GST Fraud: Bail Denied for Fake Invoice Scam Worth ₹10.89 Crores

Get the full picture - access the original judgement of the court order here

Case Name

Neeraj Karande v. Union of India

Court Name: High Court (Criminal Petition No.5967 of 2020)

Case No.: Criminal Petition No.5967 of 2020

Judge: Honourable Sri Justice K. Lakshman

Decision on: 30th November 2020

Key Takeaways

1. Serious Economic Offence: GST fraud involving fake invoices without actual supply of goods is treated as a serious economic offence, especially when the amount exceeds ₹5 lakhs, making it cognizable and non-bailable under Section 132(1)(i) of the CGST Act.

2. Non-Existent Business Premises: The court gave significant weight to the fact that both the registered office and factory of the company were found to be non-existent since 2016, indicating a well-planned conspiracy to defraud the government.

3. Ongoing Investigation: Bail was denied primarily because the investigation was incomplete, with forward chain recipients of tax credit yet to be investigated, and forensic examination of the accused’s laptop pending.

4. Business from Vehicle: The accused admitted in his statement that he was running the business from his car using a laptop and mobile phone, creating invoices and e-way bills on the move—a highly irregular business practice.

5. Risk of Tampering: Given the nature of the fraud and ongoing investigation, the court found there was a substantial risk that the accused might interfere with the investigation or tamper with evidence if released on bail.

Issue

Should the accused, Neeraj Karande, be granted regular bail in a case involving alleged GST fraud of ₹10.89 crores under Section 132(1)(i) read with Section 132(1)(b)© of the Central Goods and Services Tax Act, 2017, when the investigation is still ongoing?

Facts

The Accused and His Company:

• Neeraj Karande was the Managing Director of M/s. GE Godavari Engineering Industries Limited.
• The company had GST registration number GSTIN No.36AACCG9862H3Z7.

The Alleged Fraud Scheme:

• Between July 1, 2017, and August 31, 2020, Karande allegedly ran a sophisticated GST fraud operation.
• He issued GST invoices and e-way bills without actually supplying any goods.
• He procured fake invoices without receiving goods to inflate his company’s turnover and enhance banking loan facilities.
• He supplied invoices to other parties to help them show false expenses in their accounts.
• He helped customers avoid paying GST in cash by providing them with fake invoices.

The Non-Existent Business:

• Investigation revealed that the registered office at Plot Nos.136 and 137, Road No.3, Phase-2, Maitri Nagar, Miyapur, Hyderabad was non-existent.
• The factory at Survey No.655, Peddapur Village, Sadashivpet Mandal, Sangareddy District was also non-existent.
• Both premises were not in the company’s possession since 2016.

Mobile Business Operations:

• In his statement recorded on October 29, 2020, and November 2, 2020, under Section 70 of the CGST Act, Karande admitted he was running the business from his car (Grey Colour Swift Dezire TS07 1667) using a laptop and mobile phone.
• He created invoices on his laptop and raised e-way bills using mobile hotspot.

The Amount Involved:

• Total GST fraud: ₹10.89 crores
• Inward irregular ITC credit: ₹5.46 crores
• Outward irregular ITC credit: ₹5.43 crores

Arrest and Bail Application:

• Karande was arrested on November 2, 2020.
• He filed this bail application (Criminal Petition No.5967 of 2020) seeking regular bail.

Sale of Company Assets:

• There was a dispute about whether the company was sold by the bank under SARFAESI Act or by the company itself through a sale deed dated August 29, 2019.

Arguments

Petitioner’s (Neeraj Karande’s) Arguments:

1. No Loss to Government: The petitioner argued that there was no actual loss to the government exchequer since GST is a beneficial legislation.

2. Compounding of Offences: He pointed out that Section 138 of the CGST Act deals with compounding of offences, suggesting the matter could be settled.

3. Procedural Violation: Since the offence is cognizable and non-bailable with a punishment of five years, the respondent authorities should have followed the procedure under Section 41-A of the Code of Criminal Procedure, 1973, which they allegedly did not.

4. False Implication: The petitioner claimed he was falsely implicated, and that the alleged ITC credit availment was by a third party, not him.

5. Abnormal Delay: He argued there was an abnormal delay in lodging the complaint. The alleged fraud occurred from July 1, 2017, to August 31, 2020, but the complaint was filed only on November 2, 2020.

