Economic Offences Need A Different Approach: Rajasthan High Court Declines Bail Over Inadmissible Input Tax Credit Worth 1032 Crores

Recently, Rajasthan High Court refused to grant bail to a person who is accused of operating nearly 294 fake firms for the purpose of passing inadmissible input tax credit worth Rs. 1,032 crores fraudulently.

The court also emphasised that economic offences create a huge loss to the public exchequer, which demands that such 'white collar crimes' be considered as grave offences affecting the 'economy of the nation as a whole'.

The single-judge bench of Justice Anoop Kumar Dhand also dwelled on 'white collar criminals' pocketing a large chunk of money earmarked for developmental projects in the country.

“…During last few decades, our Country has seen the execution of various plannings involving huge expenditure by the Government for various nation-building activities. The corrupt officers, businessmen and contractors never had been so good in making their true contribution in the development works of the nation. No doubt the country did make some progress…”, the court opined that even though there has been progress, the illegal activities of such criminals have resulted in a huge loss of crores of rupees.

Though the accused petitioner was only charge-sheeted for the offence under Section 132 (1) (b), (c), (f), (j), (l) of the CGST Act, 2017 which is punishable with an imprisonment of 5 years, the court clarified that this aspect in itself won't be a sufficient ground for the grant of bail. According to the court, even though the petitioner was arraigned for offences triable by the Judicial First-Class Magistrate as in the current scenario, no straight jacket formula can be applied for grant of bail based on such factors.

When a common man is paying all kinds of taxes including CGST and SGST to the concerned governments, persons like the petitioner are obstructing the development of the nation by creating fake firms and causing a loss of over 1000 crores, the court observed. Economic offences require a different approach in matters of bail given that it's a misuse of public exchequer, the court further opined.

“…The economic offence, having deep rooted conspiracies and involving huge loss of public exchequer, needs to be viewed seriously…and thereby posing serious threat to the financial health of the Country. Economic offence is always committed by a person with calculated design profiting himself regardless of the consequences to the community”, Justice Dhand went on to note in the order.

The bench sitting at Jaipur also opined that anti-social activities of those from the upper strata in their occupations have been given due importance with the advent of the CGST Act in 2017.

Relying on Nimmagadda Prasad vs. Central Bureau of Investigation 2013(7) SCC 466, Justice Dhand took the stance that bail must be denied considering the nature of allegations against the petitioner, gravity of the alleged offence and the evidence collected by the Director General of Goods and Services Tax Intelligence. One more ground was also taken into consideration since a co-ordinate bench of the High Court denied bail to co-accused Anil Kumar who conspired with the petitioner Ashutosh Garg.

Background

The petitioner had given a confessional statement under Section 70 [Power to summon persons to give evidence & produce documents] of the CGST Act, 2017 which resulted in him getting impleading as an accused. According to the counsel, such a confessional statement of the accused was inadmissible as evidence at the stage when the grant of bail is considered, especially since there has been no adjudication of the allegation on merits as per Section 136 [Relevancy of statements under certain circumstances] of CGST Act.

The counsel for the Union of India submitted that the confessional statement revealed how the petitioner operated 294 fake firms for evading tax to the tune of Rs. 1,032 crores. In addition to the confessional statement and registering a separate case against the co-accused, physical verification of over 50 fake firms was carried out by the investigation team which proved that the addresses of all those firms are one and the same, it was contended.

Earlier, relying on a piece of information received by DGGI, Jaipur Zonal Unit, the petitioner was investigated and arrested for issuance of fake invoices of menthol without supply of underlying goods in his office. A detailed investigation that ensued brought to light the magnitude of tax fraud allegedly committed by the petitioner, using the front of 294 fake firms owned by himself for issuing fake invoices to pass inadmissible input tax credit.

For Petitioner: Mr. Prateek Kasliwal with Mr. Shubham Bhati and Ms. Mausi Dhadhich

For Respondents: Mr. Kinshuk Jain with Mr. Saurabh Jain

Case Title: Ashutosh Garg v. Union of India

Case No: S.B. Criminal Miscellaneous Bail Application No. 548/2024

Citation: 2024 LiveLaw (Raj) 45

Click Here To Read/ Download Order