Bail Granted Due to Investigation Lapses in Issuing Fake Invoices Under GST | HC

Case Details: Ishan Gupta v. Union of India - [2024] 169 taxmann.com 406 (Chhattisgarh)

Judiciary and Counsel Details

• Ramesh Sinha, CJ.
• Shevendu Pandya & Sanskar Rajput, Advs. for the Appellant.
• A.S. Kuchwaha, Sr. Adv. for the Respondent.

Facts of the Case

The applicant was arrested in connection with the offence punishable under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act). The prosecution alleged that the applicant was involved in creating fake firms and issuing fraudulent invoices. It was claimed that these fake firms were established to inflate turnovers and claim wrongful Input Tax Credits (ITC) without any actual exchange of goods or services. The applicant filed a bail application before the Chhattisgarh High Court and contended that the same tax liabilities were being sought from both the applicants and other entities, which is legally untenable under the CGST Act, Section 132(c), as no end-users or beneficiaries have been implicated, showing a clear failure of the investigative process.

High Court Held

The Chhattisgarh High Court held that the applicant was languishing in jail since 22.06.2024, and the charge sheet had been filed. The conclusion of the trial was likely to take some time. However, the GST Department failed to investigate or seize the accounts of the actual beneficiaries in the down-chain, while the applicant’s bank accounts were seized even before any summons were issued.

Additionally, the same tax liabilities are being sought from both the applicants and other entities, which is legally untenable under the CGST Act, Section 132(c), as no end-users or beneficiaries have been implicated, showing a clear failure of the investigative process. Thus, without commenting anything on the merits of the case, the High Court was inclined to grant regular bail to the applicant.