Case Law Details
Gyaan Chandra Jaiswal @ Gyan Chandra Jaiswal Vs Union of India (Jharkhand High Court)
Conclusion: While the prosecution alleged a massive ITC fraud involving multiple shell companies, the lack of documentary proof ultimately led the court to favour the bail.
Held: In the instant case, upon scrutiny of GSTR-2A of M/s Jai Bhole Enterprises, it appeared that M/s Jai Bhole Enterprises had availed input tax credit from various entities. Accordingly, the office initiated investigation against the above firms and during the investigation all the above said firms found to be fake. As per the statement of Shri Rahul Prajapati, it appeared that M/s Jai Bhole Enterprises was operated by Shri Gyaan Chandra Jaiswal (Director of M/s Maa Sharda Endeavor Pvt. Ltd. and M/s Makers Casting Private Limited and key person of M/s Kedarnath Trexim Pvt. Ltd.), all these three firms had availed inadmissible ITC from M/s Jai Bhole Enterprises. From the very statement of Gyan Chandra Jaiswal, who gave evasive reply, showed that M/s Jai Bhole Enterprises was operated by Gyan Chandra Jaiswal and his staff/ son as per his direction with sole intention to avail fake ITC from it. Since Gyaan Chandra Jaiswal was the mastermind, who created M/s Jai Bhole Enterprises, through which, he availed bogus ITC of Rs.22.31 crore and further passed on the said credit of ITC to his directorship firms amounted to Rs.33.35 crore. Thus, total involvement of fake GST ITC was Rs.55.66 crore. As such, the accused had committed the offence under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017. The Court of learned Additional Chief Judicial Magistrate, Jamshedpur in Complaint Case registered this complaint against Gyaan Chandra Jaiswal and the date was fixed. The accused Gyaan Chandra Jaiswal was taken into judicial custody and remanded to the Central Jail, Jamshedpur. Assessee had submitted that the allegations made in the complaint was that during investigation carried out in respect of various firms revealed that the below-mentioned firms were fraudulently availed Input Tax Credit and further passed on to the various firms to the end-availers. Hence, it could be easily made out that the beneficiary if at all was the end-availers and not the intermediary. As such, in absence of the named companies in the complaint, having been made a party to the present case, the entire proceeding is vitiated in view of the restriction imposed under Section 137 of the CGST. It was held that the allegations made against assessee were based on the statement of witnesses. In regard to creating the fake firms, availing and utilizing the ITC to the tune of Rs.54.33 crore, no documentary evidence had been adduced on behalf of the prosecution in support of the allegations made in the complaint and prosecution report as well against assessee. Although details summaries of GSTR-3B of fake firms was mentioned; yet any document relied upon had not been made annexure in proof of same. Accordingly, the bail application of assessee was hereby allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
1. This bail application has been filed on behalf of the petitioner, namely, Gyaan Chandra Jaiswal @ Gyan Chandra Jaiswal with prayer to release him on bail in connection with Complaint Case No.2360 of 2024 for the offence filed under sections 132(1)(b), 132(1)(c) and Section 132(5) of the Central Goods and Services Tax Act, 2017, pending in the Court of learned Special Judge, Economic Offences, Jamshedpur, East Singhbhum.
2. The prosecution case has been narrated in the complaint that intelligence has been developed by the officers of DGGI, Regional Unit, Jamshedpur, who indicated that M/s Jai Bhole Enterprises (Panchanan Sardar) has obtained GST registration number on 3rd August 2022 for supply of taxable goods inter alia goods falling under HSN 7204 (ferrous waste and scrap; remelting scrap ingots of iron or steel- waste and scrap of cast iron). In a year of its existence, it had supplied ferrous waste and scrap of Rs.122 crore involving 22 crore. It is source of pronouncement of said scraps are dubious.
2.1 M/s Jai Bhole Enterprises have filed GSTR-3B returns from August 2022 to October 2023 for the total taxable supply of Rs.1,24,86,01,948/- and payable GST thereon of Rs.22,45,92,868/- and out of which M/s Jai Bhole Enterprises have set off their GST liability of Rs.22,26,95,967/- through Input Tax Credit (ITC) only, which indicates dubious nature of
2.2 In order to verify the quantum of ITC received by their supplier(s) i.e. through GSTR-2A of M/s Jai Bhole Enterprises for the period from August 2022 to October 2023 were downloaded. On perusal of the same, it appears that during the period from August 2022 to October 2023, M/s Jai Bhole Enterprises have received ITC to the tune of Rs.22.31 crore mainly from 09
2.3 On 10.2023 in execution of search authorization the team visited the principal place of business of M/s Jai Bhole Enterprises and found that no shop, no office nothing exists at the declared place of business. The proprietor of M/s Jai Bhole, Shri Panchanan Sardar works in M/s Kedarnath Trexim Private Limited as told by his father Sri Madhusudan Sardar and stated by his own brother Sri Sachin Sardar.