6. Company Not Sold by Bank: Contrary to the prosecution’s claim, the petitioner submitted that the company was not sold by the bank under SARFAESI Act. He produced a sale deed (Document No.16494 of 2019 dated August 29, 2019) showing the company sold land and shares to M/s. Bajaj Heavy Engineering Limited.

7. No Objection Certificate: He produced a letter dated September 11, 2019, from the Assistant Commissioner (ST) Madhapur-III Circle stating they had no objection to the sale/mortgage of the company’s immovable property.

8. Coerced Statement: The petitioner claimed his statement under Section 70 of the CGST Act was recorded under pressure and coercion, and that it contradicted the complaint.

9. Investigation Complete: He argued that since he had been in jail since November 2, 2020, and the investigation was almost complete, his bail should be considered with appropriate conditions.

10. Legal Precedent: He relied on the Bombay High Court decision in Prasad Purshottam Mantri v. Union of India [2019(29) G.S.T.L. 647].

Respondent’s (Government’s) Arguments:

1. Serious Economic Offence: The respondent emphasized that this was a serious economic offence committed by the Managing Director of the company.

2. Elaborate Modus Operandi: The accused indulged in issuing GST invoices, e-way bills, and passing on input tax credit to various customers without actual supply of goods.

3. Non-Existent Premises: Both the registered office and factory were found to be non-existent, with neither being in the company’s possession since 2016.

4. Well-Planned Conspiracy: The mens rea (criminal intent) of the management, including the petitioner, clearly established a well-thought-out conspiracy aimed at duping the exchequer through a complex web of inter-connected companies engaged in fraudulent issuance of tax invoices.

5. Substantial Amount: The GST amount involved was ₹10.89 crores, which is much higher than the ₹5 lakh threshold that makes the offence non-bailable.

6. Admission in Statement: In his statement under Section 70 of the CGST Act, the petitioner categorically admitted that there was no registered premises of the factory and that he was running the business from his vehicle using a laptop and mobile phone.

7. Ongoing Investigation: The investigation was not complete, and the forward chain recipient of the tax credit needed to be investigated.

8. Recovery and Attachment: Due to ongoing investigation, the department recovered ₹42,90,133 from the electronic credit ledger of the company. A provisional attachment order under Section 83 of CGST Act was issued to the company’s banker.

9. Forensic Examination Pending: The laptop recovered under panchanama dated November 2, 2020, was to be forensically examined by CFSL, Hyderabad, and the report was awaited.

10. ITC Credit Blocked: Steps were taken to prevent further loss by blocking the ITC credit under Rule 86A(1)(a) of the CGST Act, as the competent authority (Additional Director General) had accorded approval with reasons to believe that the ITC was fraudulently availed.

11. Risk of Interference: There was every possibility of the petitioner interfering with the investigation and tampering with evidence if released on bail.

Key Legal Precedents

The judgment references the following legal provisions and precedent:

Statutory Provisions:

1. Section 132(1)(i) read with Section 132(1)(b)© of the Central Goods and Services Tax Act, 2017: This is the main offence provision under which the accused was charged. It deals with punishment for certain offences, specifically:

• Section 132(1)(b): Wrongful availment or utilization of input tax credit
• Section 132(1)©: Availment of input tax credit on the basis of invoices/bills issued without supply of goods or services
• Section 132(1)(i): Prescribes imprisonment which may extend to five years and fine where the amount of tax evaded exceeds ₹500 lakhs.

2. Section 31 of the CGST Act: Deals with tax invoice requirements. The issuance of GST invoices and e-way bills without actual supply of material/services is in contravention of this section.

3. Section 16 of the CGST Act: Deals with eligibility and conditions for taking input tax credit. Availing input tax credit on the basis of fake GST invoices issued without supply of material violates this section.

4. Section 70 of the CGST Act: Deals with power to summon persons to give evidence and produce documents. The petitioner’s statements were recorded under this section.

5. Section 138 of the CGST Act: Deals with compounding of offences. The petitioner argued this provision should apply.

6. Section 41-A of the Code of Criminal Procedure, 1973: Deals with notice of appearance before police officer. The petitioner argued this procedure should have been followed.

