The Bombay High Court on Wednesday gave an ad interim relief that no arrest can be made without following the procedures in cases of GST evasion.
The court direction came in a matter involving allegations of evading GST by circular trading and claiming an input tax credit (ITC) through fake invoices.
The matter is based on Section 132 of the Central GST (CGST) Act. It clearly says that if the amount of tax evaded or ITC availed on the basis of fake invoices is less than ₹5 crore, then the offense would be bailable and non-cognizable. However, if the amount is more than ₹5 crore it would be non-bailable and cognizable. Though the matter presented before the court involved allegations of tax evasion amounting little over ₹3 crore, the petitioner highlighted other cases as well.
It was said that based on the circular trading and issuance of fake invoices, there have been various arrests in the country.
However, it was alleged that, in few cases where the proceedings had been initiated by the authorities, there were procedural irregularities and the offense falls clearly within the category of ‘non-bailable and cognizable offense’. Criminal writ petitions have been filed in the Bombay High Court to ensure personal liberty.
One of the petitioner’s firms, during February-October 2018, received metallic scrap from a vendor. It was substantially consumed on the manufacturing process and roughly 1.86 percent of the quantum of metallic scrap received was sold as such to other persons on account of the inferior quality of the products. The petitioner claimed that GST amounting to ₹3.2 crore was paid on such supply, out of which ₹33 lakh were reversed through debit note due to poor quality. All these transactions were duly reported in the GST returns filed.
However, the tax authority alleged, during the course of an investigation, that the petitioner had availed input tax credit on invoices without actually receiving the supply. As per the purported allegations it seeks to dispute all the quantum of input tax credit availed during February-October 2018 without any basis and accordingly qualify the offense as ‘cognizable’ and ‘non-bailable.’
No loss of revenue
“Section 132 of the CGST Act provides that offenses prescribed become non-bailable and cognizable offenses only when the loss to the exchequer is more than ₹5 crore and the relevant provisions of the GST Act have been contravened,” Abhishek A Rastogi of Khaitan & Company said. He argued a couple of such criminal writ petitions in the Bombay High Court on Wednesday while emphasizing that no arrest should be made when there is no loss of revenue to the exchequer.
Risk of judicial custody
“There is a high risk of judicial custody in various cases and hence the accused should seek an ad interim protection with a court direction that the proceedings should be conducted in a fair manner after following all the procedures and the judicial custody is ordered only in those cases which clearly fall within the offenses prescribed as non-bailable and cognizable,” Rastogi said.
Source: The Hindu Business Line