Whether bail application should be granted for offense of Wrongful Availment of ITC under GST?

PJ/Case Law/2020-2021/3640

Mohit Vijay vs. Union of India SANJEEV PRAKASH SHARMA, J. S.B. CRIMINAL MISCELLANEOUS BAIL APPLICATION NO. 7605 OF 2019 dated JUNE 2, 2020- HIGH COURT OF RAJASTHAN
Issue- Whether bail application should be granted for offense of Wrongful Availment of ITC under GST?
Brief Facts: The bail applications have been filed under Section 439 CrPC in connection with Criminal Complaint filed at Chief Metropolitan Magistrate (Economic Offences), Jaipur (Raj.) for offence under Section 132(1)(b)(c)(f)(j) and (I) of the Central Goods and Service Tax Act, 2017
Applicant’s Contention: - Learned counsel submits that the allegation against the petitioners is of having issued invoices giving benefit to companies who availed benefit of ITC (Input Tax Credit). Learned counsel submits that no further investigation is required to be conducted as against the accused petitioners and they are in judicial custody since long. Learned counsel submits that under the CGST Act, the case is compoundable and maximum punishment which can be awarded is only five years. The petitioners have already remained in jail for the last 450 days and an investigation is in process against more than 1300 beneficiaries, which is likely to take long time. They further submit that in view of the COVID- 19 Pandemic, the petitioners be released on bail with certain conditions.
Learned counsel relies on the judgment in the case of Sanjay Chandra Vs. Central Bureau of Investigation reported in 2012 (1) SCC 40 as well as the order passed by the Coordinate Bench at Principal Seat at Jodhpur in the case of Gaurav Maheshwari Vs. State(S.B.Criminal Misc.IInd Bail Application No. 1825/2020) decided on 11.5.2020 and Gaurav Maheshwari Vs. State(S.B.Criminal Misc.Bail Application No. 1422/2020) decided on 13.5.2020 submits that the petitioner may be given the similar benefit and similar conditions may be laid down, which the petitioners will abide.

Revenue’s Contention: - Learned counsel appearing for the Revenue strongly opposes the bail application and submits that the petitioners have committed a huge economic offence and huge amount of CGST has been evaded resulting a huge loss of revenue since fraudulent and forged invoices were issued in relation to 34 companies, petitioners created ghost companies which were fraudulent and created only for the purpose of issuing such invoices resulted in giving benefit to as many as 1878 customers in different 21 states. Learned counsel submits that out of the said customers, 321 customers are those who are residing outside Rajasthan.

High Court’s Observation: -High Court States that, the grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused. Further, they said while keeping in view that the petitioners are already in jail for 450 days and no further investigation or recovery is to be made for the purpose of the case, even their account has also been seized Hence bail should be granted to the petitioner subject to submitting a bail bond in the sum of Rs.1,00,000/- along with one surety of the like amount subject to some conditions.
Comment:- In the past, several transactions were brought under the scanner wherein there was a supply of goods made without an actual movement of goods. This is commonly known as circular trading. If the amount involved(ITC wrongly availed) is more than 500 lakhs, then such offence is non bailable and cognizable. High Courts have stopped entertaining the writ of bail applications. The rising unemployment and shakened economy are the main reasons of increasing fraud cases. The Rajasthan High court in this case rejected the Revenue plea by saying that its courts discretion to grant bail and there is no point to refuse the bail application as investigation is already completed and accused in already in custody for more than 450 days. The Honorable High Court accepted the bail application on certain conditions and gives relief to the accused amid COVID-19 pandemic. Hence, it is evitable that fraudsters wont be spared and would be imprisoned for such serious offences.
Recently, the Punjab and Haryana High Court in the case of Akhil Krishan Maggu & Anr.(CWP No. 24195/2019), has observed that taxpayers against whom no concrete evidences are available to establish evasion of tax should not be arrested prior to determination of liability and imposition of penalty. Further, it also stated that arrest of Chartered Accountants / Advocates should not be carried out in absence of corroborative evidence linking them with the alleged offence.
Prepared by- CA Tarun Rankawat

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PJ/Case Law/2020-2021/3640

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