prpri Wrongful availment of ITC – Orissa HC denies Bail Wrongful availment of ITC – Orissa HC denies Bail

Case Law Details

Case Name : Santosh Kumar Gupta Vs Union of India (Orissa High Court)
Appeal Number : BLAPL No. 3282 of 2021
Date of Judgement/Order : 30/06/2021
Related Assessment Year :

Santosh Kumar Gupta Vs Union of India (Orissa High Court)

The genesis of the case relates to the search conducted on 29.02.2020 in the office premises of M/s. Pacific Packaging Industries which is a proprietorship concern of the Petitioner by the Senior Intelligence Officers of the Directorate General of Goods and Services Tax Intelligence. In course of the same, several documents relating to the business activities of the Firm with other concerned Firms have been collected. The statement of the Petitioner being then recorded, the Officers strongly sensed something fishy and dubious going on in the matter touching the unwanted entitlement and availment of ITC. It is said that ten (10) Firms have been created by hatching conspiracy in carrying out such magnitude of business activities like transfer of goods and services inter se without those taking place in reality and showing fake transactions to be genuine with other financial adjustment as those were ascertained upon investigation leading to the arrest of the Petitioner on 16.12.2020. Materials are yet to surface as to the developments with regard to the notices/summons issued to those entitles for deposit of the ITC as according to the Prosecution, illegally availed for pecuniary gain by playing fraud on the system and mechanism in place.

The Petitioner is said to have been involved in commission of the above Economic offences which are considered to be grave. Such dubious activities in committing offences for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as developed country in the globe in which our march is on. This introduction of the GST is for simplification and harmonization of Indirect Tax Regime in reducing cost of production, reducing inflation and making Indian trade and Industry more competitive, domestically as well as internationally and with seamless transfer of Input Tax Credit (ITC) from one stage to another in the chain of value addition; in creating in-built mechanism in the design of goods and services tax is with an aim to incentivize tax compliance by the tax payers so as to finally broaden its base in lowering the tendency of evasion. Such roles alleged to have been played by the Petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime.

With all these aforesaid, this Court is not inclined to accept the present move of the Petitioner for grant of bail.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

The matter is taken up by video conferencing mode.

2. The Petitioner being in custody in connection with 2(C) C.C. Case No.47 of  2020 pending in the Court of learned S.D.J.M., Rourkela for commission of offence under Section- 132(1 )(b)(e)(f)(i)(j)(l) of the Central Goods Services Tax Act, 2017 (CGST Act) has filed this application under Section-439 of the Cr.P.C. for his release on bail.

3. Mr.A. Pattanaik, learned counsel for the Petitioner submitted that the case against the Petitioner is founded upon the allegations that he had created about ten (10) Firms and was generating fake bills, invoices in the name of said Firms facilitating the availment of the benefit of Input Tax Credit (ITC) without actually supply/ receipt of goods and services which were credited in the name of those Firms in the Bank Accounts and that he in fact was actually handling all those accounts having taken signed blank cheques from said Account-Holders.

He further submitted that it is not the case in the complaint that in reality, such proprietors of those Firms were not there and the materials against the Petitioner are the statements of those persons who in order to get rid of the rigors of law have implicated this Petitioner. He submitted that materials on record do not indicate as to indulgement of the Petitioner in the business affairs of all those Firms. According to him, the entire case of the prosecution since is based on the documentary evidence, by now all such documents which according to the prosecution are incriminating have been seized and the statements of the material witnesses have been recorded. He submitted that the quantum of ITC based upon all those fraudulent transactions as alleged stated to have been taken, has been highly inflated in order to place gravity to the case. He further submitted that no such direct material has been collected to show that this Petitioner had passed on the ITC to the tune as above for having unlawful gain unto himself, when the fact remains that in the meantime, the Department have issued summons to all those entities for payment of ITC availed by them.

He also submitted that Accused Persons booked in cases with allegations which are of similar in nature have been granted bail by this Court.

It was submitted that the Petitioner being the permanent resident of Rourkela City, there is no scope on his part to flee from justice and the complaint having been filed in the Court of law after collection of the materials on record followed by seizure of all the relevant documents which are no more in custody or possession of the Petitioner, there arises no scope of tampering with evidence or influencing the trial. In view of all these above, he urged for grant of bail to the Petitioner as according to him, further detention of the Petitioner in custody would serve no useful purpose and as such is not warranted.

4. Mr. Ch. S. Mishra, Senior Standing Counsel for the CGST opposed the move. Referring to the written objection, he submitted that here the Petitioner is involved in commission of Economic Offences and the materials collected so far reveal that the Petitioner is the kingpin and has defrauded the State Exchequer to the tune of huge amount around Rs.40.66 crore by availing the ITC simply by managing to have transactions reflected on papers without supply of goods or services in reality and for the purpose, he has created enormous fake documents such as invoices, bills etc., besides creating fake Firms and opening Bank accounts in the name of those entities which have no real existence in the Commercial World. He further submitted that it has been ascertained in course of investigation that the Petitioner having guessed that the Authority is also after him in connection with matter as to illegal availment of ITC, has managed to destroy many more important documents for which strong inference that the Petitioner would not refrain from resorting to such acts conduct as to tampering the evidence to weaken the prosecution case is at least at this stage not altogether ruled out. He, therefore, contended that at present it is not a fit case for grant of bail to the Petitioner. As regards grant of bail to those persons booked for commission of similar offences, he submitted that this Court has granted bail to them in the facts and circumstances of those cases that to after long period of their detention in custody, on arriving at a satisfaction that there was no more the scope for them to tamper the evidence.

5. Keeping in view the submissions made, I have gone through the complaint petition as well as the documents annexed thereto.

6. The genesis of the case relates to the search conducted on 29.02.2020 in the office premises of M/s. Pacific Packaging Industries which is a proprietorship concern of the Petitioner by the Senior Intelligence Officers of the Directorate General of Goods and Services Tax Intelligence. In course of the same, several documents relating to the business activities of the Firm with other concerned Firms have been collected. The statement of the Petitioner being then recorded, the Officers strongly sensed something fishy and dubious going on in the matter touching the unwanted entitlement and availment of ITC. It is said that ten (10) Firms have been created by hatching conspiracy in carrying out such magnitude of business activities like transfer of goods and services inter se without those taking place in reality and showing fake transactions to be genuine with other financial adjustment as those were ascertained upon investigation leading to the arrest of the Petitioner on 16.12.2020. Materials are yet to surface as to the developments with regard to the notices/summons issued to those entitles for deposit of the ITC as according to the Prosecution, illegally availed for pecuniary gain by playing fraud on the system and mechanism in place.

7. The Petitioner is said to have been involved in commission of the above Economic offences which are considered to be grave. Such dubious activities in committing offences for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as developed country in the globe in which our march is on. This introduction of the GST is for simplification and harmonization of Indirect Tax Regime in reducing cost of production, reducing inflation and making Indian trade and Industry more competitive, domestically as well as internationally and with seamless transfer of Input Tax Credit (ITC) from one stage to another in the chain of value addition; in creating in-built mechanism in the design of goods and services tax is with an aim to incentivize tax compliance by the tax payers so as to finally broaden its base in lowering the tendency of evasion. Such roles alleged to have been played by the Petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime.

8. With all these aforesaid, this Court is not inclined to accept the present move of the Petitioner for grant of bail.

Accordingly, the BLAPL stands dismissed.

As the restrictions due to resurgence of COVID­19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed, vide Court’s Notice No.4587, dated 25th March, 2020 as modified by Court’s Notice No.4798 dated 15th April, 2021.

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