HC grants bail to assessee when all material evidences have been gathered during GST investigation

The Orissa High Court (Orissa HC) in the matter of Rohit Berlia vs. The Intelligence Officer has granted bail to assessee since all material evidences have been gathered during investigation.

The petitioner was detained on August 5, 2021, for an offence punishable under Section 132(1)(c) of the CGST Act, 2017, for obtaining false ITC from the firm M/s. Arshee Ventures between July 2017 and March 2019. As is clear, the firm’s commercial premises were searched and inspected by the CGST Intelligence Wing in 2018.

The petitioner filed application for bail in connection with 2 (C) CC No.328 of 2021 arising out of DGGI/BbZU/INV/ 110/GST/2018 registered under Section 132(1)(c) of CGST Act, 2017 punishable under Section 132 (1)(i).

The business firm in the name and style of M/s. Arshee Venture being engaged in trading of sponge iron, iron scrap and billets since 2016 is registered under the GST law. It is alleged that the place of business of the said firm was searched and inspected by the officers of the CGST Intelligence Wing on 30.10.2018 and seized certain documents. As per the allegation of the CGST authorities, the petitioner and his wife admitted irregular transactions having taken place by issuing sale bills without actual supply of the goods and in the process, tax credit was claimed without actual receipt of goods and tax liability was admitted and paid without physically supplying any goods and claimed tax credit and admitted tax liability on fictitious purchases and sale transactions.

The Coram found that, “petitioner submits that the accused is alleged of having made irregular transactions by issuing sale bills without actual supply of the goods and in the process, tax credit was claimed without actual receipt of goods and tax liability was admitted and paid without supplying goods and claiming of tax credit as well as admitting liability on fictitious purchases and sale transactions have been admitted at the time of inspection and search. It is contended that only allegation is that purchase bills were taken into account without receipt of the goods and tax credit was claimed in violation of Section 16(2) of CGST Act, 2017. It is claimed that there are no instances of retaining or appropriating the proceeds of the offence, inasmuch as, the entire amount of tax credit wrongly and allegedly availed has either been reversed/returned or used for payment of tax. An argument is advanced to the effect that tax is not required to be paid where there is no supply but the petitioner has paid tax on such transactions as well and in absence of any evidence to substantiate retaining the benefits arising out of the offence of claiming tax credit on the fictitious purchase bills (without receipt of the goods), the charge is not sustainable in law. In support of reversal, the petitioner contends that there is proof to show that ITC for amount of Rs.1,39,37,862/- for the month of July, 2017 is revealed from the GSTR-3B return and furthermore, Rs.8,50,000/- has been paid through DRC-03 dated 24.07.2017 against the availment of fake ITC and for such reversal of ITC dated 03.01.2019, the ledger of the petitioner maintained on GSTN portal figured zero and therefore, it is an undisputed fact that the ITC was reversed and in so far as the allegation of appropriation of any benefit arising out of the tax credit claimed on the strength of fictitious purchase bills issued by the alleged non-existing business entities is concerned, it is incorrect and not substantiated.”

The High Court ruled out that, “Application under Section 439 Cr.P.C. stands allowed. As a necessary corollary, the petitioner is directed to be released on bail on furnishing a bail bond of Rs.50,00.000/-(rupees fifty lac) with two solvent sureties for the like amount to the satisfaction of the learned court below in seisin over the matter with conditions, such as, he shall not induce, threat or terrorize any of the material witnesses, while on bail; shall not exert any kind of influence or pressure vis-à-vis the prosecution witnesses to be examined during the trial and thus, not to tamper with the collected evidence, in any manner whatsoever; shall not involve or indulge in any such similar kinds of nefarious activities, while on bail; shall surrender his passport, if he has any, before the learned court below and shall not leave the jurisdiction of the court without its prior permission.

It is pleaded that since CGST fraud involves huge amount whereby the petitioner subjected the Central Government exchequer to a substantial loss, plea of bail should not be liberally considered.”

The Judgment was made by Hon’ble R.K. Pattanaik.

The Petitioner was represented by Mr.L. Mishra and Respondent was represented by Mr. Ch. Satyajit Mishra.

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