Basudev Mittal vs. Union Of INDIA

Held

The Court rejected the applicant's bail application. The Court noted that the search of the applicant's business premises, based on alert letters concerning non-existent business entities, revealed the illegal availment of Input Tax Credit (ITC) exceeding Rs. 5,00,00,000/- by purchasing goods from suspicious and fake suppliers whose registrations had already been cancelled. The Court also took into account that over 700 vehicles mentioned in invoices submitted by the applicant, where only vehicle numbers were provided, were not found to have passed relevant toll gates. The Court found the applicant's role to be prima facie serious and acknowledged that further investigation was ongoing to identify more suspicious and fake suppliers with whom the applicant allegedly transacted to illegally avail ITC. The Court considered the nature and gravity of the offence, including the possibility of the applicant tampering with evidence and interfering with the ongoing investigation. It emphasized that economic offences, often involving deep-rooted conspiracies and significant loss of public funds, are grave and affect the country's economy. Citing the Supreme Court's observations in Nimmagadda Prasad v. Central Bureau of Investigation, the Court stated that when granting bail, it must consider the nature of accusations, evidence, severity of punishment, character of the accused, peculiar circumstances, possibility of tampering with witnesses, and the larger interests of the public/State. Based on these considerations, the Court was not inclined to release the applicant on bail.

Facts

The applicant, Basudev Mittal, proprietor of M/s Shree Sainath Enterprises, filed a first bail application after his arrest on March 30, 2022, in connection with Crime No. 178/GST/2021-22. The arrest followed a search of his residential premises on March 28, 2022, based on alert letters. The prosecution alleged that the applicant's firm purchased iron scrap from eight firms, including M/s Kalodia Traders and M/s S.R. Enterprises, whose GST registrations had been cancelled. It was alleged that the applicant fraudulently availed Input Tax Credit (ITC) to the tune of over Rs. 5 Crore. The applicant claimed innocence, stated he paid Rs. 76,00,000/- under protest, and argued the offence was bailable as the amount was less than Rs. 5 Crore, citing Section 132(4) and (5) of the GST Act. He also contended there was no credible evidence of intent and that transactions occurred when registrations were active. The charge-sheet had been filed.

Key Issues

1. Whether the applicant is entitled to regular bail under Section 439 of the Code of Criminal Procedure, considering the allegations of GST evasion and fraudulent availment of Input Tax Credit (ITC)? Petitioner's Arguments: The applicant argued he is innocent and falsely implicated. He contended that he paid Rs. 76,00,000/- under protest, making the alleged offence bailable under Section 132(4) and (5) of the GST Act as the amount was less than Rs. 5 Crore. He asserted a lack of credible evidence to prove intent to purchase from firms with cancelled registrations, stating transactions occurred when registrations were valid and he acted bonafidely. He also highlighted that the alleged forged firms had paid GST, enabling him to receive ITC. The applicant further submitted that the offence is compoundable, triable by a Magistrate, and carries a maximum punishment of five years. He is a senior citizen, a permanent resident, has been in custody since March 30, 2022, and there is no chance of absconding. He relied on several Supreme Court and High Court judgments, including Union of India v. Make My Trip (India) (P) Ltd., Radheshyam Kejriwal v. State of W.B., and Dataram Singh v. State of Uttar Pradesh. Respondent's Arguments: The respondent opposed bail, stating the applicant was habitually involved in procuring fake invoices from fictitious firms to avail ineligible ITC and pass it on, thereby denting the government exchequer. They presented alert circulars regarding fictitious suppliers M/s S.R. Enterprises and Koladia Traders. The respondent claimed that during the search, incriminating material was recovered, and scrutiny revealed the applicant routinely availed and passed on ITC based on fake invoices from numerous suspicious firms. They also noted that over 700 vehicles mentioned in invoices were not found to have passed toll plazas, and some vehicle numbers corresponded to two-wheelers/cars. The total ITC fraudulently availed and passed on was stated to be Rs. 5,68,95,176/-. The respondent argued that further investigation is ongoing to unearth more involved persons/firms and that the applicant might hamper the investigation. They relied on Supreme Court decisions like P.V. Ramana Reddy v. Union of India and various High Court orders.