2.4 The search was conducted at M/s Kedarnath Trexim Pvt. Ltd. after approval by the competent During search of premises M/s Kedarnath Trexim Private Limited, Sri Panchanan Sardar was not found, he had already run away secretly with the help of staff of M/s Kedarnath Trexim Private Limited. Statement of Shri Abhishek Kumar (the then in- charge of the Factory) and Shri Ratnesh Kumar Tiwary (Supervisor) of M/s Kedarnath Trexim Private Limited was recorded under Section 70 of the CGST Act, 2017 and during the statement, it revealed that Sri Panchanan Sardar is associated with M/s Kedarnath Trexim Private Limited. He was full time employee few months back. He has visited factory today. This fact also established from the attendance sheet where attendance of Panchanan Sardar is marked.
2.5 In subsequent follow up, principal place of business of M/s Maa Sharda Endeavour Pvt. Ltd., Plot No.FE-39, Phase-7, Adityapur Industrial Area, Jamshedpur was searched on 27.10.2023 as it is the main recipient of fake ITC passing from M/s Jai Bhole Enterprises. Tax Invoices of M/s Jai Bhole Enterprises and others like fake GSTIN entities are recovered and
2.6 The officers of DGGI, Regional Unit, Jamshedpur once again visited on 30.10.2023 at Dugani Village, Dugni Industrial Area Phase-1, Seraikela Kharsawan and approached to land owner Shri Kumud Bandhu Jyotishi and enquired about the land located at Khata No.241, Plot No.930 Halka No.3, Thana No.199, Dugani then he stated that he is the land owner of the said land and there is no construction works and entire land is an empty and also he submitted his voluntarily statement for the same. Thereafter, he also stated that he sold his land of 10 decimals of Shri Bishnu Pada Das and he asked Shri Bishnu Pada Das to come at
2.7 Shri Bishnu Pada Das came at the land and told that he is owner of 10 decimal land of Khata No.241, Plot No.930, Thana No.199, Dugani and further stated that there is no any foundation work situated here and not running any This land is empty since so many years and submitted his voluntarily statement in this regard.
2.8 In view of the above, investigation carried out so far, it appears that M/s Jai Bhole Enterprises is a non-existence firms created on paper with sole intention to pass on irregular and inadmissible Input Tax Credit to various entities.
2.9 Upon scrutiny of GSTR-2A of M/s Jai Bhole Enterprises, it appears that M/s Jai Bhole Enterprises have availed input tax credit from the following entities. (i) M/s Bhumi Lightmetal Udhyog Private Limited; (ii) M/s Niracalo Metal Private Limited; (iii) M/s Vibranta Enterprise Private Limited; (iv) M/s Exela Metal Vyapaar Private Limited; (v) M/s Inval Metal Enterprise Private Limited; (vi) M/s Pavapuri Vyapaar Private Limited; (vii) M/s Gagandeep Iron Private Limited; (viii) M/s Vibranta Scrap Private Limited etc. Accordingly, the office initiated investigation against the above firms and during the investigation all the above said firms found to be fake.
2.10 Further, summons dated 02.02.3024 issued to Shri Panchanan Sardar to appear in this office on 14.02.2024 for tendering statement under Section 70 of the CGST Act, 2017. In response of summons dated 02.02.2024, one person Shri Rahul Prajapati came to DGGI, Regional Unit, Jamshedpur on 02.2024 and introduced himself as an office staff of M/s Jai Bhole Enterprises and came there for submitting the reply of Shri Panchanan Sardar.
2.11 Upon enquiry about M/s Jai Bhole Enterprises and its proprietor Shri Panchanan Sardar, he feel uneasy and told that actually he is an office staff of M/s Maa Sharda Endeavor Private Limited and he did not know about any M/s Jai Bhole Enterprises and its proprietor Shri Panchanan
2.12 Accordingly, spot summons dated 14.02.2024 issued to Shri Rahul Prajapati to tender statement, wherein he inter alia stated that he does not know M/s Jai Bhole Enterprises and its proprietor Shri Panchanan Sardar, he did the paper work for M/s Jai Bhole Enterprises as per direction of Shri Vivek Kumar and Dhanjeet Ray (Both are staff/ employee of M/s Maa Sharda Endeavor Private Limited).
