TMI Blog2022 (3) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... ount in such manner as may be prescribed. The compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences, on payment of compounding amount as may be determined by the commissioner, the criminal proceeding already initiated in respect of the said offence shall stand abated. The Commissioner is empower to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant - applicant is ordered to be released on regular bail on executing a personal bond of ₹ 1,00,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed. Application allowed. - R/CRIMINAL MISC.APPLICATION NO. 91 of 2022 - - - Dated:- 7-3-2022 - HONOURABLE MS. JUSTICE GITA GOPI MR NIRUPAM NANAVATY SENIOR ADVCOATE WITH MR. RAHUL R DHOLAKIA(6765) for the Applicant(s) No. 1 MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 2 MR PRANAV TRIVEDI APP for the Respondent(s) No. 1 ORDER 1. The present application has been file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting firm which in turn received ₹ 10.36 crore from another non-existent firm i.e. M/s. Ronak Traders which has no GSTR-2A, without receipt of goods mentioned therein and since the entire payment has been made through utilisation of ITC which was not legally available to both these firms, and therefore no tax has been paid in respect of the invoices issued by these two firms and therefore the availment of ITC of ₹ 10.29 crore was not admissible as per section 16(2)[(b) (c)] of CGST Act, 2017. 2.3 The applicant was arrested on 01.09.2021 under the provisions of section 69 of the Central Goods and Services Tax Act, 2017 and produced before the Court of Additional Chief metropolitan Magistrate, Ahmedabad, thereby he was sent in judicial custody. The applicant thereafter preferred bail application under the provisions of section 437 of the Code before the court of learned Magistrate, which came to be rejected vide order dated 14.09.2021. Against the same, the applicant approached the Court of learned City Sessions Judge, Ahmedabad by preferring Criminal Misc. Application No.7105 of 2021, however, the same also came to be rejected vide judgment and order dated 11.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making payment of goods and tax to its suppliers as also verifying their status on website at the time of purchase of goods and the status of all the suppliers were active on the date of the purchase of goods and initially the allegation was to the tune of ₹ 10.29 crores while the applicant was arrested, however, the same was worked out to be ₹ 14.89 in the complaint sans any admissible evidence. 3.2 Mr. Nanavaty submits that the words reason to believe used in section 69(1) of the Act suggest that a statute be it of any nature, civil, criminal, quasi criminal, quasi civil has a definite destination to reach which in legal parlance is described as attainment of the object for which the law has been enacted for and to analyze the character of a statute, it has to be read as a whole then only its true character and application can be understood. He states that the GST Act is essentially a fiscal statute and the statement of object and reason has to be read together which is aimed at realization of revenue. He submits that in the present scenario, the statute itself provides a mechanism to recover the amount payable to the government, however no such steps are tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific intelligence which indicated that there were certain firms who were operating only on paper and were passing on inadmissible ITC by issuing invoices without supplying the goods mentioned therein. It is stated that M/s. Alina Traders and M/s. Galaxy Traders had received inadmissible ITC from M/s. S.K. Traders, who in turn had received inadmissible ITC from M/s. Ronak Traders. There was no GSTR-2A return which confirms that M/s. Ronak Traders had no inward supply and no ITC in their account, whereas all the payment of GST amounting to ₹ 10.36 crores for their outward supply had been shown to be made only to M/s. S.K. Traders by utilising ITC. He stated that similarly, M/s. S.K. Traders have shown outward supply on payment of GST amounting to ₹ 8.18 crores to M/s. Alina Traders and outward supply on payment of GST amounting to ₹ 2.11 crores to M/s. Galaxy Traders using ITC, which was wrongfully passed on by M/s. Ronak Traders. 4.1 Mr. Sharma further stated that based on these facts, a search warrant was issued to search principal place of business of M/s. Ronak Traders stated to be at Shop No.4, Survey No.239, Plot No.58-59, Sarkhej Road, Fatehwadi, Ahmedab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd requested to close the inquiry by transferring the inquiry to State GST authorities under section 6 of Central/Gujarat GST Act 2017. 4.5 Mr. Sharma contended that vide letter dated 02.03.2021, the applicant was informed that the inquiry at SGST was closed, as his request for transfer of case to SGST does not fall under section 6 of the said Act, 2017 thus another summons dated 09.03.2021 was issued to him directing to appear on 11.03.2021 to tender his statement and to approach the SGST authorities for closure report. Mr. Sharma stated that another summons was issued directing him to appear on 17.03.2021 to tender his statement, but he neither appear nor made his statements/submissions. 4.6 Mr. Sharma submits that it can be seen from letter dated 24.02.2021 of the Assistant Commissioner of State Tax, Ahmedabad that their inquiry was related to availing of fake ITC of ₹ 10,03,035/- by M/s. Alina Traders from M/s. Alfa Enterprises and against the said inquiry of the State GST, M/s. Alina Traders made payment of ₹ 10,03,035/- along with interest and penalty, which clearly establishes that the applicant was involved in receiving and utilising fake ITC in the past a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and availing and utilising the ITC of ₹ 14.89 crore. He stated that since the amount involved is more than ₹ 500 Lakh, the said offences are cognizable and non-bailable as per section 132(1)(i) and 132(5) of the CGST Act, 2017 and therefore urged not to exercise discretion in favour of the applicant to enlarge him on bail. 4.10 Mr. Sharma contended that the evidence collected so far clearly indicates that the accused is the mastermind in creating fake firms who subsequently defrauded the government exchequer to the tune of ₹ 14.89 crores. Further, from the statement of Shroffs/Angadiya, it is clearly established that the accused is operator of non-existent firms and directly involved in this scam. He contend that the applicant had never cooperated with the investigation and considering the nature of offence committed by the applicant he was arrested on 01.09.2021 and prosecution was launched on 29.10.2021, but the investigation is still going on and the other stake holders or beneficiaries of said illegal activities of availing and utilizing bogus ITC on the basis of invoices without receipt of goods are also under investigation and if he released on bail, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Civil Application No.13679 of 2019 with allied matters (ii) Union of India Vs. Rajnish Kumar, Tuli, [special Leave Criminal Appeal No.30 of 2010], (iii) Dukshishyam Benupani, Asstt. Director, Enforcement Directorate (FERA) Vs. Arun Kumar Bajoria [(1988) 1 SCC 52] (iv) Paresh Nathalal Chauhan Vs. State of Gujarat [Criminal Misc. Application No.6237 of 2020] (v) P.V. Ramana Reddy Vs. Union of India [Writ Petition Nos.4764 of 2019 Ors.] (vi) Union of India Vs. Sapna Jain [SLP (Crl.) 4322-4324/2019] (vii) judgment of Bombay High Court in case of Mr. Tejas Pravin Dugad Vs. Union of India Ors [Criminal Writ Petition No.1715 of 2020] (viii) Ramjas Foundation and Ors. Vs. UOI And Ors. [Civil Appeal No.6662 of 2004]. 4.15 Shri Sharma submitted that length of the punishment prescribed to the offence should not weigh higher than magnitude of the total scam undertaken to defraud the government. The fraudulent ITC claim has created a huge liability for the Government and submitted that if the applicant is released on bail he may try to influence the witnesses, who have given evidence against him and thus may try to weaken the case of the Department. Mr. Sharma submitted that while sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiderable time and it may happen, if denied bail, the judicial custody be prolonged beyond the statutory period of punishment which is for five years. 5.3 Section 132(1)(i) provides for punishment as that in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine; and section 132(2) provides that, where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine. 5.4 Section 138 of the Act makes provision for compounding of offences under the Act, even after the institution of prosecution, on payment by the person accused of the offence, such compounding amount in such manner as may be prescribed. The compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences, on payment of compounding amount as may be determined by the commissioner, the crimin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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