No arrest under GST on purchase of goods against fake invoice unless assessee benefited or colluded with seller

No arrest under GST Act on purchase of goods against fake invoice unless purchaser took benefit of fake or bogus invoice, e-way bill etc. issued by dealer or he had acted in collusion with it.

ABCAUS Case Law Citation
ABCAUS 3500 (2021) (05) HC

In this case anticipatory bail application had been filed by the applicant. The applicant was seeking anticipatory bail against the summons issued under GST Laws.

The applicant had received summons u/s under Section 70 of the Central Goods and Services Tax Act, 2017 (the Act) from the by Superintendent of CGST.

Under section 70 of the Act, GST Officials have the power to summon any person to give evidence or to produce documents or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedur,1908.

The summon was issued in respect of an ongoing investigation of forged/false invoices prepared and issued a dealer.

The submission of applicant was that the applicant had only made purchases of certain goods from the said dealer against regular invoices. The purchases were wholly valid and genuine. Yet, the applicant being summoned under Section under Section 70 and was being threatened with arrest under GST Laws.

No arrest under GST on purchase against fake invoice unless collusion

The Hon’ble High Court observed that inquiry was pending against the said dealer with respect to forged/false invoices prepared and issued by it. The applicant had been summoned only to establish the genuineness or otherwise of the invoices relied upon by the present applicant as may have been issued to him by the said dealer.

The Hon’ble Supreme Court opined that though, there is a power to arrest vested in the GST authorities, presently, there was no material basis for the apprehension of arrest claimed by the applicant.

The Hon’ble High Court stated that participation in an ongoing inquiry against the dealer may not automatically entail arrest of the applicant. The applicant’s presence had been required to lead evidence and to produce purchase orders, sales and purchase registers, stock register, bank statements, balance sheet and statutory returns or any other material that may be relevant to the inquiry.

The Hon’ble High Court stated that even if certain invoices issued by the dealer found to be bogus, it may not necessarily lead to either any accusation being made against the applicant or his arrest. Before any accusation is made against the applicant or his arrest is sought in the proceedings against dealer, it would have to be the case of the revenue authorities that the applicant had taken benefit of any such fake or bogus invoice, e-way bill etc. issued by dealer or he had acted in collusion with it.

The Hon’ble High Court opined that as per the anticipatory bail application there was no material or reason to believe that any such inference was being drawn or is being sought to be drawn by the revenue authorities against the applicant, presently.

The Hon’ble High Court stated that merely because the applicant had been called upon to participate in the inquiry, does not involve an automatic accusation against the applicant and it also does not involve the risk of his arrest.

Accordingly, the Hon’ble High Court found no real apprehension of the applicant being arrested and dismissed the bail applicant.

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