7. Section 167 of Cr.P.C.: Deals with procedure when investigation cannot be completed in twenty-four hours. The remand application was filed under this section.

8. Section 83 of CGST Act: Deals with provisional attachment to protect revenue in certain cases. A provisional attachment order was issued under this section.

9. Rule 86A(1)(a) of the CGST Act: Deals with blocking of input tax credit in certain cases. The ITC credit was blocked under this rule.

10. SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002): Referenced in the context of whether the company was sold by the bank.

Case Law Precedent:

Prasad Purshottam Mantri v. Union of India [2019(29) G.S.T.L. 647] - This Bombay High Court decision was cited by the petitioner’s counsel, though the judgment doesn’t elaborate on how this precedent was applied or what principle it established.

Judgement

The court dismissed the bail application and denied regular bail to Neeraj Karande. Here’s the reasoning:

Court’s Analysis:

1. Serious Allegations: The court noted there were serious allegations against the petitioner involving collection and issuance of invoices without actual supply of goods, leading to wrongful availment of input tax credit.

2. Elaborate Fraud Scheme: The modus operandi adopted by the petitioner—issuing GST invoices and e-way bills and passing on input tax credit without actual supply of goods—needed thorough investigation.

3. Non-Existent Business: The court gave significant weight to the fact that both the registered office and factory were non-existent and not in the company’s possession since 2016.

4. Substantial Amount: The GST amount involved (₹10.89 crores) for operations from July 1, 2017, to August 31, 2020, was substantial.

5. Admission in Statement: The petitioner’s own admission in his statement under Section 70 of the CGST Act that there was no registered premises and he was running the business from his vehicle was damning.

6. Ongoing Investigation: The court emphasized that the investigation was still pending, with several aspects requiring further inquiry.

7. Recent Arrest: The petitioner was arrested only on November 2, 2020, making it too early to grant bail.

Final Order:

“Considering the above and also the offences alleged to have been committed by the petitioner and also the aspect that the petitioner was arrested only on 02.11.2020, this Court is not inclined to grant regular bail to the petitioner. Therefore, the criminal petition is dismissed. As a sequel thereto, miscellaneous petitions, if any, pending in the criminal petition stand closed.”

Date of Judgment: November 30, 2020

FAQs

Q1: What exactly was the fraud that Neeraj Karande allegedly committed?

A: Neeraj Karande, as Managing Director of GE Godavari Engineering Industries Limited, allegedly ran a GST fraud scheme where he:

• Issued fake GST invoices and e-way bills without actually supplying any goods
• Allowed companies to wrongfully claim input tax credit (ITC) based on these fake invoices
• Procured fake invoices to inflate his company’s turnover for better bank loans
• Helped other parties show false expenses in their accounts
• The total fraud amounted to ₹10.89 crores between July 2017 and August 2020.

Q2: Why was bail denied in this case?

A: Bail was denied for several compelling reasons:

• The offence involved a substantial amount (₹10.89 crores), making it a serious economic crime
• Both the company’s registered office and factory were found to be non-existent since 2016
• The investigation was still ongoing, with forward chain recipients yet to be investigated
• Forensic examination of the accused’s laptop was pending
• The accused was arrested only recently (November 2, 2020)
• There was a risk the accused might interfere with the investigation or tamper with evidence
• The court felt it was too early and too risky to grant bail.

Q3: What is input tax credit (ITC) and why is fraudulent claiming of it serious?

A: Input Tax Credit is a mechanism under GST where businesses can reduce their tax liability by claiming credit for the GST they’ve already paid on purchases (inputs). It prevents cascading taxation. Fraudulent ITC claiming is serious because:

• It directly causes revenue loss to the government
• It undermines the entire GST system
• When fake invoices are used to claim ITC without actual supply of goods, it’s essentially stealing from the government exchequer
• In this case, the fraud involved ₹5.46 crores in irregular inward ITC and ₹5.43 crores in irregular outward ITC.

Q4: What was unusual about how this business was being run?

A: What made this case particularly suspicious was that:

• The company had no physical registered office or factory—both were non-existent since 2016
• The accused admitted in his statement that he was running the entire business from his car (a Grey Swift Dezire)
• He was creating invoices on a laptop and generating e-way bills using mobile hotspot while on the move
• All business was conducted via email (neerajkarande@godavariengg.com)
• This is highly irregular for a legitimate manufacturing/trading business and indicated a fraudulent operation.

