Fake GST ITC: Meerut Court Rejects Bail Application

Vishan Gupta Vs State of U.P. (Meerut District Court)

The applicant has been arrested and he has been explained the grounds of his arrest. The raid and search operation were conducted by the team of officers of Directorate General of GST intelligence on 25/­05/­2019 at the rented premises and during search some documents and Computer Processing Unit were resumed under panchnama and resumption memo dated 25­05­2019 and during search no business activity was found in the premises and incriminating evidences recovered from the premises of the accused. During scrutiny it was found that the input Tax Credit of Rs. 159.20 Crores had been passed on through 47 Firms leading to wrongful availment or utilisation of input tax credit. Statement of accused was recorded on 25­/05/­2019, 26­/05­/2019, and 31­/03/­2019 under Section 70 of CGST Act 2017. All the 47 fake Firms have been verified physically and found that these firms were non­existent. The copies of the panchnamas are placed opposite for perusal which clearly reflect that the firms were fake/non­existent. On being pointed out that the activity performed by the applicant, the passing on fake GST credit of Rs. 159.20 Crores through the firms created by him without supply of any goods being a cognizable and non bailable offence. The accused vide letter dated 11­06­2019 submitted certain documents which, on scrutiny, revealed that there were 31 more Firms which were admittedly created and controlled by the accused. The accused has violated provisions of the CGST Act 2017. It is also apparently clear that on account of issuance of GST invoices without supply of goods leading to fraudulent availment and utilization of input tax credit to the tune of Rs. 159.20 Crores. It is also evident from the arrest memo generated on line 04­01­2021 having valid document identification number. In the instant case, the competent authority had followed the provisions of Section 69 and after going through the investigation report he had ordered for the arrest of the applicant. It is simply clear that the applicant was in full knowledge that the Firms for which he applied for registration were not suppliers in terms of Section 2 (105) of the Act. All guidelines were followed during the preparation of the arrest memo. The applicant was called in the office of DGG Ghaziabad and he was served upon the summons and his statement was recorded on the same day and the investigation report put up before the competent authority. The applicant is sole mastermind and responsible for every act of himself. Suffice to say prima­facie, the accused has committed an economic offence and caused monetary loss to the State which is most harmful. There is a possibility to be tampered with the evidence and tempered with the witnesses if the applicant is released on bail.

Keeping in view the facts and circumstance of the case and the gravity and seriousness of the offence, without making any comment upon the merits of the case, I do not find it a fit case for bail. Hence, the bail application is liable to be rejected.

FULL TEXT OF THE JUDGMENT/ORDER OF MEERUT  HIGH COURT

1. The present bail application has been moved by accused Vishan Gupta son of late Shri Jagdish Prasad Gupta resident of 5/184, Panja Madarsa, Patwari, Belanganj District Agra in case no. 101 of 2021 under Section 132(1) (b) 132 (1) (i) of the Central Goods and Services Tax Act, at Police Station ­Sahibabad, District Ghaziabad.

2. The facts giving rise to the case are that an arrest memo under Section 69 of the Central Goods and Services Tax Act, 2017 the accused Vishan Gupta have committed an offence specified in clause (a) or clause ()b or clause (c) or clause (d) of sub­Section (1) of section 132 of the Central Goods and Service Tax, 2017 which is punishable under clause (i) or (ii) of sub­section (1) or sub­section (2) of the said Section. Accused Vishan Gupta has been arrested and he has been explained the grounds of his arrest. He was also informed about his right to have some one informed about his arrest and Sh/Ms Raghunandan has been informed about his arrest. The raid and search operation were conducted by the team of officers of Directorate General of GST intelligence on 25­05­2019 at the rented premises and during search some documents and Computer Processing Unit were resumed under panchnama and resumption memo dated 25­05­2019. During search it was found that there was no business activity in the premises and incriminating evidences recovered from the premises of the accused. From the premises of the accused three mobile phones and once CPU were resumed. During scrutiny it was observed that the input Tax Credit of Rs. 159.20 Crores had been passed on through these 47 firms leading to wrongful availment or utilization of input tax credit. Statement of accused was recorded on 25­05­2019, 26­05­2019, and 31­03­2019 under Section 70 of CGST Act 2017. All the 47 fake firms wee verified physically as well as under the summons mode which led to the conclusion that these firms were non­existent in as much as either their addresses were found to be non­existent/incorrect address. The copies of the panchnamas are placed opposite for perusal which clearly reflect that the firms were fake/non­existent. These firms were not located at their respective principal place of business. The Bank account details in respect of the 47 firms, created by Shri Vishan Gupta was retrieved from the GSTN database and the enquiry was caused from the respective Banks in as much as they were written to furnish account statement and the KYC documents. Consequent, to the investigation conducted, none of these 47 Firms were found to be in existence. On being pointed out that the activity performed by him i.e. the passing on fake GST credit of Rs. 159.20 Crores through the firms created by him without supply of any goods being a cognizable and non bailable offence. The accused vide letter dated 11­06­2019 submitted certain documents which, on scrutiny, revealed that there were 31 more Firms which were admittedly created and controlled by the accused. In view of investigation concluded till date, it is clearly substantiated and established that the accused has violated provisions of the CGST Act 2017. It is apparently clear that on account of issuance of GST invoices without supply of goods leading to fraudulent availment and utilization of input tax credit to the tune of Rs. 159.20 Crores, which is more than 5 Crores.

