GST Evasion: Orissa HC refuses to grant Bail to person accused of Wrongfully availing ITC without Actual Supply of Goods, Services [Read Order]

The Orissa High Court refused to grant bail to a person accused of wrongfully availing ITC without actual supply of Goods and Services.

The petitioner, Santosh Kumar Gupta is alleged to have created about ten Firms and was generating fake bills, invoices in the name of said Firms facilitating the availment of the benefit of Input Tax Credit (ITC) without actually supply/ receipt of goods and services which were credited in the name of those Firms in the Bank Accounts and that he in fact was actually handling all those accounts having taken signed blank cheques from said Account-Holders.

Mr.A. Pattanaik, counsel for the Petitioner submitted that it is not the case in the complaint that in reality, such proprietors of those Firms were not there and the materials against the Petitioner are the statements of those persons who in order to get rid of the rigors of law have implicated this Petitioner. He submitted that materials on record do not indicate the indulgement of the Petitioner in the business affairs of all those Firms. According to him, the entire cast of the prosecution is based on documentary evidence, by now all such documents which according to the prosecution are incriminating have been seized and the statements of the material witnesses have been recorded. He submitted that the quantum of ITC based upon all those fraudulent transactions as alleged stated to have been taken, has been highly inflated in order to place gravity on the case. He further submitted that no such direct material has been collected to show that this Petitioner had passed on the ITC to the tune as above for having unlawful gain unto himself when the fact remains that in the meantime, the Department has issued summons to all those entities for the payment of ITC availed by them.

However, Mr. Ch. S. Mishra, Senior Standing Counsel for the CGST opposed the move. Referring to the written objection, he submitted that here the Petitioner is involved in the commission of Economic Offences and the materials collected so far reveal that the Petitioner is the kingpin and has defrauded the State Exchequer to the tune of a huge amount around Rs.40.66 crore by availing the ITC simply by managing to have transactions reflected on papers without a supply of goods or services in reality and for the purpose, he has created enormous fake documents such as invoices, bills, etc., besides creating fake Firms and opening Bank accounts in the name of those entities which have no real existence in the Commercial World.

The Single Judge Bench of Justice D.Dash while refusing to grant bail said that the Petitioner is said to have been involved in the commission of the above Economic offenses which are considered to be grave. Such dubious activities in committing offenses for making huge unlawful gain by causing huge loss to the State Exchequer is a step towards not only scuttling the process of development in the country but also in standing as a developed country in the globe in which our march is on.

“This introduction of the GST is for simplification and harmonization of Indirect Tax Regime in reducing the cost of production, reducing inflation and making Indian trade and Industry more competitive, domestically as well as internationally and with seamless transfer of Input Tax Credit (ITC) from one stage to another in the chain of value addition; in creating in-built mechanism in the design of goods and services tax is with an aim to incentivize tax compliance by the taxpayers so as to finally broaden its base in lowering the tendency of evasion. Such roles alleged to have been played by the Petitioner stands in the direction of making unlawful financial gain by putting up the show that for such sincere involvement in business and carrying out the same, his entitlement to the huge sum as an incentive in the form of Input Tax Credit (ITC) flowed which he received having the tendency of foiling the entire move in introducing this new Tax Regime,” the court said.

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