The petitioner herein has filed the present Criminal petition seeking for grant of regular bail. He is the sole accused in F.No. INV/DGGI HZU/GST/Gr ‘H’/42/2020-21 dated 02.11.2020. The offence alleged against him is under Section 132 (1) (i) read with Section 132 (1)(h)(c) of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).

2. Heard Sri T. Bala Mohan Reddy, learned counsel for the petitioner, and Sri P. Dharmesh, learned Special Public Prosecutor appearing on behalf of respondent. Perused the record.

3. This is a second bail application filed by the petitioner herein. This Court vide order dated 30.11.2020 dismissed the first bail application tiled by him vide Crl.P. No.5967 of 2020.

4. The allegations levelled against the petitioner are as follows:

i) He is managing director of M/s. GE Godavari Engineering Industries Limited (hereinafter referred to as ‘Company’). He has obtained registration under the provisions of the CGST Act vide GSTIN No.36AACCG9862H3Z7. Being the Managing Director of the said Company, the petitioner has collected and issued invoice or e-way bill witho.it supply of goods in violation of the provisions of the CGST Act or the Rules made thereunder leading to wrongful availment or utilization of input tax credit rendered by him.

ii) The modus operand! adopted by the petitioner is that he has indulged in issuing GST invoices, e-way bills and passing on input tax credit to various customers without actual supply of goods. It is further alleged in the complaint that the petitioner, as per the business need of the Company, procured invoices without actual receipt of goods and supplied the said invoices and subsequently increased the Company’s annual turnover to enhance his banking loan facilities. The petitioner has also issued GST invoices without supply of goods to various other parties and helped them to show them as their expenses in their accounts.

iii) It is further alleged that he has procured GST invoices without supply / receipt of materials from the firms mentioned in the statements given by him on 29.10.2020 and 02.11.2020 through M/s. Advance Power infra Tech Limited, MIs. Radhika Electrocast Private Limited, Bahrat Gupta, Pratik Chaturvedi, Janki Lai Sureka and Siddarth Sharma at his request to his Company located in Hyderabad. Thus, issuance of GST invoices, e-way bills without actual supply of material / services is in contravention of the provisions of Section 31 of the CGST Act. Further, availing input tax credit of GST on the basis of fake GST invoices issued without supply of material is in violation of Section -16 of the CGST Act.

iv) It is further alleged that the petitioner herein has wrongfully availed or utilized input tax credit and also availed input tax credit on the basis of invoices / e-way bills issued without supply of actual goods or services, which is an offence under Clause (b) and (c) of Sub-Section (1) of Section 132 of the CGST Act which is punishable under Section 132 (1)(i) of the CGST Act. The amount involved for the operations carried out by the petitioner from 01.07.2017 to 31.08.2020 is ₹ 10.89 Crores (₹ 5.46 Crores inward irregular ITC credit plus 5.43 Crores outward irregular ITC credit), which is much higher than ₹ 500.00 lakhs, is an offence punishable under Section 132(1)(i) of the CGST Act. The said fact was admitted by him in his statement dated 29.10.2020 recorded under Section 70 of the CGST Act.

4. It is contended by the learned counsel for the petitioner that the respondent’s authorities have not followed the procedure laid down under Section 41-A of the Code of Criminal Procedure, 1973 (Cr.P.C.) since the punishment for the offence alleged against the petitioner is five ;05) years and it is a cognizable offence. There is no loss to the Government Exchequer. There is abnormal delay in lodging the complaint since the alleged availment of ITC Credit by the said Company was from 01.07.2017 to 31.08.2020 and the complaint was lodged on 02.11.2020. According to the learned counsel for the petitioner, the said company was not sold. He has filed documents in proof of the same.

5. According to the learned counsel for the petitioner, investigation is almost completed and the petitioner is in jail from 02.11.2020 and, therefore, he sought to consider the bail application on certain conditions.

6. Respondent filed its counter along with certain documents. Mr. P. Dharmesh, learned Special Public Prosecutor for the respondent, would submit the petitioner being Managing Director of the said Company has committed serious offence and availed input tax credit of ₹ 10.89 Crores for the period from 01.07.2017 to 31.08.2020. The modus operandi adopted by the petitioner in commission of offence is that he has indulged in issuing GST invoices, e-way bills and passing on input tax credit to various customers without actual supply of goods. According to him, the plant and machinery of the said Company was sold in 2016 itself and there were no established premises of the company.