Q5: What is Section 132 of the CGST Act and why does it matter here?

A: Section 132 of the CGST Act deals with punishment for certain offences. Specifically:

• Section 132(1)(b) covers wrongful availment or utilization of input tax credit
• Section 132(1)© covers availment of ITC based on fake invoices without actual supply
• Section 132(1)(i) prescribes punishment: imprisonment up to 5 years and fine when tax evaded exceeds ₹500 lakhs

Since the fraud in this case was ₹10.89 crores (much more than ₹5 lakhs), it fell under the most serious category, making it cognizable and non-bailable.

Q6: What did the accused argue in his defense?

A: The accused made several arguments:

• There was no actual loss to the government
• Authorities didn’t follow proper procedure under Section 41-A of CrPC
• He was falsely implicated
• There was abnormal delay in filing the complaint
• The company wasn’t sold by the bank as alleged
• His statement was recorded under coercion
• Investigation was complete, so bail should be granted
• However, the court found these arguments insufficient given the seriousness of the allegations and ongoing investigation.

Q7: What actions had the authorities taken during investigation?

A: The authorities had taken several steps:

• Recorded the accused’s statement under Section 70 of CGST Act
• Recovered ₹42,90,133 from the company’s electronic credit ledger
• Issued provisional attachment order under Section 83 of CGST Act to the company’s banker
• Seized the accused’s laptop under panchanama for forensic examination by CFSL Hyderabad
• Blocked ITC credit under Rule 86A(1)(a) of CGST Act with approval from Additional Director General
• These actions showed active and ongoing investigation.

Q8: What does “forward chain recipient” mean and why is it important?

A: “Forward chain recipient” refers to the companies or entities that received the fake invoices and claimed input tax credit based on them. Investigating the forward chain is crucial because:

• It helps identify all parties involved in the fraud network
• It determines the full extent of the revenue loss
• It reveals whether recipients were innocent victims or willing participants
• It helps recover wrongfully claimed tax credits
• The investigation of forward chain recipients was still pending, which was one reason bail was denied.

Q9: Can such offences be compounded (settled)?

A: The accused mentioned Section 138 of the CGST Act, which deals with compounding of offences. While GST offences can potentially be compounded (settled by paying the dues and penalty), this doesn’t automatically entitle someone to bail during investigation. The court has to consider:

• The seriousness of the offence
• The amount involved
• The stage of investigation
• Risk of evidence tampering
• In this case, despite the possibility of compounding, bail was denied due to other factors.

Q10: What happens next for the accused?

A: Following this judgment:

• The accused remains in judicial custody
• The investigation will continue, including:
• Forensic examination of the seized laptop
• Investigation of forward chain recipients
• Further evidence collection
• The accused can potentially apply for bail again later, especially if:
• Investigation is substantially completed
• He has been in custody for a prolonged period
• Circumstances change significantly
• The trial will eventually proceed based on the charge sheet filed by the authorities

1. This is an application for regular bail. The petitioner viz., Neeraj Karande is sole accused in F.No.INV/DGGI/HZU/GST/Gr’H’/ 42/2020-21 dated 02.11.2020. The offence alleged against the petitioner is under Section 132(1)(i) read with Section 132(1)(b)(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 standing counsel for the

respondent. Perused the record.

3. The allegation against the petitioner is that he is managing

director of M/s. GE Godavari Engineering Industries Limited

(hereinafter referred to as ‘Company’). The petitioner has obtained

registration under the provisions of the CGST Act vide GSTIN

No.36AACCG9862H3Z7. Being the managing director of the

company, the petitioner has collected and issued invoice or bill

without 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. The modus operandi

adopted by the petitioner is that he 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. He 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. It is further alleged

against the petitioner that he has supplied invoices without supply of

goods to some of his customers to avoid payment of the GST in cash.

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 PowerInfra Tech

Limited, M/s. Radhika Electrocast Private Limited, Bahrat Gupta,

Pratik Chaturvedi, Janki Lal 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.

4. Thus, the petitioner has wrongfully availed or utilized input

tax credit and also availed input tax credit on the basis of the invoices

/ bills issued without supply of actual goods or services and the same

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.

