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Vimal Nayan & Others v/s The Principal Commissioner of GST & Central Excise, Headquarters Preventive Unit, Chennai North Commissionerate, Nungambakkam, Chennai & Another


Company & Directors' Information:- GST PRIVATE LIMITED [Strike Off] CIN = U27104MH2002PTC136410

Company & Directors' Information:- VIMAL INDIA PRIVATE LIMITED [Strike Off] CIN = U24231DL1999PTC099648

    Crl.OP. Nos. 30467, 30470, 30474, 30477, 304 81, 30488 & 30490 of 2018

    Decided On, 12 February 2019

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE N. ANAND VENKATESH

    For the Petitioners: A. Abdul Hameed for M/s. AAV Partners, Advocates. For the Respondents: M. Venkateswaran, Spl. PP.



Judgment Text

(Prayer in Crl.O.P.No.30467 of 2018: Criminal Original Petition filed under Section 438 of Cr.P.C. to enlarge the petitioners on bail in the event of their arrest for the alleged offence under Section 132 of the Central Goods and Services Act, 2017, r/w the provisions under the Tamil Nadu Goods and Services Act, 2017, in File C.No. IV/06/88/2018-HPU.Gr-IX, on the file of the respondents.)

Common Order:

1. The petitioners facing prosecution before the respondents for the alleged offences punishable under Section 132 of the Central Goods and Services Act, 2017, are seeking anticipatory bail before this Court.

2. The case of the prosecution is that various organised companies/persons registered with the GSTN portal have involved themselves in issuing fake invoices without actual supply of Goods/Services and also receiving fake invoices without receipt of goods and avail input tax credit to cheat the exchequer. In the instant case, it is the specific case of the prosecution that the concerned companies have involved in issue of fake invoices without supply of goods and also received fake invoices without receipt of goods and thereby all the accused persons have committed offences under Section 132(1)(b) and 132(1) (c) of CGST Act, 2017. [CGST Act, 2017 - hereinafter referred as "the Act"]. By committing the offence, the exchequer has been put to a huge loss running to several thousand crores, which according to the prosecution goes against the very interest of the country's economy.

3. Mr.A.Abdul Hameed, learned counsel for the petitioner submitted that M/s. Devmata Exim Private Limited is carrying on the business of Trading of Steel and allied products. Likewise M/s. Aks Alloys Private Limited, M/s.K.S.Holding Private Limited, M/s. Data Shree Metals and Minerals Private Limited and M/s.Sar Ispat Private Limited are all involved in the very same business of manufacturing of Steel and allied products. The learned counsel submitted that under Section 31(1) of the Act, every registered trader has to issue an invoice containing details regarding the goods, which is being supplied either before or at the time of removal of goods, for supply to the recipient, where the supply involves movement of goods.

4. The learned counsel would further submit that as per Section 41 of the Act, the registered trader is entitled to take credit of eligible input tax as self assessed in his return and such amount will be credited, provisionally to his credit ledger.

5. The learned counsel would further submit that any violation of the provisions would lead to three consequences viz; levy of interest under Section 50 of the Act, recovery of Tax under Section 79 of the Act and imposition of penalty under Section 122 of the Act. The learned counsel would further submit that the authorised officer is empowered to initiate criminal proceedings for the offence committed under Section 132 of the Act, which carries a punishment of five years with fine and the authorised officer is also empowered to arrest the accused persons by virtue of the powers conferred under Section 69 of the Act.

6. The learned counsel for the petitioners submitted that the Act is a recent enactment with various unresolved issues and the respondent is proceeding further to prosecute the petitioners on mere assumptions and surmises on the ground that the petitioners are involved in issuing invoices without supply of goods/services. The learned counsel would submit that the petitioners have attended the enquiry and given statements and also submitted voluminous documents to show that there was movement of goods from the factory and there was no requirement for the petitioners to indulge in utilising fake invoices.

7. Per contra, Mr.M.Venkateswaran, learned Special Public Prosecutor appearing on behalf of the respondents would submit that the present case is only a tip of the iceberg, of a huge scandal that has come to light only recently to the department whereby various organised companies registered with the GSTN Portal have involved themselves in issuing fake invoices without supply of goods/ services and also receiving fake invoices without receipt of goods and are availing input tax credit which has caused huge loss to the exchequer running to several thousand crores of rupees.

8. The learned Special Public Prosecutor further submitted that a primarily investigation was conducted with one Danaram and Dilip Kumar which revealed that they have committed an offence under Section 132 (1)(b) and 132(1)(c) by issuing GST invoices without supply of goods/services and also have availed input tax credit in the companies floated and managed by them in the names of third party. These persons were arrested and remanded to Judicial custody during November 2018. On further investigation, based on the invoices issued by the above said two persons, it came to light that Smt. Poonam Sharma, Dr.Sanjay Kumar Sharma and Ms.Heena Kumar Sharma, have created companies in the name and style of 1) M/s.Nadesh Trade Impex Private Limited, 2) M/s.Anmol Ferro Impex Private Limited and 3) M/s. Vivan Trade Impex Private Limited. The above said three persons are directors in these three companies apart from three other persons.