3. The learned counsel Shri Mahipal Singh for the accused has submitted that the applicant is innocent and there is no criminal history of the applicant. The arrest of the accused has been made in a frivolous case based on false and bogus facts and in lack of material substance. The investigation against the applicant was initiated by conducting raid and search operation on 25­05­2019 and during this long period of 20 months, DGGI failed in collecting any evidence against the applicant. It is also evident from the fact that no raid and search operation was conducted on the permanent address of the applicant. The applicant has fully cooperated in the investigation of the case and presented himself as and when required. The Commissioner has committed a serious error in giving authorization to arrest the applicant without following the mandatory provisions of Section 69 of the CGST Act 2017. No offence under Sections 132 (1) (b) clause (I) and Section 132 (1) (b) of the CGST Act 2017. The applicant is not previous convict and he has never involved in such offence. There is no apprehension to be absconded from the territorial jurisdiction of the Court and tampering with the evidence. The applicant/accused is member of respectable family and is ready to furnish reliable sureties. Except all the arguments and facts, the learned counsel for the applicant has also cited so many case laws in bail application. Hence prayed for bail.

4. Per contra the special prosecutor Shri Lakshay Kumar for the department has opposed the bail application and has argued that the applicant/accused has committed offence under clause (b) of sub­section (1) of Section 132 of the CGST Act 2017. The applicant/accused has emerged out as the main mastermind for passing on of ITC of Rs. 159.20 Crores based on the tax invoices issued in the 47 fake and non­existent supplier Firms created by the applicant. It is also evident from the arrest memo generated on line 04­01­2021 having valid document identification number. In the instant case, the competent authority had followed the provisions of Section 69 ibid and after going through the investigation report he had ordered for the arrest of the applicant. The investigation of the case was never closed. There is a possibility to be tampered with the evidence and tempered with the witnesses if the applicant is released on bail. The applicant used Aadhar Card, PAN Card, Saving Accounts of his relatives to be created such Firms. It is simply clear that the applicant was in full knowledge that the Firms for which he applied for registration were not suppliers in terms of Section 2 (105) as ere not to be involved in any. All guidelines were followed during the preparation of the arrest memo. The applicant was called in the office of DGG Ghaziabad and he was served upon the summons and his statement was recorded on the same day and the investigation report put up before the competent authority. Hence prayed for rejection of bail application.

5. I have heard the Special prosecutor for the department and the learned counsel for the accused at length and perused the record.

6. The applicant has been arrested and he has been explained the grounds of his arrest. The raid and search operation were conducted by the team of officers of Directorate General of GST intelligence on 25/­05/­2019 at the rented premises and during search some documents and Computer Processing Unit were resumed under panchnama and resumption memo dated 25­05­2019 and during search no business activity was found in the premises and incriminating evidences recovered from the premises of the accused. During scrutiny it was found that the input Tax Credit of Rs. 159.20 Crores had been passed on through 47 Firms leading to wrongful availment or utilisation of input tax credit. Statement of accused was recorded on 25­/05/­2019, 26­/05­/2019, and 31­/03/­2019 under Section 70 of CGST Act 2017. All the 47 fake Firms have been verified physically and found that these firms were non­existent. The copies of the panchnamas are placed opposite for perusal which clearly reflect that the firms were fake/non­existent. On being pointed out that the activity performed by the applicant, the passing on fake GST credit of Rs. 159.20 Crores through the firms created by him without supply of any goods being a cognizable and non bailable offence. The accused vide letter dated 11­06­2019 submitted certain documents which, on scrutiny, revealed that there were 31 more Firms which were admittedly created and controlled by the accused. The accused has violated provisions of the CGST Act 2017. It is also apparently clear that on account of issuance of GST invoices without supply of goods leading to fraudulent availment and utilization of input tax credit to the tune of Rs. 159.20 Crores. It is also evident from the arrest memo generated on line 04­01­2021 having valid document identification number. In the instant case, the competent authority had followed the provisions of Section 69 and after going through the investigation report he had ordered for the arrest of the applicant. It is simply clear that the applicant was in full knowledge that the Firms for which he applied for registration were not suppliers in terms of Section 2 (105) of the Act. All guidelines were followed during the preparation of the arrest memo. The applicant was called in the office of DGG Ghaziabad and he was served upon the summons and his statement was recorded on the same day and the investigation report put up before the competent authority. The applicant is sole mastermind and responsible for every act of himself. Suffice to say prima­facie, the accused has committed an economic offence and caused monetary loss to the State which is most harmful. There is a possibility to be tampered with the evidence and tempered with the witnesses if the applicant is released on bail.

7. Keeping in view the facts and circumstance of the case and the gravity and seriousness of the offence, without making any comment upon the merits of the case, I do not find it a fit case for bail. Hence, the bail application is liable to be rejected.

ORDER  

The bail application of the accused Vishan Gupta is rejected.