7. It is further contended by the learned Special Public Prosecutor that the respondent’s Authorities have already recorded the statement of the petitioner under Section – 70 of the CGST Act, wherein he has categorically answered that there is no registered premises of the factory. Business is being run by him from vehicle viz., Grey Colour Swift Dzire TS07 1667 using laptop and mobile No.9493895762. He has also answered to Question No.10 stating that based on the invoices created in the laptop, he raised documents like e-way bills using hotspot and transfer documents created through mail [email protected] He also answered that he will submit all the related documents like invoices, e-way bill after retrieval of the same from his mail, as far as possible.

8. The above stated rival contentions would reveal that the petitioner herein has collected and issued invoices or e-way bills without actual supply of goods in violation of the provisions of the CGST Act and the rules made thereunder leading to wrongful availment or utilization of input tax credit rendered by him and his Company. The modus operandi adopted by the petitioner in commission of offence is also explained. According to the respondent, the plan and machinery of the said company was sold in 2016 itself, and according to the petitioner, the land was sold in August, 2019 and in proof of the same, he has filed copy of sale deed and letter dated 11.09.2019 of the Assistant Commissioner, Sales Tax. However, it is a matter to be investigated into by the Investigating Officer during the course of investigation.

9. The further allegation against the petitioner herein is that he has filed irregular inward ITC Credit of ₹ 5.46 Crores and outward irregular ITC Credit of ₹ 5.43 Crores from 01.07.2017 to 31.08.2020. The respondent’s authorities have already recorded the statement of the petitioner under Section – 70 of the CGST Act. Thus, there are several factual aspects to be investigated into by the Investigating Officer.

10. As stated above, this is a second bail application filed by the petitioner herein. The first bail application was dismissed by this Court on 30.11.2020 vide CrI.P. No.5967 of 2020 on the ground that the investigation is pending. The allegations levelled against the petitioner herein are serious in nature.

11. In the counter filed by the respondent in the first bail application i.e., Crl.P. No.5967 of 2020, it is stated that the investigation not yet completed, the forward chain recipient of tax credit is to be investigated. By referring to the said contention, this Court has dismissed the first bail application of the petitioner herein. In the present bail petition, the respondent has filed counter reiterating the very same facts. Even in the counter filed in the present application, it is contended by the respondent’s authorities that the investigation has not completed, forward chain recipient of tax credit is to be investigated. Even the learned Special Public Prosecutor for the respondent, during the course of arguments, contended that the respondent’s authorities have issued notices to various Commissionerates for the purpose of investigation. The respondent has filed several such notices. The said fact would reveal that there is no progress in the investigation from the date of filing of the counter in the first bail application till 12.12.2020 i.e., date of filing of second counter. Except saying that the respondent’s authorities have issued several notices, there is no progress in the investigation.

12. Admittedly, the petitioner herein was arrested on 02.11.2020 and since then he is jail. As discussed above, the respondent’s authorities have to collect evidence and record statements of witnesses. It appears from the counter in both the bail applications filed by the respondent’s authorities that it will take considerable time to complete the investigation. It is settled principle of law that unless guilt of the accused is proved, it has to be presumed that the accused is an innocent.

13. Considering the said aspect and also the aspect that the petitioner is in jail from 02.11.2020, this Court is inclined to grant regular bail to the petitioner herein on the following conditions:

i) The petitioner – Accused shall execute a personal bond for ₹ 25,000/- (Rupees twenty five thousand only) with two (02) sureties for a like sum each to the satisfaction of the Special Judge for Economic Offences, Nampally, Hyderabad;

ii) He shall report before the Investigating Officer once in a week viz., everyday Monday between 10.00 A.M. and 5.00 P.M. till completion of investigation and filing of charge sheet;

iii) He shall co-operate with the Investigating Officer by furnishing documents and also information as required by the Investigating Officer; and

iv) He shall not interfere with the investigation.

14. Accordingly, the present Criminal Petition is allowed.

As a sequel, miscellaneous petitions, if any, pending in the criminal petition shall stand closed.