Mumbai, February 16, 2022 – Ubaid Shiraj Shah’s bail application has been rejected by Additional Sessions Judge R.M. Sadrani. Shah was arrested for allegedly violating provisions of the Central Goods and Services Tax (CGST) Act, 2017, related to fraudulent Input Tax Credit (ITC) claims.

Prosecution’s Case:

The prosecution alleged that Shah, the proprietor of M/s. Shah Enterprises, was involved in a network of entities availing and passing fake ITC without actual goods supplies. This resulted in a substantial revenue loss to the government. The investigation revealed that many of Shah’s suppliers were fictitious or non-existent firms created to pass on inadmissible ITC based on bogus invoices. Out of 27 suppliers, 14 were found to have cancelled or suspended GSTIN numbers. The total fraudulent ITC availed and utilized was Rs. 11,80,56,620.

Defense Arguments:

Advocate Arjun Amanchi, representing Shah, argued that his client, a 24-year-old scrap trader, was falsely implicated. He stated that Shah had maintained records of goods movement, provided bank statements showing payments to suppliers, and furnished details of buyers (mill owners). He also claimed that Shah was willing to freeze approximately Rs. 80 lakhs owed by suppliers. He requested bail on any terms and conditions.

Prosecution’s Stance:

Special Public Prosecutor (SPP) Atul Surpande opposed the bail application. He argued that 14 out of 27 suppliers were fake or non-existent, and a detailed investigation was ongoing to trace the chain of ITC passing. He expressed concern that releasing Shah on bail would allow him to alert fake suppliers and tamper with documents. He highlighted the significant loss to the exchequer.

Court’s Observations and Decision:

Judge Sadrani acknowledged the economic nature of the offense, which was well-planned. He noted the ongoing investigation, the discovery of fake suppliers, and the documentary evidence against Shah. He concluded that it was not a fit case to grant bail.

“Offence committed by the applicant is economic offene which is well planned. In the investigation of the respondent, non existent/fake suppliers were noticed. Applicant availed benefit of ITC on the basis of fake invoices. Investigation is till in progress. There is documentary evidence against the applicant of his involvement in the commission of the crime. Therefore, in my opinion, it is not a fit case to grant bail,” Judge Sadrani stated in his order.

Outcome:

The bail application was rejected.

Implications:

This decision underscores the court’s strict stance on economic offenses, particularly those involving GST fraud. The court’s emphasis on the ongoing investigation, the discovery of fake entities, and the potential for tampering with evidence highlights the seriousness of the allegations and the need for a thorough investigation. The rejection of bail reflects the court’s concern about the substantial loss to the exchequer and the potential for further disruption of the investigation.