GST: High Court Finds No Grounds to Cancel Bail in Rs. 29 Crore Fake ITC Case

The Petitioner herein is the Directorate General of Goods and Services Tax Intelligence (DGGI), the Apex Investigative Agency under the Ministry of Finance, Government of India, responsible for enforcing compliance with indirect tax laws, including GST, Central Excise, and Service Tax. The Respondent/Sudhir Gulati is the Director of a Company, namely, M/s Anmol Tradex Pvt. Ltd.

The officers of DGGI developed an intelligence that M/s Anmol Tradex Pvt. Ltd. has been found to be engaged in the fraudulent availing of Input Tax Credit (ITC) on the basis of ineligible or non-genuine Invoices issued by entities that, on verification, appear to have no actual purchases or legitimate business operations. The fraudulently availed ITC has been utilised primarily for the payment of Integrated Goods and Services Tax (IGST) on export of goods, which are categorised as “zero-rated supplies” under the IGST Act, 2017.

It has been further submitted that M/s Anmol Tradex Pvt. Ltd. has availed ITC to the tune of approximately Rs. 29 Crores, out of which Rs. 25.01 Crore pertains to Invoices issued by entities owned or controlled by Mr. Rakesh Kumar Goyal. These entities have been found to be involved in circular trading and the issuance of fake Invoices, thereby passing on fraudulent ITC to multiple Companies, including those allegedly owned or controlled by Mr. Vikas Chowdhary.

Search operations were conducted on 06.03.2020 at the premises of various Supplier entities owned or controlled by Mr. Rakesh Kumar Goyal, which were identified as having supplied a significant portion of ITC availed by M/s Anmol Tradex Pvt. Ltd. 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 Respondent was granted Bail by the learned CMM vide Order dated 17.10.2020.

The Order of grant of Bail has been challenged by way of the present Petition. The first ground of challenge is that Bail has been granted to the Respondent without taking into consideration whether a prima facie case exists against the Respondent.

Secondly, the Respondent had remained non-cooperative during the investigation. Thirdly, the Respondent is an influential person with money and financial power and there is a grave possibility that he will obstruct the investigation, intimidate crucial witnesses, and manipulate or destroy evidence.

The Respondent, on the pretext of health issues, was never properly examined by the officers of the Petitioner, Department.

The Respondent in his detailed Reply has stated that the instant Petition has been filed by the Petitioner on false, vexatious and capricious grounds. The Petitioner/Department has filed the present Petition on 08.10.2021, i.e. after an unexplained and unjustified lapse of one year since the Order granting Bail was passed by learned CMM on 17.10.2020.

The Court applied The Triple Test to Grant Bail: 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 is essentially documentary/electronic 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 or tampering with the evidence.

Furthermore, it cannot be ignored that the Bail was granted vide Order dated 17.10.2020, and there is no averment of any misuse or abuse of the liberty of Bail as granted to the Respondent. There is no ground which is existing to show that the discretion of the grant of Bail has not been exercised judiciously by the learned CMM or that there is any misuse or abuse of liberty so granted by the Respondent. There is also nothing on record to show that the trial has been hampered on account of the grant of Bail.