Facts of the Case

The petitioner, Jatinder Kumar, sought pre-arrest bail under Section 482 of the BNSS in connection with summons issued under Section 70 of the CGST Act by the DGGI. Investigation had revealed that M/s Sona Casting Private Limited availed fraudulent Input Tax Credit of about Rs. 54.40 crores from non-operational/fictitious firms, of which M/s Manvi Steels — registered in the petitioner's name as proprietor — allegedly passed on fake ITC of Rs. 3.72 crores. Investigation found Manvi Steels' registered address non-existent, its total availed ITC at Rs. 14.70 crore (of which Rs. 8.47 crore traced to cancelled/suspended firms), no toll-record movement corroborating e-way bills, and wrong or missing supplier bank details. The petitioner's pre-arrest bail application had already been dismissed by the Additional Sessions Judge, Fatehgarh Sahib, before he approached the High Court.

Issues Involved

  1. Whether the petitioner, alleged to be the dummy proprietor of a non-existent firm used to pass fraudulent ITC, was entitled to pre-arrest bail under Section 482 BNSS in a Section 132 CGST Act investigation.
  2. