2025 (7) TMI 326 - HC - GST

Seeking recall of the Order vide which Bail has been granted to the Respondent - evasion of CGST running into crores of rupees - bail was granted on the third Bail Application merely after a month of rejection of second Bail Application when there was no change of circumstances - HELD THAT - The Respondent has sufficiently explained that the Complaint got filed against him on 04.12.2020 and filing of the Chargesheet in itself was a complete change in circumstances. As held in the case of Laxman Irappa Hatti 2004 (7) TMI 698 - BOMBAY HIGH COURT the considerations for grant of Bail at the stage of investigation which are material is whether the accused would present himself for investigation and cooperate in the investigations and that he would not hamper the investigations or tamper with the evidence of witnesses. However once Chargesheet gets filed these considerations fade into the background and what is now material is to consider the gravity of the offence along with the Triple Test viz. whether he is a flight risk or he would be influence the witnesses or tamper with the evidence. In the present case it cannot be overlooked that the evidence in the present case is essentially documentary and there is no likelihood of the same being tampered by the Respondent after having been admitted to Bail. There is nothing to show that he is a flight Risk or there is any likelihood of his influencing the witnesses. The discretion has been rightly exercised by the learned CMM while granting the Bail. In the present case there is no ground which is existing to show that the discretion of grant of Bail has not been exercised judiciously by the learned CMM or that there is any misuse or abuse of liberty so granted by the Respondent. There is also nothing on record to show that the trial has been hampered on account of grant of Bail. There is no merit in the present Petition for recall of the Bail Order - petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the Bail granted to the Respondent on the third Bail Application, after two earlier rejections within a short span, was legally sustainable given the absence of any change in circumstances.

(b) Whether the Respondent's non-cooperation with the investigation, including failure to appear on summons and non-provision of crucial documents such as Tally Data, justified denial or recall of Bail.

(c) Whether the principle of parity with co-accused persons, particularly regarding Bail granted to another accused, was applicable to the Respondent.

(d) Whether the Respondent was a beneficiary of the alleged fraudulent availment of Input Tax Credit (ITC) and refund of Integrated Goods and Services Tax (IGST), and the implications of such involvement on Bail considerations.

(e) Whether the discretion exercised by the learned Chief Metropolitan Magistrate (CMM) in granting Bail was judicious and in accordance with legal principles, including the impact of filing of the Chargesheet on Bail considerations.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Legality of Grant of Bail on Third Application Without Change of Circumstances

The Petitioner challenged the Bail granted on 23.12.2020 on the ground that the earlier two Bail Applications had been rejected on 26.10.2020 and 17.11.2020 respectively, and no material change in circumstances had occurred to justify the grant of Bail. Reliance was placed on authoritative precedents which establish that granting Bail by one Judge after rejection by another, without change in fact-situation, is contrary to judicial propriety and virtually overrules earlier decisions without justification.

The Court examined the Respondent's contention that the filing of the Complaint (Chargesheet) on 04.12.2020 constituted a substantial change in circumstances. The Court referred to the precedent in Laxman Irappa Hatti and Suresh vs State of Maharashtra, which recognizes that once a Chargesheet is filed, the considerations for Bail shift from the stage of investigation to the merits of the case, including the gravity of offence and risks of flight or tampering with evidence.

The Court reasoned that the filing of the Chargesheet was a material change justifying reconsideration of Bail. The discretion exercised by the learned CMM in granting Bail was thus legally permissible and not in breach of judicial propriety.

(b) Non-cooperation with Investigation and Its Impact on Bail

The Petitioner highlighted the Respondent's non-cooperation, including failure to appear on summons issued to him and his sons, and refusal or failure to provide Tally Data and other documents critical for investigation. The Petitioner contended that such conduct militated against grant or continuation of Bail.

The Respondent denied these allegations, asserting full compliance with summons and production of relevant documents. The Court noted that the Respondent's non-cooperation was alleged primarily during investigation, but post-Bail, there was no concrete evidence of misuse of liberty or interference with the investigation or trial process.

The Court emphasized that at the stage when Chargesheet is filed, the focus shifts to risks of flight, tampering, or influencing witnesses. Since the evidence was largely documentary and no material was placed on record indicating that the Respondent would tamper with evidence or abscond, the non-cooperation during investigation was not sufficient ground to recall Bail.

(c) Applicability of Parity with Co-accused

The Petitioner argued that the Respondent was not entitled to Bail on parity grounds as the co-accused, particularly Vikas Chowdhary, had been granted Bail earlier under different circumstances. The Petitioner highlighted that Vikas Chowdhary had cooperated with the investigation and offered to reverse ITC, whereas the Respondent had not.

The Court acknowledged the settled legal position that parity is a relevant but not an absolute ground for grant or denial of Bail. It noted that the Respondent's antecedents were less favorable, with involvement in multiple cases of tax evasion and fraud, unlike the co-accused who had better cooperation records.

Thus, the Court concluded that parity did not mandate denial of Bail to the Respondent, especially given the differing facts and conduct of the parties.

(d) Respondent's Role as Beneficiary of Fraudulent ITC and IGST Refund

The Petitioner contended that the Respondent was a direct beneficiary of the fraudulent availment of ITC and refund of IGST to the tune of crores of rupees. The Petitioner explained the mechanism of GST, emphasizing that genuine suppliers pay GST in cash, which is then available as ITC to buyers. The Respondent's companies, however, allegedly showed fictitious purchases and did not pay GST in cash, engaging in circular trading to pass on ITC without actual tax payment.

The Court considered these allegations and the documentary evidence indicating fraudulent activities involving multiple companies controlled or owned by the Respondent. The Court recognized the seriousness of the economic offence committed with deliberate design for personal profit at the cost of the community and national economy, citing the principle laid down in State of Gujarat vs. Mohanlal Jitamalji Porwal regarding the need to preserve public trust in the system.

However, the Court also noted that the Bail stage is not the forum to determine guilt or innocence but to assess risks related to custody, flight, or tampering. The gravity of offence informs the exercise of discretion but does not preclude Bail if other conditions are met.

(e) Exercise of Discretion by the Learned CMM in Granting Bail

The Respondent argued that the learned CMM had rightly exercised discretion under Section 439 Cr.P.C., which confers wide powers to grant Bail. The Respondent emphasized that no hard and fast rules govern Bail, and the Court must consider the evidence and circumstances, including whether the accused would hamper investigation or abscond.

The Court observed that the learned CMM considered multiple factors including the filing of the Chargesheet, the documentary nature of evidence, absence of flight risk or likelihood to influence witnesses, and the Respondent's conduct post-Bail. The Court found no indication of misuse of Bail liberty or obstruction of trial.

The Court held that the discretion was exercised judiciously and in accordance with settled legal principles, and that the Petition to recall Bail lacked merit.

3. SIGNIFICANT HOLDINGS

"The filing of the Chargesheet is, therefore, a substantial change in circumstances."

"Once Chargesheet gets filed, ... what is now material is to consider the gravity of the offence along with the Triple Test viz. whether he is a flight risk or he would influence the witnesses or tamper with the evidence."

"There is nothing to show that he is a flight risk or there is any likelihood of his influencing the witnesses. The discretion has been rightly exercised by the learned CMM, while granting the Bail."

"Parity was only one of the various other grounds that were duly considered while granting Bail."

"There is no ground which is existing to show that the discretion of grant of Bail has not been exercised judiciously by the learned CMM or that there is any misuse or abuse of liberty so granted by the Respondent."

"It is an economic offence committed deliberately by the Respondent with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. Such disregard for the interest of the community, can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner..."

The Court ultimately dismissed the Petition seeking recall of Bail, affirming the grant of Bail as lawful and justified under the circumstances.