2025 (5) TMI 301 - HC - GST

Seeking grant of regular bail during the pendency of trial - passing on fradulent Input Tax Credit (ITC) and during search the said firm was found to be non-existent - reliability of the applicant s confession recorded under Section 70 of the Central Goods and Services Tax Act 2017 - HELD THAT - This Court finds that the case of the prosecution is based upon documentary material or the statement of accused recorded under Section 70 of Central Goods and Services Tax Act 2017 - Further no documentary evidence connecting the applicant with 232 firms has been collected and the reliance has been placed upon the confession of applicant recorded during his custodial interrogation but in the considered opinion of this Court the truthfulness of the same or its evidentiary value would be tested during trial which is yet to commence. Admittedly the offence alleged in the complaint are triable by Magistrate and the same provides for maximum punishment of 5 years. The investigation in the case is complete as the complaint/charge-sheet dated 07.03.2024 already stands filed before the trial court and the charges against the applicant has not been framed so far. During the course of hearing it is not disputed by Mr. Parv Agarwal learned counsel that though the case is fixed for recording of pre-charge evidence under Section 244 Cr.P.C. but no prosecution witnesses has been examined till date. Thus it is clear that the conclusion of trial would consume considerable time and further detention of the applicant behind the bars would not be justified keeping in view the period of more than a year and three months already undergone by him. The applicant is ordered to be released on regular bail in the above case subject to his furnishing the requisite bail bond and surety bond to the satisfaction of the trial court. Conclusion - The conclusion of trial would consume considerable time and further detention of the applicant behind bars would not be justified keeping in view the period of more than a year and three months already undergone by him. Bail application allowed.

1. ISSUES PRESENTED and CONSIDERED

- Whether the applicant is entitled to regular bail under Section 439 Cr.P.C. (now Section 483 Bharatiya Nagarik Suraksha Sanhita, 2023) during the pendency of trial for alleged offences under Sections 132(1)(b) & 132(1)(i) of the Central Goods and Services Tax Act, 2017?

- Whether the evidence collected during investigation sufficiently connects the applicant with the alleged fraudulent Input Tax Credit (ITC) scheme involving multiple non-existent firms?

- The evidentiary value and reliability of the applicant's confession recorded under Section 70 of the Central Goods and Services Tax Act, 2017.

- The impact of the stage of trial and the period of custody already undergone by the applicant on the grant of bail.

2. ISSUE-WISE DETAILED ANALYSIS

Entitlement to Bail under Section 439 Cr.P.C. / Section 483 Bharatiya Nagarik Suraksha Sanhita, 2023

The legal framework governing bail in this case is Section 439 of the Criminal Procedure Code, 1973, as substituted by Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023. The Court examined whether the applicant, accused of offences punishable with imprisonment up to five years under the CGST Act, is entitled to regular bail during trial.

The Court noted that the offences are triable by Magistrate and carry a maximum punishment of five years. The trial had not yet commenced, and charges had not been framed. The prosecution had not examined any witnesses despite the case being fixed for pre-charge evidence under Section 244 Cr.P.C. This indicated that the trial would require considerable time to conclude.

In applying the law to facts, the Court emphasized that prolonged detention without trial is not justified, especially since the applicant had already undergone custody for over a year and three months. The Court also considered that the prosecution witnesses were official in nature and there was no apparent risk of their being influenced or tampered with. These factors weighed in favor of granting bail.

Connection of the Applicant with the Alleged Fraudulent Scheme

The prosecution alleged that the applicant was the mastermind behind the creation of 232 non-existent firms used to pass on fraudulent ITC amounting to approximately Rs. 1048 crores, which further involved 4088 other firms. The investigation revealed that the applicant operated these firms from his residence and created fake invoices and E-way Bills as per directions of co-conspirators.

However, the Court observed that the complaint did not arraign the alleged co-conspirators (Naved, Shadab, Raghu, and Shamin) as accused, despite the applicant's statement implicating them. The Court also found that the prosecution had not collected documentary evidence directly connecting the applicant to the 232 firms nor verified bank accounts to establish his control over these firms. The details of the 4088 firms receiving fake invoices were not included in the complaint.

The Court held that the reliance on the applicant's confession under Section 70 CGST Act, 2017, was premature to assess its evidentiary value, which would be tested during trial. Thus, the material on record was insufficient to conclusively establish the applicant's involvement at this stage.

Evidentiary Value of the Applicant's Confession under Section 70 CGST Act, 2017

The applicant's statement under Section 70 of the CGST Act was recorded during custodial interrogation, wherein he admitted creating fake firms and invoices. The prosecution placed reliance on this confession as a key piece of evidence.

The Court, however, clarified that the truthfulness and evidentiary value of such confession must be scrutinized during trial. It refrained from giving any opinion on the merits of the confession at the bail stage, recognizing that custodial statements require careful examination in the context of the entire evidence.

Stage of Trial and Custodial Period Considerations

The Court took into account that the investigation was complete and the charge sheet had been filed, but the trial had not commenced and no prosecution witnesses had been examined. The case was pending for pre-charge evidence recording.

Given the considerable delay and the fact that the applicant had already been in custody for more than a year and three months, the Court found that continued detention was not warranted. The balance of convenience and principles of justice favored bail.

The Court also noted the absence of any indication that the applicant would tamper with evidence or influence witnesses, which further supported the grant of bail.

3. SIGNIFICANT HOLDINGS

- "The truthfulness of the confession recorded under Section 70 of the Central Goods and Services Tax Act, 2017 or its evidentiary value would be tested during trial which is yet to commence."

- "The offences alleged are triable by Magistrate and provide for maximum punishment of 5 years. The investigation is complete, but the trial has not commenced and no prosecution witnesses have been examined till date."

- "The conclusion of trial would consume considerable time and further detention of the applicant behind bars would not be justified keeping in view the period of more than a year and three months already undergone by him."

- "There does not seem to be any possibility of prosecution witnesses being won over, thus the concession of regular bail is deemed appropriate."

- The Court granted regular bail subject to furnishing bail and surety bonds and compliance with terms and conditions imposed by the trial court.

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