2.13 As per the statement of Shri Rahul Prajapati, it appears that M/s Jai Bhole Enterprises is operated by Shri Gyaan Chandra Jaiswal (Director of M/s Maa Sharda Endeavor Pvt. Ltd. and M/s Makers Casting Private Limited and key person of M/s Kedarnath Trexim Pvt. Ltd.), all these three firms had availed inadmissible ITC from M/s Jai Bhole Enterprises.
2.14 It is also evident from the EPF contribution paid by M/s Kedarnath Trexim Pvt. Ltd for their employees that Shri Panchanan Sardar was an employee of M/s Kedarnath Trexim Ltd. during the period in which fake ITC passed by the firms of Shri Panchanan Sardar.
2.15 Upon visit to the principal place of business, it was found that the premises was surrounded by the Tin sheet. One person came forward and introduced himself as Shri Mukesh Kumar deputed here as a guard. Upon enquiry of M/s Jai Bhole Enterprises with him then he shocked and unable to say anything. Accordingly, spot summon was issued to him under Section 70 of the CGST Act, 2017 and his statement was recorded, in his statement stated that he has come here to work at the behest of Shri Vikash Pandey. The landowner of the premises was also contacted over the phone. Shri Bishnu Pada Das came at the premises and his statement was also recorded under Section 70 of the CGST Act, 2017, wherein he stated that he is the owner of this land and he rented. A rent agreement has been made on the name of Shri Panchanan Sardar by the people of M/s Kedarnath Trexim Private Limited.
2.16 Further, the statement of owner of the additional place of business Shri Aayub Khan was recorded under Section 70 of the CGST Act, 2017, wherein he has stated that he is the owner of the said premises and rented the same to Vivek Pandey, who works in M/s Kedarnath Trexim Pvt. Ltd. and also stated that he did not know Panchanan Sardar. As such, M/s Jai Bhole Enterprises was created by the Director of M/s Maa Sharda Endeavor Private Limited, M/s Makers Casting Private Limited and key person of M/s Kedarnath Trexim Private Limited for availing of fake ITC from it.
2.17 Thereafter, the summons was issued to Gyan Chandra Jaiswal, who never turned up to tender his On 24.06.2024, Shri Gyan Chandra Jaiswal appeared and his statement was recorded under Section 70 of the CGST Act, 2017. Shri Gyan Chandra Jaiswal has stated that end users of GST ITC availed and passed on by M/s Jai Bhole Pvt. Ltd., Bhumi Light Metal Udhyog Pvt. Ltd., Vibranta Enterprise Pvt. Ltd., Exela Metal Vyapar Pvt. Ltd., Inval Metal Enterprises Pvt. Ltd., Pavapuri Vyapar Pvt. Ltd., Gangadeep Iron Pvt. Ltd., Vibranta Scrap Pvt. Ltd. From the very statement of Gyan Chandra Jaiswal, who gave evasive reply, shows that M/s Jai Bhole Enterprises is operated by Gyan Chandra Jaiswal and his staff/ son as per his direction with sole intention to avail fake ITC from it. From the above statement, he admitted that sometime he invests in auction through M/s Jai Bhole Enterprises company along with others and share profit. Since Gyaan Chandra Jaiswal is the mastermind, who created M/s Jai Bhole Enterprises, through which, he availed bogus ITC of Rs.22.31 crore and further passed on the said credit of ITC to his directorship firms such as (i) Maa Sharda Endeavour Private Limited (ii) M/s Makers Casting Private Limited and his son’s directorship firm (iii) M/s Kedarnath Trexim Private Limited amount to Rs.33.35 crore. Thus, total involvement of fake GST ITC is Rs.55.66 crore. As such, the accused has committed the offence under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017.
3. Vide order dated 25.06.2024, the Court of learned Additional Chief Judicial Magistrate, Jamshedpur in Complaint Case 2360 of 2024 registered this complaint against Gyaan Chandra Jaiswal and the date was fixed.
4. The accused Gyaan Chandra Jaiswal was taken into judicial custody and remanded to the Central Jail, Ghaghidih, Jamshedpur till 07.2024 vide order dated 25.06.2024 and date was fixed awaiting the prosecution report.
