SC denies bail ahead of arrest of company director who took advantage of input tax credit for fake invoices

The Supreme Court on Friday refused to grant advance bail to one of the directors of a company, which was allegedly involved in the misuse of an input tax credit (ITC) on the basis of false invoices .

A bench headed by Judge AM Khanwilkar and Judge CT Ravikumar refused to grant pre-arrest bail against the dismissal of the application for early bail by the High Court of Gujarat, where an early bail plea was rejected by the High Court, for an offense under Section 132 of the GST Act, on the grounds that the offense falls within the jurisdiction of an “economic offence” involving the liability to tax and the public money.

However, the bench in its order granted the petitioner protection for a week until he applied for bail in the High Court, so that he could appear before the relevant authority.

Lead Attorney Kapil Sibal appeared today on behalf of petitioner Nileshbhai Natubhai Patel. He argued that there was no dispute as to who supplied the goods which were registered under the GST Act, since such goods cannot be registered without verification. It is also undisputed that the money was sent via RTGS and sent to the bank. Respondent’s case is that the 36 companies are fictitious and the money sent to them via RTGS was withdrawn by them in cash and paid to the claimant via anghadiyas.

Instead of going to the bank and getting the required information, they recorded the declarations of two people under Section 132(1)(b) of the Gujarat GST Act, which provides the power to stop, but contains no further procedural directions. The defendants named by the respondents were charged with blank billing and fraud, however, the name of the petitioner in this case was not included in the complaint, Sibal said.

He added in the complaint that it was alleged that the petitioner challenged the interim order in the High Court, failed to appear before the relevant authority and failed to appear before the High Court and had tampered with evidence stored in the applicant’s mobile phone.

Sr Adv. Sibal argued that the petitioner appeared before the relevant authority and was asked 279 questions and was forced to write a statement indicating that he had cooperated with the investigation. The petitioner did not present his phone as it had been damaged in an accident, and anyway, since he was being summoned as a defendant, they could not legally ask him for evidence contained in his phone. At the urging of the Court, it was indicated that the applicant would appear before the relevant authority in the coming week, as he has been so summoned, with adequate protection from arrest afforded by the Court.

ASG, SV Raju, appearing on behalf of the Respondents, argued that the 36 companies were fictitious companies intended to commit fraud. It was argued that material goods were brought in from the black market, without an invoice and that these goods were from the 36 fictitious companies and that fabricated invoices were presented and the money was consequently deposited in the bank. However, this whole scheme is a fraud amounting to Rs 762 crore. The trucks and drivers involved in the transport belonged to the petitioner it was submitted.

In addition, ASG argued that the evidence in the phone had been tampered with and that evidence of the ownership of the trucks, belonging to the plaintiff, had been found, counsel for the respondents submitted.

Sibal refuted that the companies in question are publicly traded companies and that the input tax credit can only be claimed when the goods are sold further and cannot be shown on the books when the materials are imported from the black market. Moreover, the petitioner was not named in the complaint and there was no investigation. Yet, the petitioner is ready to appear before the authority concerned on the protection granted by this Court.

The Single Judge Bench of Gujarat High Court Judge Vipul M. Pancholi, while denying early bail, said that if the applicants are released on early bail, there is every chance that the applicants tamper with evidence and witnesses and at the time of the trial, the petitioners would not be available.

In the High Court, current plaintiff Nileshbhai Natubhai Patel is one of the co-defendants, along with Divya Arvindbhai Monpara, Rohitbhai Bhikhabhai Chauhan, directors of Madhav Copper Limited, who allegedly purchased the material worth Rs 762 crores, which in fact did not purchase, but false invoices were obtained in order to falsely claim an input tax credit and said purchases were allegedly made from 36 different businesses and corporations. It is further alleged that the plaintiffs thereby evaded payment of state tax worth Rs 137 crore by claiming unwarranted input tax credit as the suppliers failed to pay the tax. to the government although it was collected from the claimant’s company.

Case Name – Nileshbhai Natubhai Patel v Gujarat State and another.