Allahabad High Court Grants Bail To Applicant Accused Of Availing Excess Input Tax Credit, As Proceedings U/S 70 And 74 Pending Since Long

The Allahabad High Court has granted bail to the applicant accused of availing excess input tax credit as the proceedings under Section 70 and Section 74 of the Goods and Service Tax Act, 2017 were pending since long.

Section 69 of the GST Act gives power to the Commissioner to order arrest of any person who has committed any offence under Section 132 of the Act. Section 132 lays down a list of offences and the punishments for the same. Section 132(1)(a) and 132(1)(b) provide for offence relating to availment of input tax credit based on fraudulent invoices. The punishment for such offence under Section 132(1)(i) is given as imprisonment for a term of upto 5 years and fine.

While considering Section 69 read with Section 132 of the Goods and Service Tax Act, 2017, Justice Piyush Agrawal held

“Taking into consideration the provisions of law and the fact that the Commissioner is empJustice Piyush Agrawalowered 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.”

Factual Background

Applicant is alleged to have availed input tax credit of more than Rs. 4,28,37,362/- from 2017-18 to 2022-23 without actual movement of goods based on forged and fictitious documents of supplies were procured from various non-existing firms i.e. Santosh Enterprises, Sandip Metal, Honey Metal and Rajpal & sons. It was alleged that the applicant that the applicant had cancelled e-way bills worth Rs. 17,33,83,966 without any explanation and the details of the trucks alleged to have been carrying the goods were not found in toll plaza records.

Counsel for applicant argued that he had been falsely implicated in the crime. It was submitted that the applicant is a proprietor of a duly registered firm under GST and the purchases were made after checking the credentials of the firms. It was submitted that the fact that such dealers are still registered with the GST department was not in dispute.

It was argued that during survey of applicant's business premises no material was found against the firm and the notice issued under Section 74 was duly replied to. However, no order has been passed in the proceedings under Section 74, and the authorities had proceeded to file arrest the applicant on 22.12.2023.

Further, it was argued that the contents of notice under Section 70, Section 74 and the FIR were similar. However, the FIR has not been lodged by any officers of G.S.T. department but by the Incharge Inspector, Special Tax Force, leaving the proceedings under GST Act redundant.

Per Contra, counsel for respondent argued that bail could not be granted to the applicant as there was no actual movement of goods and excess input tax credit was claimed on sham transactions. It was argued that the firms from which transactions have been shown are bogus firms. Further, it was submitted that no movement of goods could be shown by the RFID tags which were to be affixed on the windshield of the trucks as per notification dated 7.9.2018.

It was argued that GST Act does not impliedly or explicitly repeal the provisions of the IPC or CrPC.

High Court Verdict

The Court observed that though proceedings had been initiated under Sections 70 and 74, no final adjudication order was passed by any authority. Further, it was observed that the registration of neither the applicant's firm nor the sellers had been cancelled.

The Court placed reliance on Sanjay Chandra Vs. CBI where the Supreme Court had observed that it is important to consider the delay in concluding a trial while considering grant of bail.

“Here, taking into consideration the course of investigation adopted by the Department, the evidence, so collected, the trial will take considerable time and it may happen, if denied bail, the judicial custody of applicant can be prolonged beyond the statutory period of punishment which is five years.”

The Court held that the punishment for wrong availment of input tax credit is imprisonment which shall extend upto 5 years and fine under Section 69 read with section 132 of the Act. For a registered person, every second offence or thereof shall be punishable. The Court further relied on Section 138 of GST Act which provides that for compounding of all offences can be done before or after prosecution is commenced when payment is made by such person.

While relying on Supreme Court's observation in Sanjay Chandra that “seriousness of the offenses alone is not conclusive of the applicant's entitlement to bail”, the Court granted bail to the applicant.

Case Title: Qamar Ahmed Kazmi vs. State of U.P. 2024 LiveLaw (AB) 133 [CRIMINAL MISC. BAIL APPLICATION No. - 2329 of 2024]

Citation: 2024 LiveLaw (AB) 133

Counsel for Applicant: Mr. Anoop Trivedi, Sr. Advocate assisted by Mr. Ankit Shukla

Counsel for Opposite Party: Mr. Manish Goel, A.A.G. assisted by Mr. Nitesh Kumar Srivastava

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