Facts of the Case

The petitioner, Nitin Goyal, approached the Punjab & Haryana High Court by filing a petition under Section 438 of the Code of Criminal Procedure seeking anticipatory bail in connection with an FIR registered for offences relating to GST fraud. The prosecution alleged that the petitioner had fraudulently availed Input Tax Credit (ITC) amounting to ₹1,10,35,701 through fake GST invoices generated using fictitious firms operating from false addresses and created through different proprietors.

The FIR was initially registered under Section 420 IPC, and during investigation, offences under Sections 467, 468, 471, 120-B IPC and Section 132 of the GST Act were also added. The investigation suggested that the fraudulent activities resulted in significant financial loss to the State exchequer.

Issues Involved

  1. Whether the petitioner was entitled to anticipatory bail under Section 438 CrPC in a case involving alleged GST invoice fraud exceeding ₹1 crore.
  2. Whether custodial interrogation was necessary for investigating the alleged GST scam.
  3. Whether the petitioner could claim parity with a co-accused who had already been granted bail.

Petitioner’s Arguments

The petitioner submitted that:

  • The principal evidence against him was based on the confession of a co-accused, which was not legally admissible against him.
  • No useful purpose would be served by custodial interrogation.
  • Pre-arrest detention would cause irreparable hardship to him and his family.
  • Since a co-accused had already been granted bail, he was also entitled to similar relief on the principle of parity.

Respondent’s Arguments

The State opposed the anticipatory bail application and argued that:

  • The petitioner was actively involved in a large-scale GST fraud by generating fake invoices and creating fictitious business entities.
  • The fraud resulted in wrongful availment of ITC exceeding ₹1 crore, causing substantial loss to government revenue.
  • Custodial interrogation was essential to uncover the complete conspiracy, trace the financial transactions, identify other beneficiaries, and ascertain whether any government officials were involved.
  • Grant of anticipatory bail at this stage would adversely affect the investigation.

Court Order / Findings

The Punjab & Haryana High Court dismissed the anticipatory bail petition and held that:

  • The allegations disclosed a prima facie case involving fraudulent availment of GST Input Tax Credit through fake invoices and fictitious firms.
  • The alleged fraud exceeded ₹1 crore and constituted a serious economic offence affecting public revenue.
  • Custodial interrogation was justified for effectively investigating the conspiracy and identifying all persons involved.
  • The petitioner could not claim parity with the co-accused because the allegations against both accused persons were materially different and the circumstances under which bail had been granted to the co-accused were distinguishable.
  • Considering the seriousness of the allegations and the stage of investigation, the petitioner failed to establish exceptional circumstances warranting anticipatory bail under Section 438 CrPC.

Accordingly, the High Court dismissed the petition while clarifying that its observations would not influence the trial or any future regular bail proceedings.

Important Clarification

The judgment reiterates that:

  • Fraudulent availment of GST Input Tax Credit through fake invoices constitutes a serious economic offence.
  • In large-scale GST fraud cases involving substantial public revenue, custodial interrogation may be necessary to uncover the complete conspiracy.
  • Anticipatory bail is an exceptional relief and will not ordinarily be granted where the investigation requires custodial interrogation and a prima facie case of serious financial fraud exists.
  • Bail granted to a co-accused does not automatically entitle another accused to similar relief when their roles and allegations differ.

Sections Involved

  • Section 420 of the Indian Penal Code
  • Section 467 of the Indian Penal Code
  • Section 468 of the Indian Penal Code
  • Section 471 of the Indian Penal Code
  • Section 120-B of the Indian Penal Code
  • Section 132 of the Goods and Services Tax Act
  • Section 438 of the Code of Criminal Procedure=

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785391083_2291compressed.pdf

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