HC dismisses pleas of Directors seeking to quash Criminal proceedings for allegedly creating fake invoices to evade Tax liabilities

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The Bombay High Court dismissed pleas of Directors seeking to quash criminal proceedings for allegedly creating fake invoices to evade tax liabilities.

The directors of Ganraj Ispat Private Limited lifted the plea for quashing criminal proceedings against them on allegations that they committed fraud under the Central Goods and Services Tax Act.

There was admission by the petitioners of having created a record of false invoices for input tax credit by deceiving the authority.

Upon seizure of the records of the company, the directors voluntarily deposited the penalty amount and not under protest.

Senior Advocate MD Adkar urged that the GST liabilities of about Rs 84 lakhs had been deposited with the Directorate-General of GST Intelligence under protest, so that they can challenge such liability imposed.

On the other hand the tax department said that the petitions were misconceived. The Department submitted that following investigation into another company, it was revealed that fake records of false invoices for input tax credit were issued to Ganraj Ispat for an amount of over Rs. 5.5 crore for which GST of Rs. 84 lakhs was recoverable.

The division bench of Bench of Justices TV Nalawade and MG Sewlikar said that White collar offences are more serious than offences like murder, dacoity etc. Such offences are committed after hatching conspiracy. This circumstance needs to be kept in mind by Court as the granting of relief of anticipatory bail hampers investigation and such approach causes damage to the image of judiciary

The bench further reasoned that  that the earlier interim order passed earlier in the matter virtually prevented the tax department from exercising their powers, including the issuing of summons which indirectly got the petitioners the relief of anticipatory bail.

Therefore, the Court concluded that there was material to make out a prima facie case of fraud against the petitioners.

The court while relying upon the provisions and scheme under the CGST Act, the observed that in cases like the present one, both the adjudication and prosecution start simultaneously and, therefore, the special CGST Act will apply over the CrPC.

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