Gujarat High Court Grants Bail To Metal Industries Proprietor In Rs. 6.67 Crore GST Evasion Case

The Gujarat High Court has granted bail in a case of GST evasion amounting to Rs. 6.67 Crores to the proprietor of Metal Industries, a business engaged in manufacturing and trading brass products, metal scrap, etc. in Jamnagar after 79 days of cost

Justice MR Mengdey presiding over the case, held, “In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the FIR, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail.”

This decision followed an application filed under Section 439 of the Code of Criminal Procedure, 1973, seeking regular bail. The applicant's advocate argued that the goods, purchased from M/s. Om Bana Enterprise in Coimbatore, Tamil Nadu, were intercepted by the State Tax Officer in Jamnagar on April 8, 2022. The purchases were made through valid tax invoices, with payments processed via banking channels. All relevant documents proving the legitimacy of the transactions, including proof of delivery, were in possession of the complainant. No outstanding recovery was pending against the applicant.

The counsel contended that the prosecution failed to provide any incriminating evidence linking the applicant to the alleged offence. The allegations in the Arrest Memo were deemed general and vague, relying solely on presumptions and assumptions without concrete evidence. The memo lacked specific details regarding the offences allegedly committed by the applicant.

Furthermore, the advocate argued that claiming ineligible tax credit alone does not constitute an offence under Section 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017, especially without allegations of receiving invoices without corresponding goods delivery. It was emphasised that the complainant only questioned the applicant's purchases and not its sales, highlighting the legal principle that sales cannot occur without preceding purchases.

Alternatively, the APP representing the respondent-State objected to granting regular bail, asserting that the applicant was arrested under Section 69 of the GST Act for allegedly committing an offence punishable under Section 132(1)(c) of the GST Act.

Additionally, it was argued that the applicant had unlawfully claimed input tax credit amounting to Rs. 6.67 Crores based on purchases from various registered entities, which, according to the revenue, were non-existent.

Moreover, it was contended that the extent of tax evasion surpassed the thresholds necessitating the accused's arrest as outlined in Section 132 of the GST Act. Thus, the Assistant Public Prosecutor urged the dismissal of the present application.

After thoroughly examining the allegations, Shah's detention since the date of arrest, and pertinent legal precedents, notably the Sanjay Chandra v. Central Bureau of Investigation case, the High Court found it appropriate, prima facie, to exercise its discretion and grant Shah bail.

Consequently, the Court approved Shah's bail application, stipulating his release upon furnishing a personal bond of Rs. 10,000 along with one surety. Several conditions were imposed to ensure Shah's cooperation with the investigation and adherence to legal proceedings.

"At the trial, the trial Court shall not be influenced by the observations of preliminary nature qua the evidence at this stage made by this Court while enlarging the applicant on bail," the Court concluded.

Case Title: Dipen Champaklal Shah Vs State of Gujarat

LL Citation: 2024 LiveLaw (Guj) 71

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