The Rajasthan High Court has refused to grant bail to Input Tax Credit (ITC) amounting to 10.87 crores, based on forged transactions and also manipulated the bills showing transportation of goods from Delhi to Jaipur. The court found that the material collected by the department prima facie exhibits that the petitioner was fraudulently profited from the ITC based on sham bills obtained or procured in the name of non-existing firms.
The single bench of Justice Praveer Bhatnagar held that “There is no such provision that before arresting a person, written reasons should be assigned to the petitioner. Further, the petitioner has not raised this question at the instance when he was arrested and not challenged before the Competent Court. It is also pertinent to mention here that the statement rendered by the petitioner was recorded under Section 70 of the Act of 2017, empowers the Authority to record the statements. Further, these statements are relevant under Section 136 of the Act of 2017. “
Become a PF & ESIC expert with our comprehensive course – Enroll Now
Vineet Jain , the accused-petitioner has been arrested in connection with the offence(s) under Section
132(1)(C),(f)&(H), Central Goods and Services Tax Act, 2017 (‘the Act of 2017’). The matter is exclusively triable by the Magistrate, and the maximum punishment prescribed under Section 132 of the Act of 2017 is 5 years. There is no chance of interfering or tampering with the evidence as most witnesses are public servants. It is also submitted that the charge sheet against the petitioner has already been produced, and the trial of the case may take considerable time.
It is vehemently argued that the petitioner was arrested without complying with the mandate declared by the Apex Court in Prabir Purkayastha Vs. State (NCT of Delhi), 2024 and Pankaj Bansal Vs. Union of India, (2024). It is argued that the Authority needed to provide the petitioner with written reasons for the arrest. The arrest memo shows that no written reasons were furnished to the petitioner before the arrest memo.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
It is vehemently argued that provisions of Section 69(2) of the Act of 2017 are pari materia with the provisions enshrined under Section 19 of the Prevention of Money Laundering Act ( ‘the PMLA’) and the Apex Court in Pankaj Bansal Vs. Union of India (supra) and Prabir Purkayastha Vs. State NCT Delhi (supra) has categorically held that the Agency must furnish written reasons before the person’s arrest under the PMLA provisions.
The arrest memo shows that written reasons were not furnished to the petitioner in the present matter. It is also argued that it is alleged against the petitioner that he falsely availed Input Tax Credit to Rs.10.87 crores. In contrast, the CGST Portal itself shows that firms from which the petitioner received the scrap were registered on the CGST Portal. It is also argued that the respondents have not filed any complaints against these firms.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
It is also vehemently argued that the statement of the petitioner recorded under Section 70 of the Act of 2017 is also under coercion and cannot be read against the petitioner as, at the time of recording of the statement of the petitioner, the petitioner was under arrest. It is also contended that the petitioner’s statement further shows that they were not recorded at the petitioner’s house but in the Department’s office.
Counsel appearing for the CGST has vehemently opposed the bail application and contended that the petitioner has caused the Department a loss of Rs.10.87 crores by availing of fake Input Tax Credit without receiving any scrap or goods. On investigation, all the firms were found to be non-existent, and the petitioner had received scrap from the fake non-existent firms. It is also contended that upon investigation, it was found that the petitioner, to avail of the fake Input Tax Credit, also forged the Eway Bill of the so-called Transport Company.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The E-way bill submitted by the petitioner for availing the Input Tax Credit was found to be fake as no goods were ever delivered through the Transport Company from Delhi to the petitioner’s firm. The investigation also revealed that the Transport Company’s owner clearly stated that he never transported scrap in his truck, as shown in the E-Way Bill submitted by the petitioner from Delhi to Jaipur. The Transport Company’s forged rubber stamps were also recovered from the petitioner’s possession. T
The petitioner has thus caused a loss of revenue to the Department by availing of a fake Input Tax Credit without receiving any goods from the fake companies. It is also contended that under Section 69(2) of the Act of 2017, there is no such embargo that before arresting the person, reasons in writing should be supplied to the person affected; therefore, considering the above facts, the bail application of the accused-petitioner deserves dismissal.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
The bench viewed that in the matter of Y.S. Jaganmohan Reddy Vs. Central Bureau of Investigation, (2013) , it was held that the economic offences are to be dealt with iron hands as such offences are committed with cool calculation and deliberate design and they affect economic fabric of the whole country.
The court refused to grant bail on the ground that the material collected by the department prima facie exhibits that the petitioner was fraudulently profited from the ITC based on sham bills obtained or procured in the name of non-existing firms.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