5. It is also alleged that the GST amount involved for the

operations carried out by the petitioner from 01.07.2017 to 31.08.2020

is Rs.10.89 crores (Rs.5.46 Crores inward irregular ITC credit plus

5.43 crores outward irregular ITC credit), which is much higher than

Rs.500.00 lakhs, is an offence punishable under Section 132(1)(i) of

the CGST Act. The said fact of petitioner working is explained by

him in his statements dated 29.10.2020 recorded under Section 70 of

the CGST Act.

6. Learned counsel for the petitioner would submit that there is

no loss to the Government exchequer. The GST is a beneficial

legislation. Section 138 of the CGST Act deals with compounding of

offences. The punishment is five (5) years. It is a cognizable offence

and non-bailable. Therefore, the respondent authorities have to

necessarily follow the procedure under Section 41-A of the Code of

Criminal Procedure, 1973 (for short ‘Cr.P.C.’). In the present case,

the respondent authorities have not followed the same.

7. The learned counsel for the petitioner would further submit

that the respondent authorities have falsely implicated the petitioner in

the present crime. He would further submit that even as per the

complaint, the alleged availment of ITC credit is by a third party and

that there is abnormal delay in lodging the complaint. As per the complaint, the alleged availment of ITC credit by the Company is

from 01.07.2017 to 31.08.2020 and the complaint was lodged on

02.11.2020. Thus, there is abnormal delay in lodging the complaint.

8. Learned counsel for the petitioner would further submit that

the respondent authorities are alleging that the Company was closed

and it was sold by the bank by invoking the procedure laid under the

Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI

Act’). But, according to him, the Company was not sold. He has filed

copy of the sale deed bearing document No.16494 of 2019 dated

29.08.2019 executed by the Company in favour of M/s. Bajaj Heavy

Engineering Limited. Referring the said document, learned counsel

for the petitioner would submit that the land and shares of the said

Company were sold under the above sale deed and not by the bank

under the provisions of the SARFAESI Act as alleged by the

respondent authorities.

9. Learned counsel for the petitioner by referring to the letter

dated 11.09.2019 issued by the Assistant Commissioner (ST)

Madhapur-III Circle, Hyderabad Rural Division to the Sub Registrar

(SRO), Sadasivpet Mandal,Sanga Reddy District, Telangana, would

submit that the respondent authorities have no objection to sale /

mortgage immovable property of the Company as mentioned in its

earlier letter dated 31.01.2019.

10. Learned counsel for the petitioner has relied on the

principle laid down by the High Court of Bombay in Prasad

Purshottam Mantri v. Union of India He has also referred to the

statement recorded by the respondent authorities under Section 70 of

the CGST Act and would submit that under pressure and coercion, the

said statement was recorded. Even as per the statement of the

petitioner, the same is contrary to the contents of the complaint.

Learned counsel for the petitioner would submit that the respondent

authorities have arrested the petitioner on 02.11.2020 and since then

he is in jail. The investigation is almost completed. Therefore, the

petitioner’s bail application may be considered by imposing any

conditions.

11. On the other hand, the learned standing counsel for the

respondent would submit that the petitioner herein being the managing

director of the Company has committed serious offence. The modus

operandi adopted by the petitioner is that he indulged in issuing GST

invoices, e-way bills and passing on input tax credit to various

customers without actual supply of goods. He has referred to the

contents of remand application filed under Section 167 of Cr.P.C.

In the said remand application, it is specifically mentioned that the

investigation revealed that the registered office of the Company is

found to be non-existent which is said to be located at Plot Nos.136

and 137, Road No.3, Phase-2, Maitri Nagar, Miyapur, Hyderabad.

The factory of the Company said to be located at Survey No.655,

Peddapur Village, Sadashivpet Manal, Sangareddy District, is also

non-existent.

12. Learned standing counsel for the respondent would further

submit that since both the premises are found to be not in possession

of the said entity since 2016, there is no established premises of the

Company. The mens rea of the management of the Company

including the petitioner, managing director of the Company, can be

clearly viewed which establishes the well though out conspiracy

aimed at duping the exchequer by way of creation of a complex web

of inter-connected companies engaged in fraudulent issuance of tax

invoices without supply of goods or services to enable the recipient

companies to avail and utilize fake input tax credit leading to loss to

the Government exchequer.

