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August 22, 2020

CA aged 27 in jail for GST Registration of alleged fraudulent firm gets Bail

by facelesscompliance in GST, Legal Court Judgement

CA aged 27 in jail for GST Registration of alleged fraudulent firm gets Bail

The intent to “arrest” by GST authorities is based upon contravention of certain provisions of law or upon indulgence in some activities which are described as offence under Goods and Service Tax.

Section 132 has provision for punishment for commitment of any offence described in the section.  According to Section 132(1), whoever commits any of the following offences:-

  1. supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made there under, with the intention to evade tax;
  2. issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made there under leading to wrongful availment or utilisation of input tax credit or refund of tax;
  3. avails input tax credit using such invoice or bill referred to in clause (b);
  4. collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
  5. evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);
  6. falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
  7. obstructs or prevents any officer in the discharge of his duties under this Act;
  8. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made there under
  9. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made there under
  10. tampers with or destroys any material evidence or documents
  11. fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
  12. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section,

shall be punishable in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds 500 lakh rupees, with imprisonment for a term which may extend to 5 years and with fine

Let us refer to the case of Paridhi Jain Vs State (Rajasthan High Court) where bail applications were filed on behalf of the petitioner who was in custody for the offences under Section 132[1][i] of Goods and Service Tax Act for GST registration of alleged fraudulent firms.

Submissions by the Petitioner

  • The present petitioner is a professional Chartered Accountant and she was getting the firms registered on the behalf of her clients after collecting requisite documents from them.
  • According to the petitioner, it was the duty of the competent authority of the department to get the details furnished by her, verified as per the KYC (Know Your Customer) norms
  • The petitioner submitted that she was facing imprisonment for more than 1 month.
  • As per Section 132(1)(i) of the Central Goods and Service Tax Act, if an amount of Rs.3 crores is wrongly received by a person as an input tax credit, then the person is liable to undergo punishment of 3 years and if this amount exceeds to Rs.3 crores and over Rs.5 crores, then he has to undergo punishment of 5 years.
  • Petitioner further submitted that the amount of wrongly availed input Tax credit is yet to be ascertained by the authorities and the offences alleged against her are still under trial by Magistrate.
  • It was submitted that the amount which had come in her bank account as well as in her close relatives’ accounts was very well explained.
  • The petitioner also undertook to co- operate with the investigating authority as and when called for and any violation in providing any information or document asked for by the departmental authorities may result into the cancellation of liberty of bail granted by this Court.

Submissions by the State

  • However, in contradiction, Additional Advocate General appearing for the State as well as Special Public Prosecutor appearing for the GST Department submitted that the investigation was still in progress and will take considerable time to conclude as also the actual transaction of the money has not yet been ascertained.
  • They did not dispute the fact that if the petitioner undertook to cooperate with the investigation of the case, the benefit of enlargement of bail cannot be seriously opposed by them.

Observations of Rajasthan HC

  • Having regard to the facts and circumstances of the case and upon a consideration of the arguments advanced and the fact that the petitioner being a practising Chartered Accountant and a lady of 27 years was facing imprisonment for last more than 1 month and in view of the undertaking submitted by the petitioner to fully cooperate with the investigating agency and provide the information/documents asked for by the investigating agency, the Rajasthan High Court was of the opinion that the bail applications filed by the petitioner was deserved to be accepted.
  • Consequently, the bail applications were allowed.
  • It was ordered that the petitioner Paridhi Jain arrested shall be released on bail provided she furnishes a personal bond of Rs.10,00,000 each with two sureties of Rs.10,00,000 out of which one of the surety will be of a close family member each.
  • She was ordered to deposit her passport before the Investigating Authority and was told to not leave the country without the prior permission of the concerned Court.

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