Mahendra Kumar Singhi Vs Commissioner of State Tax (High Court of Madras)
Section 132 of the Act will apply with all force the moment an invoice or a bill is issued without, movement of goods or Input Tax Credit has been wrongly availed. In the present caser the preliminary investigation reveals that the entities have formed a cartel by doing circular trading between seven Companies whereby nearly 98 per cent of the transactions are among themselves and 2 per cent of the supply have been wade to other entities. In other words, the very same goods are being repeatedly shown as being supplied by way of purchase/sales amongst the entities only with a view to defraud the revenue and to distribute the credit illegally and fraudulently. That apart, there are also prima facie materials to show that the E-way bills generated by the entities are found to be totally false since on verification it was found the so-called movement of goods which is Iron and Steel has been done in vehicles which are two wheelers/three wheelers, vehicles which have already been seized by the finance companies and vehicles where the transporter himself says that no such movement of goods took place. The total turnover shown by the petitioners and the corresponding tax paid by them after adjusting the Input Tax Credit is almost minuscule. It was also brought to the notice of the Court that even though the petitioners were bound to maintain the accounts and records in the principal place of business, all that was kept at Bangalore, in total violation of Section 35 of the Act. The amounts that are reflected in the material produced by the respondent and shown in the interim report are staggering.
It will be relevant to reiterate the earlier order passed by this Court under similar circumstances in Crl. O.P. Nos. 30467, 30470, 30474, 30477, 30481, 30488 30490 of 2018 dated 20.02.2019. The relevant portions of the order is extracted hereunder:
“14. The enactment in question has cone into force very recently with a laudable object of one country one tax. Therefore wherever the department finds that certain provisions in the Act is misused by creating fake invoices and input tax credit is being availed without any movement of goods, the same has to be curbed and nipped in the bud to ensure that it does not grow into another mega scam having a direct impact on the economy of this nation. Since the department has collected some prima facie materials , they want to act fast before it becomes a huge racket, failing which the entire economy of this country would weaken and collapse.
15. If the petitioners are conducting genuine business through the above said companies, they can easily prove during the investigation the actual movement of goods, which will all be borne out by documents. If the department is satisfied regarding the same, the department will leave out the companies belonging to the petitioners and proceed further with the investigation.
16. In the considered view of this Court, in matters of this nature, the department must be given the complete independence to investigate the cases since it involves the national interest. This Court by entertaining an Anticipatory Bail Petition and by imposing certain conditions, should not tie the hands of the department in proceeding further with the investigation since what has been unearthed till now is only the tip of iceberg and there is a long way to go for the department to find out how long this fake invoices have extended their tentacles”.
The above order will squarely apply to the facts of this case also- This Court in the light of the nature and gravity of the accusations put forth by the prosecution and also the fact that the investigation is at a very early stage, is not inclined to entertain these anticipatory bail petitions. It is open to the petitioners, to make complete disclosure by submitting all the relevant documents before the respondent and it is for the respondent to consider the same and satisfy themselves and proceed further in accordance with law.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
The petitioners facing prosecution before the respondents for the alleged offences punishable under Section 132 of the Central Goods and Services Act, 2017, are seeking anticipatory bail before this Court.
2. The petitioners are husband and wife. There are several entities in the nature of Proprietorship Concerns, Partnership Concerns or Private Limited Companies, in which the petitioners are Proprietor, Partner and Directors and the entities are engaged in the supply of Iron and Steel by way of sales/purchases. All the entities are registered under the CGST and TNGST Act.
3. The respondent Department through its Competent Officer,- during the course of inspection conducted u/s 67 of the Tamil Nadu Goods and Services Act,2017 [the Tamil Nadu Goods and Services Act, 2017 – hereinafter referred as “the Act”] , on a comparison of the Output Tax due and the Input Tax Credit availed by the different entities found that huge Input Tax Credit was passed on/distributed amongst the various entities fraudulently. On further verification of the online E-way bills generated by the entities it was found that the so-called movement of goods itself was false. Therefore, the Joint Commissioner (enforcement), Salemrauthorised officials to conduct inspection and search in the business premises of the petitioners and also seized the necessary documents and goods. This exercise was conducted pursuant to the powers given under Section 67 of the Act. The inspection was conducted on 09.01.2019. Parallelly, inspection was also conducted at Bangalore and the premises was sealed.
4. It is the further case of the prosecution that summons were issued to the petitioners for enquiry. In the meantime, the petitioners filed the anticipatory bail petition before this Court and this Court directed the petitioners to appear for interrogation as and when required by the respondent.
5. It is the case of the respondent that the preliminary investigations revealed that outward supply of goods from 02.06.2018 to 09.01.2019, was shown without, movement, of goods on the basis of false and bogus E-way bills. Similarly inward supply from 02.06.2018 to 09.01.2019, was also fraudulently shown without actual movement of goods by bogus E-way bills. The total assessable value for the taxguru.in Outward supply was identified as Rs.2639283519/- and the tax payable was assessed as Rs.475071033/-. Similarly, the Inward supply value was assessed at. Rs.3378861838/- and the tax payable was assessed as Rs.607854399/-.
6. The relevant portion in the interim report filed by the respondent is extracted hereunder:
“The above materials and the preliminary investigation furnish reason to believe that the above entities, through the active involvement of the Petitioners who were in charge and responsible for the conduct, of business of the above entities, had fraudulently availed/distributed credit, in violation of the following clauses under Section 122 read with 132 of the TN Goods and Services Taxes Act, 2017 as under:
