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September 16, 2020

HC reduces Bail bond for accused involved in Fake GST Invoices

by shivam jaiswal in GST, Legal Court Judgement

HC reduces Bail bond for accused involved in Fake GST Invoices

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) of the CGST Act, whoever commits any of the following offences:-

a. 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

b. 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

c. avails input tax credit using such invoice or bill referred to in clause (b)

d. 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

e. evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d)

f. 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

g. obstructs or prevents any officer in the discharge of his duties under this Act

h. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, 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

i. 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

j. tampers with or destroys any material evidence or documents

k. fails to supply any information which he is required to supply under this Act or the rules made there under or supplies false information

l. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, shall be punishable:-

1. in cases where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 500 lakh, with imprisonment which may extend to 5 years and with fine;

2. in cases where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 200 lakh but does not exceed Rs 500 lakh, with imprisonment which may extend to 3 years and with fine;

3. in the case of any other offence where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 100 lakh but does not exceed Rs 200 lakh, with imprisonment for a term which may extend to 1 year and with fine;

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4. in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment which may extend to 6 months or with fine or with both.

According to Section 132(2), where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to 5 years and with fine.

According to Section 132(3), the imprisonment referred to in clauses (i), (ii) and (iii) of subsection (1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for minimum 6 months.

According to Section 132(4), notwithstanding anything contained in the Code of Criminal Procedure, 1973 (Central Act 2 of 1974), all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.

According to Section 132(5), the offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) shall be cognizable and non-bailable.

According to Section 132(6) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner.

Now, we can examine the provisions of arrest. According to Section 69 of Central Goods and Service Tax Act, 2017:-

  1. where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a), (b), (c) or (d) of section 132(1) which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of State tax to arrest such person.
  2. Where a person is arrested under sub-section (1) for an offence specified under section 132(5), the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within 24 hours.
  3. Subject to the provisions of the Code of Criminal Procedure, 1973:
  4. where a person is arrested under sub-section (1) for any offence specified under section 132(4), he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate
  5. in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.

Let us refer to the case of Ranjit Singh Vs State of Haryana (Punjab and Haryana HC) where petition was filed seeking to quash the condition in the order, passed by the Additional Sessions Judge, whereby, while granting bail to the petitioner, he was directed to furnish bail bonds of Rs.50,00,000 with one surety of like amount, to the satisfaction of the Magistrate. Similarly, he was directed to pay the outstanding liability of Rs.1,94,78,017 along with interest which was stated to be in respect of his firm, M/s Maa Karni Yarns under GST Act, 2017. Certain other conditions were also imposed regarding submitting of passport and joining investigation and abiding by all conditions envisaged under Section 438 Cr.P.C., apart from directions not to influence or threaten the witness of the prosecution.

Submissions by the Petitioner

  • Petitioner argued that the said conditions resulted in practically denying the grant of bail to him as he was not in a position to pay the said amount.
  • It was further submitted that there was a presumption of innocence against the accused and a finding had to be recorded by a competent Court of jurisdiction that the petitioner was guilty.
  • Since a complaint was filed under the relevant provisions, the said condition was on the wrong assumption that the petitioner was guilty.
  • Direction was issued for recovery of the amount which was not permissible as it amounted to prejudging the issue.
  • According to the petitioner, putting such a condition for grant of bail was unwarranted.

Submissions by State Council

  • State Counsel justified the imposition of the conditions by submitting that a complaint had been filed under the Act against the accused which was pending before the competent Court.
  • Petitioner was arrested by the police. He was involved in floating bogus firms and supply of fake invoices and facilitating loss of huge amount of revenue to the State Exchequer.
  • Once the amount exceeded Rs 5 crores, the offence would become non-bailable under Section 132(1)(l)(i) and 132(5).
  • There was a non-existent firm in the name of M/s Maa Karni Yarns due to which tax had been evaded of Rs.1,94,78,017.
  • Details were also given as to how the petitioner had shown purchases from fake firms along with other accused, to submit that it would protect the interest of the Exchequer and the prosecution.

Reference by the High Court to the Provisions of Law The power of arrest lies under Section 69 whereby the Commissioner has reasons to believe that the person had committed any offence specified under the provisions of Clauses (a), (b), (c) & (d) of Section 132(1) which is punishable under Clauses (i) & (ii) or Section 132(2), he may authorize any officer of State Tax to arrest such person.

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