13. He would further submit that the GST amount involved for

the operations carried out by the petitioner for the period from

01.7.2018 to 31.08.2020 is 10.89 crores.

14. Learned standing counsel would further submit that the

respondent authorities have already recorded the statement of the

petitioner under Section 70 of the CGST Act, wherein the petitioner

has categorically answered to Question No.9 of the said statement

stating that presently, there is no registered premises of the factory.

Business is being run by him from vehicle viz., Grey Colour Swift

Dezire 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

neerajkarande@godavariengg.com. 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.

15. The learned sanding counsel has also referred to paragraph

No.6 of its counter affidavit, wherein it is stated that the investigation

is not completed and forward chain recipient of the tax credit is to be

investigated. Due to ongoing investigation, the department could lay

its hand on an amount of R.42,90,133/- in the electronic credit ledger

of the Company of the petitioner. He caused loss of to a tune of

Rs.10.89 lakhs to the exchequer of the Government. There is every

possibility of the petitioner interfering with the investigation and

tampering with the evidence. With the said submissions, the learned

standing counsel for the respondent authorities seeks dismissal of the

present application.

16. In view of the above rival submissions, the allegations

against the petitioner are that he has collected and issued invoices or

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 is that he indulged in issuing GST invoices and e-way bills and passing on input

tax credit to various customers without actual supply of goods. It is

also specifically mentioned in the remand application that the

registered office and also the factory of the petitioner are non-existent

one. According to the respondent authorities, the bank has sold the

unit of the Company by invoking the procedure laid down under

SARFAESI Act. Both the registered office and the factory are found

to be not in possession of the Company since 2016. The petitioner has

filed irregular inward ITC credit of Rs.5.46 crores and outward

irregular ITC credit of Rs.5.43 crores from 01.07.2017 to 31.08.2020.

In the statement recorded under Section 70 of the CGST Act, the

petitioner has admitted that presently there is no registered premises of

the factory. The business is being run by him from the vehicle viz.,

Grey Colour Swift Dezire TS07 1667. He is also conducting business

by using his laptop and mobile No.9493895762. He has answered that

based on the invoices created in the laptop, he has raised documents

like e-way bills using hotspot and transfer documents created through

e-mail neerajkarande@godavariengg.com. He also answered that he

will submit all the related documents like invoices, e-way bill after

retrieval from his mail, as far as possible.

17. In the counter affidavit, the respondent authorities

specifically contended that the investigation is not yet completed.

The forward chain recipient of the tax credit is to be investigated.

Due to ongoing investigation, the department could lay its hand on an

amount of Rs.42,90,133/- in the electronic credit ledger of the

Company of the petitioner. Further, a provisional attachment order

under Section 83 of CGST Act was issued to the banker of the

Company. Steps have been undertaken to get the laptop recovered

under panchanama dated 02.11.2020 to be forensically examined by

CFSL, Hyderabad. Such forensic science laboratory report is awaited.

Steps have been taken to prevent further loss to the Government

exchequer by blocking the ITC credit under Rule 86A(1)(a) of the

CGST Act as the competent authority i.e., the Additional Director

General has accorded approval along with reasons to believe that the

ITC has been fraudulently availed and is ineligible due to two counts

i.e. the petitioner has availed credit on fake invoices obtained without

supply of goods and Company of the petitioner not conducting

business from its registered place.

18. Thus, there are serious allegations against the petitioner.

There are several aspects to be investigated into by the investigating

officer during the course of investigation. The modus operandi said to

have been adopted by the petitioner in commission of offence is to be

investigated into by the investigating officer. The GST amount

involved for the operations carried out by him for the period from

01.7.2017 to 31.08.2020 is Rs.10.89 crores. Admittedly, the

investigation is pending.

19. Considering the above and also the offences alleged to have

been committed by the petitioner and also the aspect that the petitioner

was arrested only on 02.11.2020, this Court is not inclined to grant

regular bail to the petitioner.

20. Therefore, the criminal petition is dismissed.

As a sequel thereto, miscellaneous petitions, if any, pending in

the criminal petition stand closed.

K. LAKSHMAN, J

November 30th, 2020.