Bail granted to an Applicant involved in fraudulent ITC

The Hon'ble High Court Allahabad in the matter of Paras Jain v Union of India [Criminal Misc. Bail Application No. - 21848 of 2022 dated July 29, 2022] granted bail to an Applicant involved in a trial relating to Input Tax Credit ("ITC") fraud and held that seriousness of the offences alone is not conclusive of the Applicant's entitlement to bail.

Facts

A bail application has been filed by M/s Paras Jain ("the Applicant") with a prayer to release him against the complaint file by the Directorate General of G.S.T ("the Respondent"), regarding offences committed under Section 132 (1)(b) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") that fake ITC of INR 40.66 crores on the strength of invoices issued by non-existent firms, M/s JMJ Traders and Ms. Durga Traders ("the Firms"). The Firms had passed on fraudulent ITC to M/s Balaji Enterprises ("the Buyer") of INR 57.96 lacs. In the search conducted in the registered office of the Buyer wherein the proprietor of the firm stated that some invoices for metal scrap from the Applicant without receiving any goods has been received and admitted his tax liability on account of availing fake ITC. The Applicant admitted the that fake invoices from 76 bogus firms to various business buyers without supplying of goods or services were issued and have availed ineligible ITC amounting to INR 343 crores.

Applicant's contentions

• The allegation is that the firms in dispute were non existing. However, the registration number generated by Goods and Services Tax department of the firms are mentioned in the complaint itself and the registration number was granted as per Rule 8 & 9 of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules") after due verification of their credentials. No demand notice for ascertaining tax claimed has been issued till date as per Section 74 of the CGST Act.
• The offence alleged is punishable upto 5 years. The Applicant is in jail since February 18, 2022. No custodial interrogation of the Applicant is required. The sanction for transaction accorded is based merely on his subjective satisfaction and not as per requirements of the Section 69(1) of the CGST Act.

Respondent's contentions

• The allegations against the Applicant in the complaint are fully proved.
• Fraudulent availment and utilization of ITC of more than INR 5 crore has been done by the Applicant and offence alleged is cognizable and non bailable as per Section 132(5) of the CGST Act.
• The involvement of the Applicant with 75 fake firms was discovered and no one turned up in response to the summons from 75 firms.

Issue

• Whether bail application of the accused against the complaint by the Respondent regarding offences committed under Section 132 (1)(b) of the CGST Act should be accepted?

Held

The Hon'ble High Court Allahabad in [Criminal Misc. Bail Application No. - 21848 of 2022 dated July 29,2022] has held as under:

• Relied upon the judgement of Hon'ble Supreme Court in case of [Sanjay Chandra v CBI, [2012 1 SCC 40] dated November 23, 2012] and remarks that, "seriousness of the offences alone is not conclusive of the Applicant's entitlement to bail" and taking into consideration the course of investigation, the trial will take considerable time and , if the bail is denied then the judicial custody can be prolonged beyond the statutory period of punishment which is five years.
• Held, in favour of the Applicant after taking into consideration that - (i) Applicant has no prior criminal history of any economic offence or otherwise against him, (ii) the trial will take considerable time, (iii) Applicant's argument, evidence on record regarding Applicant's complicity and larger mandate of the Article 21 of the Indian Constitution.
• Accordingly, Court allows the bail application, subject to furnishing a personal bond, two sureties in the like amount to the satisfaction of the Court and a bank guarantee of Rs. 50 lacs.