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'Prima Facie Input Tax Credit Wrongly Availed Exceeds Five Crores': Chennai Court Dismisses Bail Plea Of Person Accused Of Tax Evasion

Sebin James
1 Feb 2022 4:27 AM GMT
Prima Facie Input Tax Credit Wrongly Availed Exceeds Five Crores: Chennai Court Dismisses Bail Plea Of Person Accused Of Tax Evasion
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The accused have admitted to have committed the offence...The evidentiary value of the statement obtained under Section 70 of TNGST Act has to be dealt with during the course of trial, the court clarified.

In an offence that comes under Section 132 (1) (i) of TNGST Act related to mere bill trading by raising invoices without actual supply of goods, the Egmore Additional Chief Metropolitan Magistrate (E.O II) has dismissed the bail application of the accused stating that there is prima facie complicity of the accused and the input tax credit wrongly availed has exceeded Rs 5 Crores.The...

In an offence that comes under Section 132 (1) (i) of TNGST Act related to mere bill trading by raising invoices without actual supply of goods, the Egmore Additional Chief Metropolitan Magistrate (E.O II) has dismissed the bail application of the accused stating that there is prima facie complicity of the accused and the input tax credit wrongly availed has exceeded Rs 5 Crores.

The Additional CMM noted in the order that the investigation is still at the nascent stage and the other individuals involved in the tax evasion racket is yet to be arrested. The court also discarded the petitioner, Mr. Yasar Arabath's contention that state authorities have no right to add the CGST Tax evasion.

Citing the examination of the accused under Section 70 of the TNGST Act, the court noted that the accused have acceded to have committed the offence in the statement attached with the remand report.

The court, therefore, noted in the order as below:

"The petitioner/ accused was examined under Section 70 of TNGST Act... The evidentiary value of the statement has to be dealt with during the course of trial. Even otherwise, there is prima facie complicity of the accused with the crime. Learned Counsel for the petitioner would contend that the beneficiaries and those who evaded tax were not implicated... The medical records of the petitioner/ accused showing various illnesses have been produced...Here it is to be emphasised that non implication of other accused and his illness would hardly be of any help to the petitioner."

Section 132 (1) (i) of the TNGST Act makes a person liable for attempting to commit or abetting any of the offences in (a) to (k) of Section 131 (1). Section 131 (1) (i) lays down that such a person will be subject upto three years imprisonment and fine if the amount of tax evaded or the amount input tax credit wrongly availed or the amount of refund wrongly taken exceeds five crores. Section 131 (5) further states that the said offences will be non-bailable and cognisable.

On the above aspect, the court also dissected the argument of the petitioner that the offence was bailable in nature since the quantum referred to in the arrest memo was below five crores since it was only calculted till July, 2021. However, the court was of the opinion that the prosecution later accepted the discrepancy in the arrest memo and the remand report that contains the revised amount till November 2021.

"However, the documents produced by Prosecution in Arrest Memo and details in the remand report would disclose that the input tax availed by the petitioner/ accused had crossed 5 crores limit. So obviously it falls within the purview of 132 (1) (i) of TNGST Act, 2017

The court clarified that there were no infirmities in the arrest of accused. In a situation where the release of the accused might hamper further investigation, it is reasonable to deny bail when prima facie complicity has been established, the court added.

The bail plea under Section 436 CrPC pertains to the accused who was engaged in bill trading activity and passing on the input tax credit to the beneficiaries. According to the respondent Deputy COmmissioner of State Taxes , the accused himself has taken ITC in GSTR-3B return without actual receipt of goods. The respondent further submitted that the accused has issued fake invoices to the tune of Rs 5,16,36, 620, causing loss to the government exchequer.

M/s Ahmad Associates appeared for the petitioner/ accused and N.R.R Arun Natarajan, Special Government Pleader (Taxes) appeared for the respondent.

Case Title: Yasar Arabath v. Deputy Commissioner (State Taxes)

Case No: CR.M.P No. 3 Of 2022 in R.R. No. 01 Of 2022

Click Here To Read/ Download Order


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