Tax Invoice Scam & Fake Timber Sale Worth ₹20 Crore: Uttarakhand HC Upholds Bail Cancellation Of Accused Who Allegedly Operated Fictitious Firms

The Uttarakhand High Court has upheld the trial court's order cancelling bail to Mohd. Shahnawaz, the main accused who orchestrated the fake supply of timber and tax evasion scam, which cost the state exchequer over Rs 20 Crores.

The single-judge bench of Justice Rakesh Thapliyal refused to allow the S.482 CrPC application preferred by the applicant/accused against the cancellation of the bail order passed by Sessions Judge, Udham Singh Nagar.

“….conduct of the applicant, seeking regular bail without disclosing the material facts, about the criminal history and the facts about his conviction clearly reveals that he procured the bail by way misrepresentation and in such an eventuality, the same Court was right in cancelling the bail”, the bench sitting at Nainital observed.

The court agreed with the Additional Advocate General's contention that the accused unjustly secured the bail by deliberately misrepresenting the facts concerning his criminal history and past conviction in a similar economic offence.

The court found that his criminal history was suppressed in his first bail application before the Sessions Judge. Later, through objections, the respondent state revealed the past criminal history of the accused. At this juncture, the applicant tactically withdrew the first bail application and filed another one after 5 days. His second bail application was allowed by the trial court. The bail granted on 05.03.2024 was revoked later, after the complainant filed an application citing misrepresentation and subsequent threatening of witnesses.

“…The question is if he has moved the First Bail Application, wherein the objections were called and the objections were filed by disclosing the criminal history of the applicant, then why he has not pressed the First Bail Application. Furthermore, even if he has not pressed First Bail Application, why he has not disclosed the criminal history in the Second Bail Application”, the court pointed out.

The High Court also opined that there was no irregularity in the same court touching upon the merits of the case while cancelling bail.

“…To examine this issue, this Court also examined the allegation which appears to be serious in nature and the present applicant is certainly indulged in committing the economic offences due to which he caused a huge revenue and tax losses to the government exchequer, amounting to more than Rs. 20,00,00,000/-…”, the single bench added.

The applicant, after an investigation undertaken by the Special Investigation Branch (SIB), State Tax, Rudrapur, was arraigned for offences under Sections 132(1)(b), 132(1)(c) and 132(1) of Uttarakhand Goods and Service Tax Act/The Central Goods and Service Tax Act, 2017. The State Tax Commissioner also accorded the sanction for prosecution under Section 132(6) of the Uttarakhand GST Act. As a result, the Deputy Commissioner of SIB, as the 'authorised officer' under the State's GST Act, preferred a complaint before CJM, Udham Singh Nagar.

According to the investigation team, the applicant is the kingpin operating the nexus of around 28 known shell firms registered under various names in the Jaspur area, involved in the scam of issuing and selling fake invoices of timber to buyers from many states. The invoices were issued without the actual supply of goods, thereby causing immense loss to the government exchequer, the complainant has alleged.

The SIB had also collected various documents indicating the applicant's role in the fraudulent generation of e-way bills, fake bilties, Forest (Transit Pass) & Mandi passes without getting actual sale-purchase of wood. According to the SIB, by issuing fake invoices without the actual movement of goods, the applicant has passed on fake Input Tax Credit benefits to dealers within Uttarakhand and in the nearby states.

The applicant was allegedly operating the entire scheme by using phones and laptops, and utilizing the assistance of some youngsters in the transportation of cash, e-way bills and debit-credit transactions, says the complainant.

Counsel for the Applicant- Adv. Lalit Sharma

Counsel for the State- G.S. Sandhu and Bhaskar Chandra Joshi, A.G.A. 

Case Title: Mohd. Shahnawaz Hussain v. State of Uttarakhand & Ors.

Case No: C482 Application No. 1000 of 2024

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