Bail may be conditionally granted in cases of fraudulent ITC availment through fake invoices

The Hon'ble Allahabad High Court in M/s. Pradip Kumar Jain v. Union of India [Criminal Misc. Bail Application Nos. 18606 of 2024 dated May 29, 2024], allowed bail to the Assessee, considering nature of offense, punishment, lack of evidence regarding creation of fake firms, and period of jail stay, the Assessee made out case for bail. The bail was granted subject to conditions including non-tampering with evidence and appearing before trial court.

Facts:

Mr. Devendra Kumar Jain was the proprietor of M/s. Aadi Enterprises and five other non-existent firms, which were operated by him. Mr. Pradip Kumar Jain ("the Petitioner"), was the proprietor of M/s. Arav Enterprises and M/s. N.P. Industries. The Petitioner conducted genuine business during the years 2017-18, 2018-19, 2019-20, and 2020-21.

Mr. Devendra Kumar Jain had availed and passed on without actual supply of goods, based on fake tax invoices issued and received. Consequently, both Mr. Devendra Kumar Jain and the Petitioner had committed offenses under Section 132(1)(b) & (c) and Section 132(1)(i) of the Central Goods & Services Tax Act, 2017 ("the CGST Act"), respectively.

Further, Mr. Devender Kumar Jain had applied for cancellation of GST registration on December 01, 2020 for cancellation of 5 firms those were cancelled which shows that there was no any tax liability on him at that very time.

The Petitioner contended that no assessment of liability had been made by the authorities, and no notice had been issued before their arrest. Aside from the Petitioner's statement, there was no other material evidence showing that they had availed ITC fraudulently and they had been in jail since February 28, 2024.

The Directorate General of GST Intelligence ("DGGI") contended that the Petitioner was involved in evading ITC by creating fake firms and there were no records of the device used to create the non-existent firms. They feared that if granted bail, the Petitioner might resume similar activities and misuse bail privileges.

Hence, aggrieved by the circumstances, the Petitioner filed writ petition requested to release the Petitioner on the bail during the pendency of case.

Issue:

Whether bail can be granted in the case of issuing fake invoices in order to avail ITC?

Held:

The Hon'ble Allahabad High Court in Criminal Misc. Bail Application Nos. 18606 & 18751 of 2024 held as under:

· Held that, the Petitioner be released on bail on furnishing a personal bond and two heavy sureties by each in the like amount to the satisfaction of the court concerned subject to following conditions:

1. The Applicant must not tamper with evidence during trial,

2. The Applicant must not pressurize/intimidate the prosecution's witnesses.

3. The Applicant must appear before the trial court on scheduled dates unless exempted.

4. They Applicant is prohibited to commit similar offence or suspected individuals acquainted with the case.

5. They must not directly or indirectly make an inducement, threat or promise to any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade them from disclosing such facts to the Court or to any police officer or tamper with the evidence.

Breach of any of the conditions, the prosecution shall be liberty to move bail cancellation application before the court.

Our Comment:

Section 132 of the CGST Act discusses "Punishment for certain offences". Further, Section 132(1) of the CGST Act states that whoever commits, or causes to commit and retain the benefits arising out of, any of the offences like:

· Issue of any invoice or bill without supply of goods or services or both in violation of the provisions of the CGST Act and the rules made thereunder leading to wrongful availment or utilization of ITC or refund of tax as mentioned in Section 132(1)(b) of the CGST Act or

· availing ITC using the invoice or bill referred to in Section 132(1)(b) of the CGST Act or fraudulently avails ITC without any invoice or bill as mentioned in Section 132(1)(c) of the CGST Act,

shall be punishable in cases where the amount of tax evaded or the amount of ITC wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 500, with imprisonment for a term which may extend to 5 years and with a fine.

In the Pari Materia case of Gaurav Kakkar v. Directorate General of GST Intelligence, Jaipur Zonal Unit [S.B. Criminal Miscellaneous Bail Application No. 17536/2022 dated January 11, 2023], the Hon'ble Rajasthan High Court relied on the judgment of the Hon'ble Supreme Court in the matter of Vinay Kant Ameta v. UOI [Criminal Appeal No. 60/2022, dated January 10, 2022], wherein, the accused was directed to deposit INR 200 crores as a condition for grant of bail. Hence, the Hon'ble Rajasthan High Court directed the release of the petitioner on bail and stipulated the petitioner must execute a personal bond for INR 2,00,000/- and provide two sureties of INR 1,00,000/- each. These conditions were set to ensure the petitioner's appearance before the court for every hearing and whenever called upon to do so until the conclusion of the trial.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED