2025 (6) TMI 1258 - HC - GST

Seeking grant of bail - operating certain firms which were registered in the name of some other persons issuing the fake invoices and claiming input tax credit (ITC) ultimately evading GST - HELD THAT - The allegation against the petitioner is that he by actually operating 44 firms which were registered in the names of some other persons has issued the fake invoices and claimed the input tax credit (ITC) and ultimately made evasion of GST amounting to about Rs.26 crores though the Department after making a thorough investigation has found the substance in the allegations against the accused petitioner and submitted their report. However the said allegations against the accused petitioner are to be proved on the basis of evidence to be led before the trial court. The punishment for the alleged offence is given under section 132 of the Act of 2017 and the maximum punishment for amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds five hundred lakhs rupees would be imprisonment for a term which may extend to five years and with fine meaning-thereby the maximum punishment for the alleged offence is imprisonment for five years. In the present case the accused petitioner is in custody since 25.03.2025 and looking to the fact that the trial of the case has not yet started and in all there are 46 prosecution witnesses to be examined by the trial court it can be very well presumed that the the conclusion of trial will take long time. The accused petitioner is in custody since 25.03.2025 and the Department after completion of the thorough investigation submitted its report and the trial of the case has not yet started wherein 46 witnesses are to be examined which may take considerable time and so also the observations of the Hon ble Apex Court in the case of Vineet Jain and the fact that the learned Public Prosecutor has not been able to point out any extra ordinary circumstances in the present case for rejection of bail application of the accused petitioner this Court without expressing any opinion on the merits and demerits of the case deems just and proper to release the accused petitioner on bail. It is directed that the accused petitioner shall be released on bail provided he furnishes a personal bond in the sum of Rs. 1, 00, 000/- together with two sureties in the sum of Rs. 50, 000/- each to the satisfaction of the trial Court with the stipulation that he shall appear before the trial Court or any other Court to which the matter is transferred on all subsequent dates of hearing and as and when called upon to do so - Bail application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the accused petitioner, implicated under section 132(1) of the Rajasthan Goods & Service / Central Goods & Service Tax Act, 2017, is entitled to bail pending trial.

- Whether the allegations of issuing fake invoices through firms registered in others' names, resulting in GST evasion amounting to Rs. 26 crores, are sufficiently substantiated to deny bail.

- The applicability of the maximum punishment prescribed under section 132 of the Act of 2017 and its impact on bail considerations.

- The effect of the completion of investigation and filing of charge-sheet on the bail application.

- The relevance of the accused's custodial period and the anticipated duration of trial in deciding bail.

- The consideration of precedents and principles relating to bail in economic offences involving GST evasion.

- Whether any extraordinary circumstances exist to justify refusal of bail.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Entitlement to Bail under Section 132(1) of the GST Act, 2017

The legal framework governing the offence is section 132(1) of the Rajasthan Goods & Service / Central Goods & Service Tax Act, 2017, which prescribes punishment up to five years imprisonment and fine for evasion of tax or wrongful claim of input tax credit exceeding Rs. 500 lakhs. The offence is compoundable and triable by a Magistrate.

The Court noted that the accused petitioner was alleged to have operated 44 firms registered in others' names to issue fake invoices and claim input tax credit, resulting in evasion of approximately Rs. 26 crores. The State GST Department conducted a thorough investigation and filed a charge-sheet without leaving any investigation pending against other implicated persons or firms.

Precedents relied upon by the petitioner's counsel, including judgments from the Apex Court and coordinate benches of the High Court, emphasized the principle that bail should not be denied in cases where the maximum punishment is limited and the accused has already undergone significant custodial detention. The Court referred specifically to the Vineet Jain case where the Apex Court underscored that in offences triable by a Magistrate with limited sentences, bail should ordinarily be granted unless extraordinary circumstances exist.

The Court also highlighted the fundamental principle of criminal jurisprudence that every accused is presumed innocent until proven guilty by a competent court, citing the Apex Court's ruling in Ramesh v. State of Karnataka.

The Public Prosecutor argued the serious nature of the offence and its detrimental impact on the State's economy. However, the Department had completed its investigation and filed the charge-sheet, and no pending investigation remained against other persons allegedly involved.

The Court observed that the trial had not yet commenced and 46 prosecution witnesses were to be examined, indicating a protracted trial duration. Given the accused's custodial period since 25.03.2025 and the likelihood of a lengthy trial, the Court considered the delay in conclusion of trial a relevant factor favoring bail.

Issue: Application of Precedents and Bail Jurisprudence

The Court analyzed multiple judgments cited by the petitioner, including those of the Apex Court and coordinate benches, which consistently held that in cases involving economic offences punishable with imprisonment up to five years, bail should not be routinely denied, especially when the accused is not a flight risk and no extraordinary circumstances are shown.

The Vineet Jain judgment was pivotal, where the Apex Court granted bail to an accused involved in similar GST evasion allegations, emphasizing the limited sentence, documentary nature of evidence, absence of antecedents, and the trial being triable by a Magistrate. The Court noted the surprise expressed by the Apex Court at the denial of bail at various levels in that case and its observation that ordinarily bail should be granted in such circumstances.

The Court also referred to a coordinate bench's earlier decision in Manoj Kumar Jain, where bail was granted under similar facts and circumstances, reinforcing the principle that the compoundable nature of the offence and the trial's anticipated duration are material considerations.

Issue: Consideration of Custodial Period and Trial Duration

The accused petitioner had been in custody since 25.03.2025, and the charge-sheet was filed on 22.05.2025. The trial had not commenced, and 46 witnesses were to be examined, indicating that the trial would be time-consuming. The Court considered the prolonged pre-trial detention without commencement of trial as a factor favoring bail.

The Court underscored that the accused's status as a businessman who has contributed substantially in tax payments and the absence of any indication that he would abscond or tamper with evidence further supported the grant of bail.

Issue: Absence of Extraordinary Circumstances to Deny Bail

The Public Prosecutor failed to point out any extraordinary circumstances warranting rejection of bail. The Department had completed the investigation and was proceeding against the accused petitioner alone. The cancellation of dummy firms was already initiated by the Department. No material was placed to suggest risk of flight, tampering with evidence, or repetition of offence by the accused.

The Court found no justification to deny bail on these grounds.

3. SIGNIFICANT HOLDINGS

"The maximum punishment for the alleged offence is imprisonment for five years."

"It is a well settled law that the presumption of innocence is available to an accused / person under the fundamental principles of criminal jurisprudence that every person shall be presumed innocent unless he is proved guilty by the competent Court."

"In cases where the offence is compoundable and triable by the Magistrate and the accused has already suffered considerable custody, bail should ordinarily be granted unless extraordinary circumstances exist."

"The trial of the case is likely to take considerable time as there are 46 prosecution witnesses to be examined and the trial has not yet commenced."

"The Department has completed investigation and filed the charge-sheet; no investigation remains pending against other implicated persons or firms."

"The accused petitioner is a businessman who has contributed much in tax and there are no chances of his absconding."

"The learned Public Prosecutor has not been able to point out any extraordinary circumstances for rejection of bail application."

"Accordingly, the accused petitioner is directed to be released on bail upon furnishing a personal bond of Rs. 1,00,000/- with two sureties of Rs. 50,000/- each, with the stipulation that he shall appear before the trial Court on all subsequent hearings and shall not leave India without prior permission."