Bail given Despite Rs. 29 Crore GST Fraud: Court Applied Triple Test to Protect Liberty

The Petition under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “Cr.P.C.”) has been filed to seek recall of the Order dated 23.12.2020 vide which Bail has been granted to the Respondent/Rakesh Kumar Goyal, in the Complaint filed against him for offences punishable under Section 132(1)(c) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017), on account of evasion of CGST running into crores of rupees.

Briefly stated, the officers of Directorate General of GST Intelligence (DGGI) developed an intelligence that (i) M/s Aastha Apparels Pvt. Ltd., (ii) M/s JBB Apparels Pvt. Ltd., (iii) M/s JBN Apparels Pvt. Ltd., and (iv) M/s Nautilus Metal Craft Pvt. Ltd., were engaged in fraudulent availment of Input Tax Credit (ITC) on the Invoices of non-existing and fictitious Firms or such Firms which apparently did not make any purchases themselves.

It was also gathered that they were also utilising this fraudulently availed ITC for payment of Integrated Goods and Services Tax (IGST) on export of goods (also termed as zero-rated supply under IGST Act, 2017) and taking a refund of such IGST from the Department. Most of such Suppliers’ Companies were owned or controlled by the Respondent/Rakesh Kumar Goyal.

Detailed investigations were carried out, which included searches at the business premises of the aforesaid four companies, and it was found that the Respondent, along with other co-accused persons, had been involved in the acts amounting to offences under Section 132 CGST Act, 2017.

The first Bail was rejected on 26.10.2020 by learned ACMM, and the second Bail was rejected on 17.11.2020 by learned ASJ. Merely after an interval of just about one month, Bail was finally granted upon the third Application on 23.12.2020.

The Order of grant of Bail has been challenged by way of the present Petition.

Arguments of the petitioner

• Dismissal of the Application by one Judge and grant of Bail by another Judge is contrary to judicial propriety
• It was held that once the Application is rejected, there is no question of granting a similar prayer, as it amounts to virtually overruling the earlier decision without there being a change in the fact-situation.
• The Respondent not only consistently disobeyed the summons issued to him, but he also failed to join the investigations. He, to date, has not provided the Tally Data as asked through repeated summons, to enable the Investigating Agency to carry forward the investigation. However, no documents have been produced to show that the Tax obligation has been discharged at the time of import as part of Customs Duty.
• Respondent has continued to evade investigations and has remained uncooperative. In fact, his non-cooperative attitude continued even after the grant of Bail.
• There is no parity with the other co-accused who has been granted bail.
• The respondent was a beneficiary of the evasion, although he had asserted that he was not, which is factually incorrect.

The main contention of the Petitioner/DGGI to seek recall of the Bail Order was that it was granted on the third Bail Application merely after a month of rejection of second Bail Application, when there was no change of circumstances.

High Court

Triple Test to Grant Bail:

Triple Test viz. whether he is a flight risk or he would be influence the witnesses or tamper with the evidence?

In the present case, it cannot be overlooked that the evidence in the present case, is essentially documentary and there is no likelihood of the same being tampered with by the Respondent after having been admitted to Bail. There is nothing to show that he is a flight Risk or that there is any likelihood of his influencing the witnesses. The discretion has been rightly exercised by the learned CMM while granting the Bail.

Accordingly, the Petition for recall of the Bail Order was dismissed