Subhash Chouhan vs. Union Of INDIA

Held

The Court granted bail to the applicant, Subhash Chouhan, subject to certain conditions. The Court considered the allegations of wrongfully utilizing Input Tax Credit (ITC) of Rs. 6,95,32,472/- and supplying taxable goods without payment of taxes and invoices to the tune of Rs. 27,70,559/-, totaling Rs. 7,23,03,031/-. It noted that offences under the Act are generally bailable and non-cognizable, except for Section 132(5). The Court also took into account the maximum punishment of 5 years with fine, the applicant's detention since October 27, 2021, and the fact that co-accused were enlarged on bail. The applicant's contention that the offence is compoundable was also considered. The Court found it appropriate to enlarge the applicant on bail upon depositing Rs. 70 lakhs under protest or admission, which would be adjusted later. The bail was granted with conditions including executing a personal bond, appearing in court, furnishing property details, and not alienating property without court permission. The Court's ratio is that while economic offences are serious, the period of detention and the bailable nature of most GST offences warrant consideration for bail, especially when coupled with a substantial deposit towards the disputed amount.

Facts

The applicant, Subhash Chouhan, proprietor of M/s Minal Traders, was arrested on October 27, 2021, in connection with a GST crime registered for offences under Sections 132(1)(a), 132(1)(c), and 132(1)(1)(i) of the Central Goods and Service Tax Act, 2017. The prosecution alleges that the applicant wrongly availed Input Tax Credit (ITC) of Rs. 6,95,32,472/- by procuring invoices from fake firms and supplied goods worth Rs. 27,70,559/- without payment of tax and invoices. The total alleged tax evasion and ITC availed is Rs. 7,23,03,031/-. The applicant sought bail, arguing innocence, procedural irregularities, and that the offences are compoundable and bailable. Co-accused have been granted bail. The applicant has been in jail for over nine months.

Key Issues

1. Whether the applicant is entitled to bail considering the nature of the alleged offences under the Central Goods and Service Tax Act, 2017, specifically Sections 132(1)(a), 132(1)(c), and 132(1)(1)(i)? Petitioner's arguments: The applicant argued that the offences are summons-based and bailable, as per Section 138 of the Act, particularly for tax evasion up to Rs. 5 crores. They contended that due procedure was not followed, necessary documents were not considered, and the offence is compoundable. The applicant also highlighted that co-accused were granted bail and that the time spent in jail (over 9 months) is a significant factor. They relied on judgments from the Gauhati and Delhi High Courts granting bail in similar cases. The applicant also argued that the GST portal lacks a mechanism for cross-checking ITC claims and that the department's failure contributed to the issue. Revenue's arguments: The non-applicant (Revenue) opposed the bail application, stating that the applicant was habitually involved in procuring fake invoices and that investigations were ongoing. They presented the applicant's statement recorded on October 27, 2021, where he could not provide satisfactory replies. The Revenue relied on Supreme Court judgments in P.V. Ramana Reddy and Nimmagadda Prasad, emphasizing the gravity of economic offences and the need for a different approach in granting bail, citing the potential for deep-rooted conspiracies and huge losses to public funds.