Bail allowed to GST Accused for fraudulent availing of Input Tax Credit amounted to Rs 10.71 Cr

Varun Rakesh Bansal Vs State of Gujarat (Gujarat High Court)

Conclusion: Gujarat High Court had recently, while deciding upon an application filed under section 439 of the Code of Criminal Procedure, granted bail to a GST accused for fraudulently availing input tax credit worth Rs 10.71 crores, in respect of fiction transactions amounting to Rs 59.55 cores as the department already had sufficient time to investigate their claim and to gather evidence, which they had alleged were in connection with fraudulent claim of Input Tax Credit and alleged evasion. The department had already attached the property under section 83 which was valued as Rs.6,17,21,463/-. Further the amount of Rs.50 Lakhs had been paid by the applicant and if necessary under sub­section (1) of section 138, the Commissioner would have all the authority to compound the offence on payment being made by the alleged accused.

Held: The present applicant was the erstwhile director of the company namely Active Metals Pvt. Ltd. till October, 2019. , who was appointed as an authorized representative to look into the matters of CGST/SGST of the company. Search was conducted on 20.06.2022 at the company and residential premises of the Directors, and on 22.07.2022, a letter along with order was issued under section 83 for provisional attachment of the plant, machinery, vehicles and stock of the company on the ground that input tax credit was availed by the company by showing fake purchases from bogus/suspicious entities. The search was conducted during the period from 20.07.2022 to 28.07.2022, and on 28.07.2022, the applicant came to be arrested by issuing arrest memorandum by the State Tax Officer, Enforcement Division, Rajkot, for the offence punishable under section 132(1)(c) of the CGST and GST Act, alleging that input tax credit of Rs.10.71 crores in respect of fictitious transactions amounting to Rs.59.55 crores was availed by him. It was held that pre-charge evidence was required to be recorded. It was true that fraudulent ITC claim had created huge liability for the government, but equally it was necessary that the accused gets an opportunity to defend his case. The department during the course of judicial custody of the present applicant had made necessary investigation and collected documentary evidence through the applicant himself and those supported documents had been produced with the complaint before the Chief Judicial Magistrate. The argument of the learned APP that investigation was still in progress and release of applicant would create hindrance in further investigation, did not make good the level on merits, since the department already had sufficient time to investigate their claim and to gather evidence, which they had alleged were in connection with fraudulent claim of Input Tax Credit and alleged evasion. The department had already attached the property under section 83 which was valued as Rs.6,17,21,463/-. Further the amount of Rs.50 Lakhs had been paid by the applicant and if necessary under sub­section (1) of section 138, the Commissioner would have all the authority to compound the offence on payment being made by the alleged accused. The details of all the fake companies had been recorded. 138 transactions had been found to be suspicious and against that the applicant claimed the said to be actual transfer against the payment by RTGS. Both the sides would get an opportunity to prove their case. Further custody of the applicant did not appear to be necessary, since the department, if provided by law, could go on with the further investigation and produce necessary documents in support of their case, as sufficient time for the investigation was taken prior to filing of the complaint by the department. Hence, considering the facts and circumstances of the case and in view of the observations made above, the present application was allowed. The applicant was ordered to be released on regular bail.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. This application has been filed under section 439 of the Code of Criminal Procedure for regular bail in connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/ Varun Bansal/2022-23/B.61, dated 28.07.2022 issued under section 69(1) read with section 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017 (for short ‘GST Act’) and Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).

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