounts leading to wrongful availment of ineligible Input Tax....
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....ere utilized for the purpose of getting the money back through 'angadia' service. The applicant has failed to give any satisfactory explanation qua the same. The mobile squad of the respondent Department had demanded the E-way bills from the drivers of the Trucks utilized for transporting the goods; however, discrepancies were found in the journey details inasmuch as the duration of journey beginning from the place from where the goods were loaded into the Trucks upto the place where the goods were unloaded did not match. 3.4 It was submitted by the learned Public Prosecutor that investigation was also carried out at the residence of the Chartered Accountant & In-House Consultant of "Utkarsh Ispat LLP" and many objectional and questionable documents related to the said firm were found. There are allegations of tampering with the relevant bills against the Chartered Accountant & InHouse Consultant of the applicant's firm at the time of recording his statement. 3.5 The learned Public Prosecutor further submitted that the applicant has been arrested u/s. 69 of the Act and during the search proceedings as also during his investigation at Nadiad, the applicant has not rendered any coo....
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....upplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (j) tampers with or destroys any material evidence or documents; (k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or (l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, shall be punishable- (i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine; (ii) in cases where the amount of ta....
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....CGST Act, the punishment prescribed for offence under section 132(1) (c) is imprisonment for a term which may extend to Five years and with fine. The alleged offence is triable by the Magisterial Court where, even the pre-charge evidence is required to be recorded. 7. In P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791, the Apex Court held as under: "22. The learned senior counsel for the appellant has also placed reliance on the decision in Sanjay Chandra vs. CBI, (2012) 1 SCC 40 with specific reference to paragraph 39, which reads as hereunder: "39. Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds: the primary ground is that the offence alleged against the accused persons is very serious involving deep-rooted planning in which, huge financial loss is caused to the State exchequer; the secondary ground is that of the possibility of the accused persons tampering with the witnesses. In the present case, the charge is that of cheating and dishonestly inducing delivery of property and forgery for the purpose of cheating using as genuine a forged document. The punishment for the offence is impris....
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....enied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so. Therefore, the underlining conclusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for either grant or refusal of bail though it may have a bearing on principle. But ultimately the consideration will have to be on case to case basis on the facts involved therein and securing the presence of the accused to stand trial." 8. During the course of arguments, it was pointed out by the learned Senior Advocate appearing for the applicant that the respondent-Department has already attached immovable property belonging to the applicant in excess of the amount of alleged evasion or fraudulent claim of input tax credit made by him. If that be so, then the interest of the respondent Department is already protected. The provisions of Section 138 of the GGST Act & CGST Act provide for "compounding of offences". Under sub-section (1) of section 138, any offence under the Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment....