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TMI Blog2025 (2) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... an error while granting bail to the present respondent-Lovkesh Kumar. The court below has observed that respondent Lovkesh Kumar's statement was not recorded under normal circumstances. The Court also recorded that the proprietor of M/s. Guruvax Rai Praveen Kumar is Sushil Kumar, and no evidence is available on the record indicating that respondent Lovkesh Kumar is the operator of the firm M/s. Guruvax Rai Praveen Kumar. The court below also recorded the finding that the department unintentionally did not arrest the M/s Guruvax Rai Praveen Kumar proprietor to shift the liability on respondent Lovkesh Kumar. The Court observed that the respondent is the proprietor of two firms, M/s. Guruvax Rai Cotton Industries and M/s. Guruvax Rai & Sons have deposited the amount of Rs.65,00,000/-. Therefore, the remaining GST liability of the respondent is less than Rs.5,00,000,00/-, and the case comes under the category of a bailable offence. The said observation of the Court is misconceived and against the settled law canon. The provisions of Section 122 of the CGST and Section 132 of the CGST are entirely different from those of Section 122 of the CGST. 3. Under Section 132 of the CGST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nonexistent firms. It is also contended that the respondent-Lovkesh Kumar, in his statement rendered under Section 70 of Goods and Services Sale Tax Act, has admitted that the entire work of collecting the fake bills from the fake and non-existent firm based in Sirsa, Haryana, was done by him and his nephew, the other coaccused Gautam Garg. The investigation also revealed that the raw slips related to the M/s Gurbax Cotton Industries, M/s. Gurbax Rai and Sons and M/s. Gurbax Rai Praveen Kumar was recovered from the residence of the present respondent, Lovkesh Kumar, and the other co-accused, Gautam Garg. The investigation also revealed that the two groups were found on the Mobile Whatsapp of the present Respondent, of which Lovkesh Kumar was also a member, and evidence of GST evasion by the said firms was found in the said Whatsapp group during the search of the premises of Gautam Garg, blank pre-signed chequebooks of M/s. New Gupta Traders were also found, and on confronting the respondent Lovkesh Kumar, he accepted that he used to withdraw the amount paid by the aforesaid three firms based on fake firms in lieu of receipt of counterfeit bills. The respondent, Lovkesh Kumar, also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted interim relief to the co-accused Gautam Garg and directed that no coercive steps shall be taken against the co-accused Gautam Garg. It is also contended that the complainant has incorrectly moved under Section 132(1)(c), 132(1)(f) of the CGST Act. The Act of 2017 provides a penalty for certain offences under Section 122 and case respondent falls under Section 122 of the CGST Act. It is also argued that the respondent has failed to produce credible and substantial evidence that the respondent fraudulently availed any Input Tax credit or falsified financial records. The investigation is primarily based on voluntary statements that lack corroboration by the director. These statements cannot be the sole basis invoking serious charges under Section 132(1)(c) without directly linking the respondent for committing the said activities. It is also argued that the remand and the arrest issued under Section 59 of the CGST Act against the respondent were also illegal. The department has also failed to record the "necessity to arrest in the arrest memo". 7. Learned counsel for the petitioner has relied on the judgment of Union of India Vs. Ashish Agarwal, (2023) 1 SCC 617, Issardas Daulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds. (xvi) When the bail order is marred by serious flaws that result in a miscarriage of justice. On the touchstone of the above-stated tenets, the Court must analyse whether the impugned order dated 05.04.2024 granting bail needs interference. The learned Court below observed that the respondent is entitled to bail as the memo of arrest lacks grounds for arrest. The learned Court below placed reliance upon the Judgment Hon'ble Allahabad High Court. The provisions of arrest are described explicitly under section 69 of the CGST Act below:- "Where a person is arrested under Sub-Section (1) for an offence specified under Sub-Section (5) of Section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours." (xvii) If the bail order appears to be arbitrary, whimsical, or perverse given the case's specific facts. 10. The Court also analysed that no material is available on the record to suggest that the accused respondent was operating the business of M/s Gurbax Rai Praveen Kumar. 11. The analysis of the court below suffers from perversity as it is not the conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that many documents and electronic evidence were collected, and the respondent was found to be directly involved in generating the false and fabricated goodless invoices. Also, the Court failed to appreciate that the respondent had wrongly availed ITC by generating fake invoices, causing wrongful gain to the three companies and wrongful loss to the Government. The ITC availed by the respondent amounts to Rs.8.59 crores. While granting bail to economic offenders, the Hon'ble Apex Court has reiterated that economic offences are class apart and need to be visited with different approaches in bail. While considering the bail application of the respondent, the Court did not consider the gravity of the offences and enlarged the respondent's bail, misconstruing the facts and the legal position. It is also pertinent to mention here that while considering the bail application, the Court shouldn't enter into the question of the legality of the arrest; the legitimacy of the arrest can be questioned only if there is a gross violation of any provision of the Act. In the present case, the respondent was duly informed regarding the grounds of arrest before arresting the respondent. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder; (xvii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher; (b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. (3) Any person who-- (a) aids or abets any of the offences specified in clauses (i) to (xxi) of subsection (1); (b) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (d) fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat subsection shall be cognizable and non-bailable." 17. Thus, it is apparent from the bare perusal of Section 132 (1) (c) that whoever avails input tax credit using the invoice or bill and fraudulently availed input tax credit without receiving any goods, shall be punishable under Clause (l) with imprisonment for a term which may extend to 5 years. The offences committed under Clause a, b or c shall be cognizable or non-bailable under the provisions contained under Section 132(5) of the CGST Act. 18. Sections 122 (viii) and 122 (x) explicitly address the unlawful acquisition of refunds and falsifying final records or creating fake accounts. Under Section 132 (c), it is mandated that invoices or bills cannot be utilised without the corresponding supply of goods or services. In this case, the respondent wrongfully availed of input tax credit without receiving any goods, relying on forged bills from non-existent companies. The evidence unmistakably establishes that the respondent was the proprietor of M/s Gurbax Rai & Sons and M/s Gurbax Rai Cotton Industries. Investigative materials have further revealed that the respondent fraudulently availed input tax credit amounting to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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