High Court denied pre-arrest bail to accused of fake ITC utilisation on possibility of misusing the concession of pre arrest bail
In a recent judgment, High Court of Punjab & Haryana denied pre-arrest bail to accused of fake ITC utilisation observing that there was possibility of petitioner’s misusing the concession of pre arrest bail and may enable him to avoid custodial interrogation, tamper with evidence or manipulate record by taking undue advantage of the legal and procedural loopholes.
ABCAUS Case Law Citation:
5003 (2026) (01) abcaus.in HC
In the instant case, the Petitioner had filed a Petition under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) seeking anticipatory bail in case filed under Sections 132(1) (b), 132(1) (c) read with Section 132(5) of Central Goods and Services Tax Act, 2017 (Act, 2017) by Directorate General of GST Intelligence (DGGI).
The DGGI had issued notice under Section 70 of Act, 2017 to the Petitioner alleging that the investigation had revealed that four GST registered companies had availed, utilized and passed on ineligible Input Tax Credit (ITC) in excess of the credit actually reflected in their respective GSTR2B returns and issued invoices without any underlying supply of goods or services thereby availing ITC in illegal manner.
The petitioner was acting as partner/director of two of these entities. On a comparative analysis of ITC reflected in the GSTR-3B and GSTR-2B as well as in the ITC ledger position, it was revealed that there was utilization of ITC to the extent of nearly Rs. ten crores without any corresponding supply.
The petitioner was found to be directly involved in the circulation of credit and fraudulent availment. It was also revealed that the above named firms were infact non-existent at their registered addresses. On issuance of notice, apprehending his arrest, the petitioner moved an application for grant of anticipatory bail which had been dismissed by the Additional Sessions Judge.
Before the Hon’ble High Court, the Petitioner contended that he had been falsely implicated. Summons under Section 70 of Act, 2017 had been repeatedly being issued against him though neither any FIR was registered nor any complaint has been filed against him. His co-partner was arrested and had been extended benefit of default bail.
It was submitted that the Petitioner was a partner in only two firms. He cannot be held vicariously liable for independent business venture of another partner. He had no financial decision making powers. He did not play any role in appointment of the Chartered Accountant. His custodial interrogation was not required. No recovery was to be effected from him and He was ready to join the investigation. It was , therefore, urged that the petition for pre-arrest bail deserved to be allowed.
On the other hand, the GST Department submitted that the against the Petitioner there were serious and specific allegations and he was acting as a partner in two firm/company and was exercising control over financial and operational decision. He was responsible for day to day affairs of the above named concern and had been operating two other concerns which was inter linked through common proprietorship, financial flow and return filing pattern.
It was submitted that the acts committed one Director/Partner in the firms, constituted cognizable and nonbailable offences punishable under Section 132(1) (b) and Section 132(1)(c), read with Section 132(1) (i) and Section 132(5) of the Act 2017 and further punishable under Section 20(xv) of the IGST Act, 2017.
It was further submitted that a detailed forensic examination of the mobile phone of said partner/director corroborated the findings of the investigation, revealing communications evidencing the deliberate passing of ITC without underlying supply, as well as the creation and circulation of fabricated invoices. The detailed PDF recovered from his device listed multiple entities to whom invoices had been issued without any real supply.
It was submitted that the conduct of the Petitioner, who was responsible for the management and supervision of the firms, similarly attracts liability under the same provisions, as he knowingly availed and utilised ITC without underlying supply and passed on ineligible ITC far in excess of the credit legitimately available.
It was submitted that investigation established a systematic, organised, and deliberate fraud involving the creation of non-existent entities, the generation of fabricated invoices, and the circulation of ineligible ITC amounting to several crores of rupees, resulting in substantial loss to the exchequer and attracting stringent penal consequences under the GST law.
The Hon’ble High Court observed that the inquiry was at its nascent stage. As per the reply filed by the respondent, the petitioner had not cooperated with the inquiry conducted so far. Huge amount of Government exchequer was involved which demands calls for a Proper and thorough inquiry to be conducted in the matter.
The Hon’ble High Court opined that there was a possibility of petitioner’s misusing the concession of pre arrest bail. Any latitude may enable him to avoid custodial interrogation, tamper with evidence or manipulate record by taking undue advantage of the legal and procedural loopholes. The Petitioner may also influence the persons who are actually aware of the transactions and can also delay the investigation by avoiding his personal appearance.
Accordingly, keeping in view the facts and circumstances, Hon’ble High Court opined that the petition did not deserve to be allowed and the same was dismissed.
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