9. The learned Special Public Prosecutor further submitted that in the names of the above said three companies, GST invoices have been issued for several crores of rupees without supply of materials and thereby facilitating the buyer of the invoices to avail input tax credit. That apart, they have also received GST invoices from fake companies running to several crores of rupees without receipt of goods/services. Statements were recorded from these persons and it was categorically admitted by them that fake invoices were issued without supply of any goods and only with an intention to enable the receiver to avail input tax credit and from that they took commission on the invoice value. All these persons were arrested and remanded to Judicial custody.

10. The learned Special Public Prosecutor would further submit that on further investigation it came to be known that the companies belonging to the petitioners have received fake GST invoices from the above said accused persons and have availed input tax credit without supply of goods/services. Therefore the petitioners were called to attend an enquiry and without giving a statement and supplying all relevant records, the petitioners have chosen to approach this Court by filing Anticipatory Bail Petitions. The learned counsel submitted that the issue involves national interest since the loss to the exchequer runs to several thousands of crores of rupees.

11. This Court has carefully considered the submissions made on either side. It will be relevant to take note of certain provisions under the Act. As per Section 31 of CGST Act, 2017:-

(1) A registered person supplying taxable goods shall, before or at the time of –

(a) removal of goods for supply to the recipient, where the supply involves movement of goods: or

(b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed.

As per Section 132(1)(b) of the CGST Act, 2017, any person "issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made there under leading to wrongful availment or utilisation of input tax credit or refund of tax".

As per Section 132 (1)(c) of the CGST Act, 2017, any person "avails input tax credit using such invoice or bill referred to in clause (b);"

As per Section 13(1)(i) of the CGST Act, 2017, "in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;"

Further as per Section 132 (5) of the CGST Act, 2017, the offences specified in clause (a) or clause (b) or clause (c) or clause (d) of subsection (1) and punishable under clause(i) of that sub-section shall be cognizable and nonbailable.

Further as per Section 69(1) of the CGST Act, 2017, "Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order authorise any officer of central tax to arrest such persons".

12. The case of the prosecution is that the companies involved in these cases have received invoices without receipt of goods/ services from the supplier of bogus invoices to enable them to avail the input tax credit and to reduce their cash payment. This is an offence under Section 32(1)(b) & 32(1) (c) of the Act. According to the respondent department the petitioners are adopting a modus operandi whereby they make payment to the suppliers of invoices without movement of goods/services through banking channel and get back such amount after payment of agreed commission to the supplier of fake invoices. This according to the prosecution involves loss to the exchequer running to several crores and is against the national interest.

13. The department has taken a very specific stand in this case at paragraph 17 of the Counter filed in these petitions which is extracted hereunder:

"17. ...............In the instant case the investigation carried out so far by the Department inter alia revealed that companies managed by the petitioners are involved in the aforesaid offences. Hence the petitioner was summoned by the Department. If the petitioner got the evidences that they are not involved in the above said offences, they would have appeared before the investigating officer and proved their innocence. The department is in the process of identifying the various persons involved in the above such offences and are being summoned to unearth the possibilities of revenue leakages created by these offenders".

14. The enactment in question has come into force very recently with a laudable object of one country one tax. Therefore wherever the department finds that certain provisions in the Act is misused by creating fake invoices and input tax credit is being availed without any movement of goods, the same has to be curbed and nipped in the bud to ensure that it does not grow into another mega scam having a direct impact on the economy of this nation. Since the department has collected some prima facie materials , they want to act fast before it becomes a huge racket, failing which the entire economy of this country would weaken and collapse.

15. If the petitioners are conducting genuine business through the above said companies, they can easily prove during the investigation the actual movement of goods, which will all be borne out by documents. If the department is satisfied regarding the same, the department will leave out the companies belonging tothe petitioners and proceed further with the investigation.

16. In the considered view of this Court, in matters of this nature, the department must be given the complete independence to investigate the cases since it involves the national interest. This Court by entertaining an Anticipatory Bail Petition and by imposing certain conditions, should not tie the hands of the department in proceeding further with the investigation since what has been unearthed till now is only the tip of the iceberg and there is a long way to go for the department to find out how long this fake invoices have extended their tentacles.

17. As argued by the learned counsel for the petitioners, it is true that the entire issue is borne out by documents and once the petitioners co-operate for the inv

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estigation by submitting all the relevant documents, they should not be unnecessarily arrested. However, it is a settled proposition of law that this Court while considering a petition for Anticipatory Bail has to necessarily taking into consideration the nature and gravity of the accusation in a given case. When a case involves serious offences, grant of Anticipatory Bail by itself will cause prejudice to the investigation. Where the accused persons are charged of violation of CGST Act, involving colossal loss of revenue to the exchequer and the investigation is at a very nascent stage, prudence demands that this Court should lay of its hands from the investigation and allow complete independence to the prosecuting agency to proceed further with the investigation. 18. In the light of the nature and gravity of the accusations put forth by the prosecution and also the fact that the investigation is at its very early stages, this Court is not inclined to entertain these Anticipatory Bail Petitions. It is open to the petitioners to make complete disclosure by submitting all the relevant documents before the respondent and it is for the respondent to consider the same and satisfy themselves and proceed further in accordance with law. Accordingly, all these criminal original petitions shall stand dismissed.
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