Gujarat High Court Grants Bail To Lawyer Accused Of Filing GST Return For 'Non-Existent, Fake Entities'

Sanghani has been booked under Sections 132 (1)(b) (whoever issues any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax), and 132 (1) (c) (whoever avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill) of Central Goods and Services Tax Act, 2017.

Justice Nikhil S Kariel in his order noted that the allegation levelled against the petitioner was that he had filed "fraudulent returns knowing that the companies for which the returns were being filed were absolutely non-existent". It said,

"Prima facie, it also appears that the applicant has given statement under Section 70 of the Act whereby he has admitted to the fact that he was aware about some of the firms being non-functional and fake entities created solely for the purpose of fraudulent availment and passing of input tax credit without any actual supply of goods. The fact of the complaint (charge-sheet) having been filed. The fact of the role attributed to the present applicant is of having done the compliance activity and whereas, it would appear that the financial benefit which has accrued in favour of the present applicant appears to be slightly more than what a normal consultant would charge. Beyond the same, it does not appear that the applicant was part of the conspiracy or was in any way a major player in the entire alleged fraud".

The court also noted that the investigation was over and after noting the role attributed to the petitioner and the maximum punishment that could be imposed, the court said that it is inclined to grant bail.

"In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the First Information Report, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail," the court said.

The court thus granted bail to the petitioner on him furnishing bond of Rs. 50,000 with one surety of the like amount and subject to certain conditions.

The prosecution had alleged that several firms were created solely for the purpose of passing on fake/fraudulent/ineligible input tax credit (ITC) without an underlying supply of goods and that the total fake ITC availed and passed on by such firms is more than Rs. 30 crore. The beneficiary of such ITC has already been arrested and is in judicial custody at present.

The prosecution alleged that despite knowing that the firms were non-functional and fake entities created solely for the purpose of passing fake ITC, the petitioner continued to file GST returns for these firms and that he was also responsible for GST Registration and E-Way Bill generation of some of the firms. Further, instead of charging professional fees, the applicant used to get a commission of 0.20% of the turnover of fake invoices issued for passing on fake ITC to various firms.

For Petitioner: Advocate Apurva N Mehta

For State: Addl. Public Prosecutor JK Shah

For Respondent 2: Advocate Utkarsh R Sharma