Facts of the Case

The petitioner, Ishithore, a Chartered Accountant and partner in M/s. John Moris & Co., Tirupur Branch, was arrested on 29.06.2023 and remanded to judicial custody for offences punishable under Section 132(1)(b) & (c) of the Central Goods and Services Tax Act, 2017, in a case registered by the Directorate General of GST Intelligence, Trichy. The prosecution's case was that the petitioner had floated bogus entities in his own name and in the names of family members and other accomplices, used credentials of third parties to issue invoices without any actual supply of goods or services, and thereby circulated and ultimately passed on ineligible input tax credit worth approximately Rs. 120 crore to end users. A private complaint was also filed and taken on file as C.C. No. 987 of 2023 before the learned Chief Judicial Magistrate, Trichy. The petitioner filed a bail application under Section 439 of the Code of Criminal Procedure before the Madurai Bench of the Madras High Court, which was heard and decided on 16.11.2023.

Issues Involved

  1. Whether the petitioner is entitled to bail in a prosecution alleging fraudulent availment and passing on of input tax credit worth Rs. 120 crore under Section 132(1)(b) & (c) of the CGST Act.
  2. Whether selective prosecution — of the petitioner alone among the directors/partners of the implicated entities — furnishes a ground for bail.

Petitioner's Arguments

  • The petitioner is innocent and has not committed any offence as alleged by the prosecution.
  • He is one of several Directors, yet the respondent police has not prosecuted any of the other Directors, pointing to selective treatment.
  • He has been in custody since 29.06.2023 and is willing to abide by any conditions the Court may impose if granted bail.

Respondent's Arguments

  • The petitioner caused a revenue loss of approximately Rs. 120 crore by availing input tax credit without any actual underlying transactions and by issuing invoices without supplying any goods.
  • Investigation in the case is still pending, and a private complaint has already been taken on file as C.C. No. 987 of 2023 before the Chief Judicial Magistrate, Trichy.
  • The petitioner is habitually engaged in floating bogus firms and companies in the names of family members, employees and accomplices, and routinely changes partners, directors and business locations to evade detection.
  • In his own statement dated 28.06.2023, the petitioner admitted to floating multiple entities and issuing invoices, some without any actual supply of goods or services, before closing many of those entities.

Court Order/Findings

  • The Court considered the seriousness of the allegations, the scale of the alleged revenue loss, and the petitioner's own admission in his statement of 28.06.2023 confirming that he had floated multiple entities and issued invoices without actual supply of goods or services.
  • Holding that it was not inclined to grant bail given the seriousness of the allegations and the revenue loss caused to the Government, the Court dismissed the criminal original petition and declined bail.

Important Clarification

  • In prosecutions under Section 132(1)(b) & (c) of the CGST Act for fake invoicing and fraudulent input tax credit, a self-incriminating statement admitting to floating shell entities and issuing invoices without actual supply of goods, combined with a large quantum of alleged revenue loss, weighs heavily against the grant of bail.
  • The fact that co-accused persons or fellow directors have not been equally prosecuted does not, by itself, entitle an accused to bail where the individual's own admissions and role are substantial.

Sections Involved

  • Section 132(1)(b) & (c), CGST Act, 2017 — offence of issuing an invoice without supply of goods or services leading to wrongful availment or utilisation of input tax credit, and offences relating to fraudulent availment of ITC.
  • Section 439, Code of Criminal Procedure, 1973 — power of the High Court/Sessions Court to grant bail.

Decision – In Favour of

The decision favours the Department. Bail was denied, with the Court giving weight to the scale of the alleged revenue loss (approximately Rs. 120 crore) and the petitioner's own admission of having floated bogus entities and issued invoices without actual supply of goods or services.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case No.: CRL OP(MD) No. 19733 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr Justice V. Sivagnanam
  • Decision Date: 16 November 2023
  • Disposal Nature: Dismissed - bail denied

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