Gujarat HC grants Bail to GST Accused for Fraudulent availing of Input Tax Credit worth Rs 10.71 Cr [Read Order]

Gujarat - HC - grants - Bail - GST - Accused - Fraudulent - Input - Tax - Credit - TAXSCAN

The Gujarat High Court has recently, while deciding upon an application filedunder section 439 of the Code of Criminal Procedure, granted bail to a GST accused for fraudulently availing input tax credit worth Rs 10.71 crores, in respect of fiction transactions amounting to Rs 59.55 cores.

The applicant being the erstwhile director till October, 2019, of the company namedActive Metals Pvt.Ltd.,was subsequently by a resolution dated 15.11.2021, appointed as an authorized representative to look into the matters of CGST/SGST of the company.

It is stated that, under section 67(2) of the CGST and GST Act, a search was conducted on 20.06.2022 at the company and residential premises of the Directors, and on 22.07.2022, a letter along with an order issued under section 83 of the Act for provisional attachment of the plant, machinery, vehicles and stock of the company on the ground that input tax credit was availed by the company by showing fake purchases from bogus/suspicious entities.

The search being conducted during the period from 20.07.2022 to 28.07.2022, and on 28.07.2022, the applicant came to be arrested by issuing arrest memorandum by the State Tax Officer, Enforcement Division, Rajkot, for the offence punishable under section 132(1)(c) of the CGST and GST Act, alleging that input tax credit of Rs.10.71 crores in respect of fictitious transactions amounting to Rs.59.55 crores was availed by him.

It was submitted by the applicant  that while arresting the applicant, the mandatory procedure of section 69 of the CGST Act, 2017 had not been followed, which envisages that if the commissioner has reasons to believe that a person committed offence under clause (a) to (d) of section 132(1), he shall by order authorize any officer of central tax to arrest such person; and as the same has not been observed in the appellantā€™s case, the entire exercise carried out is in blatant violation of the procedure contemplated in section 69 of the CGST Act, 2017.

In addition to the same it was further submitted by the appellant that the allegation of availing wrongful input tax credit is without any basis and contrary to the evidence, as the documentary evidence for the purchase of goods including transportation details had been provided by the applicant, which itself suggested the movement of goods, thus, making section 132(1)(c)  non- applicable to the present case.

Hearing to the contentions and perusing the materials on record, the High Court observed:

ā€œThe custody of the applicant does not appear to be necessary, since the department, if provided by law, can go on with the further investigation and produce necessary documents in support of their case, as sufficient time for the investigation was taken prior to filing of the complaint by the department.ā€

ā€œHence, considering the facts and circumstances of the case and in view of the observations made above, the present application is allowed. The applicant is ordered to be released on regular bail in connection with Arrest Memo No.DCST/Enf/Div-10/STO-3/Varun Bansal/2022-23/B.61, dated 28.07.2022 on executing a personal bond of Rs.1,00,000/- (Rupees One Lakh only) with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions that he shall;

[a] not take undue advantage of liberty or misuse liberty;

 [b] not act in a manner injurious to the interest of the prosecution;

[c] surrender passport, if any, to the lower court within a week;

[d] not leave India without prior permission of the concerned trial court;

 [e] furnish the present address of residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of the concerned trial courtā€, the Court added.

ā€œIf breach of any of the above conditions is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter. Bail bond to be executed before the lower Court having jurisdiction to try the case.ā€, concluding its observation the High Court reminded.

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