5. Learned counsel for the petitioner has submitted that the allegations made in paragraph No.2 of the complaint is that during investigation carried out in respect of various firms reveals that the below-mentioned firms were fraudulently availed Input Tax Credit and further passed on to the various firms to the end-availers. Hence, it can be easily made out that the beneficiary if at all is the end-availers and not the intermediary. As such, in absence of the named companies in the complaint, having been made a party to the present case, the entire proceeding is vitiated in view of the restriction imposed under Section 137 of the CGST
5.1 Learned counsel for the petitioner has further submitted that the Central Board of Indirect Taxes and Customs, GST Policy Wing issued a circular No.171/03/2022-GST dated 06.07.2022, whereby clarification on various issues relating to the applicability of demand and penalty provisions under CGST Act in respect of transactions invoking fake invoices was
5.2 Learned counsel for the petitioner has further submitted that when the aforesaid circular read with Section 122(1)(ii) of the CGST Act, 2017, the petitioner could not have been arrested and could not have been prosecuted for the offence under Section 132 of the CGST The custody of the petitioner is directly in conflict with the guidelines issued by the Hon’ble Apex Court in the case of Satyendra Kumar Antil Vs. CBI reported in (2022) 10 SCC 51 inasmuch as the maximum punishment prescribed is five years. The petitioner is not a Director and does not hold any position in M/s Kedarnath Trexim Private Limited and as would be evident, there is an admission in the hands of the prosecution itself. The petitioner does not pose any flight risk inasmuch as the place of permanent residence is at Jamshedpur, Jharkhand and is ready and willing to abide by all the conditions that may be imposed by the Court. The petitioner is having no criminal antecedent.
6. Per contra, the learned counsel for the Union of India has submitted that Shree Gyaan Chandra Jaiswal is the mastermind, who created M/s Jai Bhole Enterprises through which he availed bogus ITC of Rs.22.31 crore and further passed on the said bogus credit of ITC to his directorship firms such as (i) M/s Maa Sharda Endeavour Private Limited & (ii) M/s Makers Casting Private Limited and his son’s directorship firm (iii) M/s Kedarnath Trexim Private Limited. Further, the petitioner is engaged in availing and utilizing the fake ITC through his directorship firm M/s Maa Sharda Endeavour Private Limited and M/s Maker Casting Private Limited and his son’s directorship firm M/s Kedarnath Trexim Private Limited, amounting to 32.02 crore. Thus, total involvement of fake GST ITC is Rs.54.33 crore as the same is in detail in the prosecution report, as such, the petitioner is the main beneficiary and mastermind. In view of the above, contended to reject the bail application of the petitioner.
7. Heard Indrajit Sinha, learned counsel for the petitioner and Mr.Parth S.A. Swaroop Pati, learned Sr. SC, CGST for the Union of India and perused the materials available on record.
8. From perusal of the complaint and also the prosecution report filed in this case, it is found that the allegations made against the petitioner are based on the statement of witnesses. In regard to creating the fake firms, availing and utilizing the ITC to the tune of Rs.54.33 crore, no documentary evidence has been adduced on behalf of the prosecution in support of the allegations made in the complaint and prosecution report as well against the petitioner. Although, on behalf of the prosecution in Annexure-B of counter affidavit in list of documents/ RUD is given, wherein at Sr. No.37 i.e. RUD-37, details summaries of GSTR-3B of fake firms is mentioned; yet any document relied upon has not been made annexure in proof of same. The petitioner has been languishing in jail since 06.2024 and the offence alleged against the petitioner is punishable for five years. Therefore, taking into consideration that the trial of this case is not likely to be concluded in near future and also the fact that the prosecution has not shown any apprehension of tampering the evidence or any flight risk of the petitioner; I am inclined to allow the bail application.
9. Accordingly, the bail application of the petitioner is hereby allowed. Let the petitioner be released on bail on furnishing bail bond of Rs.1,00,000/-(Rupees One Lakh) with two sureties of the like amount to the satisfaction of the court concerned in aforesaid case with following conditions:
i. The petitioner shall co-operate in the investigation, inquiry and trial and shall not absent himself without any reasonable cause on the date fixed by the learned trial Court;
ii. The petitioner shall surrender his Passport to the Court concerned and shall not leave the precincts of India without leave of the trial Court;
iii. The petitioner shall not threaten the witness or tamper any evidence and;
iv. In breach of any of the condition, the learned trial Court would be at liberty to cancel the bail of the petitioner without any further reference to this Court.
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