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June 2, 2020

HC denies Bail for Businessmen dealing in bogus GST billings

by Rubina Dsouza in GST, Legal Court Judgement

HC denies Bail for Businessmen dealing in bogus GST billings

Introduction

Input Tax Credit (ITC) is an important pillar of the GST regime. Input credit basically means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount. What is supposed to be an advantage that registered GST holders can benefit from, has also led to many people abusing the law for their own welfare. The law has provided mechanism to mitigate the same. 

The court recently declined the bail of Sandeep Goyal and Rajesh Arora who were held liable for committing a GST fraud. Let us first refer to the law before understanding what happened in these cases.

Provision of the law:-

Wrongful availment of ITC is punishable under Section 132 of the CGST Act, 2017

Quantum of OffencePunishment
amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken > Rs 5 croreimprisonment which may extend to 5 years + fine
amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken > Rs 2 croreimprisonment which may extend to 3 years + fine
amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken > Rs 1 croreimprisonment which may extend to 1 years + fine

The below mentioned offences shall be cognizable and non-bailable:-

  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 point 2.
  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. 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

Sandeep Goyal vs Union Of India on 17 April, 2020

Case against Sandeep Goyal:-

  1. Created about 555 fake firms and has committed fraud to the tune of Rs.74,00,00,000
  2. Investigation for the same is still pending
  3. More number of fake firms created by the Sandeep Goyal are being detected

Facts which are not in dispute:-

  1. Maximum punishment to be imposed on the petitioner, if convicted, is five years.
  2. Sandeep Goyal has already undergone one year and eight months imprisonment.

Order Passed:-

  1. In case the investigation is not completed within three months from this day, the petitioner shall be released on bail by the Trial Court by imposing appropriate terms and conditions.
  2. If the investigation is completed, the report shall be filed before the concerned court.
  3. In case, the investigation is completed and the report is filed within three months from today, it is open for the petitioner to move the trial court for bail, if he so chooses.
  4. If such an application is filed, the same shall be considered on its own merits by the trial Court.
  5. The special leave petition is disposed of accordingly.

Rajesh Arora vs Union of India on 26 May, 2020

Facts of the Case:-

  1. Maximum period of sentence that can be awarded in the present case is five years
  2. Petitioner is in custody since 03.08.2018
  3. Wrongful availment of ITC

Order Passed:-

  1. Respondent has opposed the petition and has submitted that bail petition filed by similarly situated co-accused Sandeep Goyal was dismissed by this Court vide order dated 05.02.2020
  2. If investigation is not completed in terms of aforesaid order passed i.e., within three months petitioner be released on bail by the trial court, subject to its satisfaction
  3. It is further ordered that in case investigation is completed within three months from the date of the order passed, it would be open for the petitioner to move the trial court for bail. In case, any such application is filed by the petitioner, the same be disposed of by the trial court on merits in accordance with law

Hence, the High Court of Rajasthan rejected the bail application of Rajesh Arora and Sandeep Goyal for wrongful availment of ITC until the investigation is complete.

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