Gujarat High Court Grants Bail In Case Of Alleged Issuance Of Invoices Without Supply Of Goods Under CGST Act

The Gujarat High Court has granted bail for an individual implicated in a case related to an FIR filed under Sections 132(1)(b) and (1) of the Central Goods & Services Tax Act, 2017. The case revolves around the purported issuance of GST invoices without actual delivery of goods, allegedly resulting in a significant financial loss to the government treasury.

Justice Divyesh A Joshi presiding over the matter, passed the Order granting bail in an application is filed under Section 439 of the Code of Criminal Procedure, 1973, for regular bail in connection with an FIR registered with the Directorate General of GST Intelligence, Rajkot of the offence punishable under Sections 132(1)(b) and (1) of the Central Goods & Services Tax Act, 2017. 

The Senior advocate appearing on behalf of the applicant asserted that the accused, who is also the proprietor of M/s. Remgold International registered under the CGST Act, was solely engaged in legitimate trading and brokerage activities in Rajkot and had no involvement in the present case. Heargued that the accused was unjustly implicated, alleging that in collusion with other individuals, they had supposedly issued GST invoices without actual supply of goods, resulting in a purported loss of Rs. 33 crores to the government exchequer.

Furthermore, the counsel highlighted that the Directorate General of Goods & Services Tax Intelligence, Rajkot Regional Unit, conducted searches at the applicant's business and residential premises on specific dates, during which the accused fully cooperated, providing all requested information and surrendering documentary and electronic evidence. Subsequently, the respondent Office subpoenaed the accused under Section 70 of the Central Goods & Services Tax Act, 2017, for recording his statement post the conclusion of the search and seizure proceedings.

The counsel contended that fearing arrest, the applicant sought anticipatory bail from the Sessions Court, which was denied. Dissatisfied, the applicant approached the High Court for pre-arrest bail, which was later withdrawn. He pointed that in the interim, the applicant was arrested by the Bhavnagar Police for unrelated offenses, and upon transfer, came into custody of the respondent-authority.

He submitted that the purpose of arrest, when the applicant was cooperating, posed a question regarding the malicious intent of the prosecuting authority because while rendering his cooperation, the applicant was coerced into signing several statements and documents by the investigators.

The prosecution, represented by advocate Nikunt Raval, rebuffed the applicant's claims, asserting their involvement in an intricate scheme aimed at fraudulently obtaining Input Tax Credit (ITC) through the issuance of bogus invoices. Raval supported his argument by referencing statements from co-accused individuals and presenting recovered documents as evidence. He contended that the magnitude of the offense, amounting to over Rs.33 crores, justified severe measures under Section 132(1)(i) and 132(5) of the CGST Act, 2017.

After considering the arguments presented by both sides, the Court noted that there was consensus regarding the applicant's involvement in significant and serious economic offenses.

The Court asserted, "The department has already filed a complaint against the applicant, wherein list of documentary evidences has also been furnished. The proprietors of other firms have also been made witnesses in the complaint, who were also the beneficiary of the allegedly illegal conduct of the applicant."

"The evidence collected against the applicant has been described in the complaint. The offences with which the applicant-accused has been indicted, are all exclusively triable by the Court of Magistrate. The applicant is in jail since 07.11.2023 and there is no allegation that he is having any past criminal history of any economic offence against him," the court added.

Citing the Supreme Court's ruling in Sanjay Chandra v. CBI, [2012 1 SCC 40], and the case of State of Kerala v. Raneef, [(2011) 1 SCC 784], the court emphasized the significance of considering trial delays in bail applications.

The court expressed concern that considering the investigative process and evidence collection, the trial might endure a significant duration. Consequently, if bail is denied, the applicant's judicial custody could exceed the statutory punishment period of five years stipulated under the Act, the Court further expressed.

In its ruling, the court elucidated on Section 132(1)(i) of the statute, which prescribes penalties for offenses involving tax evasion or misuse of input tax credit or wrongful refund exceeding five hundred lakh rupees. The court noted that such offenses could entail imprisonment for up to five years along with a fine. Additionally, the court referred to Section 132(2) of the statute, which stipulates enhanced penalties for repeat offenders, with imprisonment for up to five years and a fine for each subsequent offense.

The court also made reference to Section 138 of the Act, which allows for the compounding of offenses under the Act, even after the initiation of prosecution. This provision enables individuals accused of offenses to settle the matter by paying the prescribed compounding amount, which includes the tax, interest, and penalty involved in the offenses. Upon payment of the compounding amount as determined by the commissioner, ongoing criminal proceedings related to the offense are to be abated.

"Taking into consideration the aforesaid provisions of law and the fact that the Commissioner is empowered to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court deems it proper to exercise discretion in favour of the applicant- accused." the Court held.

Furthermore, the court considered the nature of the offense, arguments presented by the respective counsels, evidence indicating the accused's involvement, the broader principles of Article 21 of the Constitution of India, and legal precedents such as the judgments in Dataram Singh Vs. State of U.P. and another (2018)3 SCC 22 and Satendra Kumar Antil Vs. C.B.I., S.L.P. (CRL.) No. 5191 of 2021, decided on 11.7.2022. Without delving into the merits of the case, the court concluded that the applicant had established a case for bail.

Consequently, the court allowed the application and ordered the release of the applicant on regular bail, contingent upon the execution of a personal bond of Rs. 15,000/- (Rupees Fifteen Thousand only) along with one surety of the same amount, subject to the satisfaction of the trial court and certain conditions.

Case Number: R/CRIMINAL MISC.APPLICATION (FOR REGULAR BAIL - AFTER CHARGESHEET) NO. 2455 of 2024

Case Title: JATINBHAI PRAFULBHAI KAKKAD Versus STATE OF GUJARAT & ANR.

LL Citation: 2024 Livelaw (Guj) 29

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