Sri. Neeraj Karande vs. The Directorate General Of GST Intelligence

Held

The Court held that there are serious allegations against the petitioner involving the issuance of GST invoices and e-way bills without actual supply of goods, leading to wrongful availment or utilization of input tax credit. The modus operandi, including the alleged non-existence of the registered office and factory, and the petitioner admitting to running the business from a vehicle using a laptop, warrants further investigation. The Court noted that the GST amount involved is substantial (Rs. 10.89 crores) and that the investigation is pending, with aspects like the forward chain recipient of tax credit yet to be investigated. The forensic examination report of the seized laptop is also awaited. Considering the gravity of the offenses, the ongoing investigation, and the potential for the petitioner to interfere with evidence, the Court was not inclined to grant regular bail. The Court dismissed the criminal petition.

Facts

The petitioner, Sri Neeraj Karande, Managing Director of M/s. GE Godavari Engineering Industries Limited, sought regular bail in a case registered by the Directorate General of GST Intelligence (DGGI). The allegations are that the petitioner, under his company's GSTIN, collected and issued invoices/bills without supplying goods, leading to wrongful availment or utilization of input tax credit (ITC). The modus operandi involved issuing GST invoices and e-way bills without actual supply of goods, and procuring invoices without actual receipt of goods to inflate turnover for banking facilities. The petitioner allegedly supplied invoices without goods to customers to help them show expenses and avoid GST payment in cash. The GST amount involved for the period July 1, 2017, to August 31, 2020, is stated to be Rs. 10.89 crores (Rs. 5.46 crores inward irregular ITC and Rs. 5.43 crores outward irregular ITC). The petitioner was arrested on November 2, 2020.

Key Issues

1. Whether the petitioner is entitled to regular bail in connection with the alleged offenses under Section 132(1)(i) read with Section 132(1)(b) and (c) of the Central Goods and Services Tax Act, 2017, considering the gravity of the alleged offenses and the amount of GST involved? Petitioner's Arguments: - There is no loss to the government exchequer. - Section 138 of the CGST Act deals with compounding of offenses, and the punishment is five years. - The respondent authorities failed to follow the procedure under Section 41-A of the Code of Criminal Procedure, 1973. - The petitioner has been falsely implicated. - The alleged availment of ITC credit is by a third party. - There is an abnormal delay in lodging the complaint (period from July 1, 2017, to August 31, 2020, with complaint lodged on November 2, 2020). - The company was not sold by the bank under SARFAESI Act; a sale deed dated August 19, 2019, executed by the company in favor of M/s. Bajaj Heavy Engineering Limited shows sale of land and shares. - Earlier letters from the Assistant Commissioner (ST) indicated no objection to sale or mortgage of property. - Statements recorded under Section 70 of the CGST Act were under pressure and coercion, and contradict the complaint. - Investigation is almost complete, and the petitioner has been in jail since November 2, 2020. Respondent's Arguments: - The petitioner, as Managing Director, committed serious offenses involving issuing GST invoices and e-way bills and passing on ITC without actual supply of goods. - The registered office and factory of the company are found to be non-existent. - The petitioner admitted in his Section 70 statement that there are no registered premises and business is run from a vehicle using a laptop and mobile. - The investigation is not completed, and the forward chain recipient of the tax credit needs to be investigated. - A provisional attachment order under Section 83 of the CGST Act was issued. - A laptop used for creating documents was seized for forensic examination, and the report is awaited. - ITC credit has been blocked under Rule 86A(1)(a) of the CGST Act due to fraudulent availment on fake invoices and the company not conducting business from its registered place.