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September 7, 2021

HC denies bail to man charged with obtaining fraudulent ITC

by Mahesh Mara in GST, Legal Court Judgement

HC denies bail to man charged with obtaining fraudulent ITC

Fact and Issue of the case

The Applicant is accused of procuring bogus bills from companies that did not exist in order to claim Input Tax Credit (ITC) and hence was taken into Judicial Custody (JC). The Applicant thereby has contended that the companies in question have ceased to manufacture goods but have not ceased to exist in entirety. Furthermore, the Applicant also contended that he was not provided with any reason or grounds before his arrest and hence, the Applicant is entitled to bail.

By virtue of filing the present application under Section 439 Cr.P.C, regular bail is prayed on behalf of the applicant/accused Yogesh Kumar Goyal. On receipt of the present application, notice of the application was issued to the respondent/ Department DGGI and after appearance through counsel on Video Conferencing, department choose to file reply to the application and accordingly a detailed reply to the same has been filed by opposing the grounds taken in the application.

The copy of the reply to the application u/s 439 Cr.P.C filed by the department was supplied to learned Senior counsel for the applicant/accused through electronic mode. It is argued by learned senior counsel that applicant has been associated as Director of M/s Urja Global Limited for the last eight years, it is a public listed company on stock market for the last 29 years, having more than 3 lakhs shareholders ; is improved Channel Partners of Ministry of New & Renewable Energy (MNRE) ; is important player in the filed of renewable energy and development of new technologies, engaged in designing, consultancy, integration, supply, installation, commissioning and maintenance of off­grid and grid connected Solar Power Plants concerning solar product.

It is further argued that M/s Urja Global Limited cannot be termed as non­operational or non­existing company ; the department has failed to understand that company is not a manufacturing company, it is only a trading company, no manufacturing activities was done at the premises of the company and at present the firm had shifted its registered office and functioning from 487/63, Ist Floor, National Market, Peeragarhi, New Delhi 87, this address has duly been acknowledged to the department by taking necessary steps as per law.

It is further argued that accused company used to buy Batteries Panel, Solar Panel, Inverters etc from the different companies, used to sell them directly to M/s Jetibai Grandsons Pvt Ltd and there is no questions to pass on the input credit to the buyers which they used to receive from the service, however, the accused company used to deposit the additional tax on their gross income as per law ; that all the transactions of input and output tax claims are uploaded on the website by directly uploading on the GST portal since the dealings were with the registered company ; that no invoices ever issued by M/s Jetibai Grandsons Pvt Ltd in order to claim any input tax credit on the strength of invoices generated from said company and importantly the remand application did not mention details of even a single invoice on the basis of which ITC claim was sought.

It is argued further that the arrest of the applicant/accused is illegal, without complying the requirements of law by the officials of the GST, even the grounds of the arrest was not disclosed which is a serious infirmity and would make the arrest and detention illegal ; that the applicant do not have any business relationship or dealings with the suppliers L­1, which are bogus and have been mentioned deliberately by the department in the remand application to implicate the applicant/accused falsely.

It is argued that investigations were conducted at the premises of various firms at Delhi and Chennai related to the applicant/accused and it was discovered that M/s Microlyte Energy (P) Ltd and M/s Urja Global Limited have availed and utilized ITC of Rs. 55.10 Crores and Rs. 17.21 Crores on the strength of invoices procured from the non­existent and cancelled firms at L1 and L2 stage fraudulently ; and from his own statements, it is revealed that accused company had issued invoices without actual supply of goods or services to pass on fake ITC of GST on bogus invoices to the fictitious, non­ existent or non­functional firms/companies without actual movement of goods.

Observation of the court

At the very outset, it is stated that there is no hard and fast rule nor any precedent that completion of 30 days in judicial custody entitles the applicant/accused to be released on bail, as was argued by learned senior counsel. And importantly, the material placed on record by the prosecution, which has surfaced on record during investigation conducted so far, the factum of existent of such firms is seriously under cloud. As was rightly highlighted by the learned Senior Standing Counsel, the said firms appears to exist only on papers and the entire so called business transactions seems to have been manipulated by the applicant himself. Prima facie complicity of the applicant/accused in the present case is evident from the records of the case.

So far as judgment of MakeMyTrip is concerned, as rightly submitted by the ld. Counsel, the issue therein primarily was regarding classification of goods under Service Tax ; secondly and importantly, the Hon’ble Court was of the view that there is no prima facie material on record against the accused persons therein and hence relief was granted. But in the present case, the entire act of the applicant/accused indicates cheating and forgery on his part, based upon false, fabricated and forged documents wherein the Input tax credit in crores of rupees have been claimed by floating fictitious companies. The raising of false and forged bills without actual supply of goods or services to the said fictitious, non­operational and non­existing firms to avail fake input tax credit of GST is a grave offence causing loss to the government exchequer.

Additionally, reliance is placed on the judgment of S. Jagan Mohan Reddy Vs. CBI (2013) 7 SCC 439 wherein it was held : “Economic offences constitute a class apart and needs to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.”

Further, it is evident from the record that one of the main accused/Managing Director of applicant’s ( M/s Urja ) is absconding, is evading the process of law which is hampering the further investigation of the case ; and if the applicant is enlarged on bail at this stage there is strong possibility of him influencing the prosecution witnesses and / or hampering the investigation of the case.

Thus, in light of my above discussion and taking note of the nature of accusations and severity of the offences alleged ( economic offences ), and that investigation is still at nascent stage ; number of accused persons are absconding and evading the process of law ; the entire incriminating material is yet to be recovered, additionally, as noted above, the Managing Director of the company is absconding and there is strong possibility of the applicant interfering in the investigation and/or influencing the witnesses of the case, if enlarged on bail, at this stage of the case, hence, no grounds for grant of bail is made out. Accordingly, the bail application under section 439 Cr.P.C of applicant/accused Yogesh Kumar Goyal stands disposed off as dismissed.


The court ruled against the petitioner and rejected the bail application

Read the full order from below


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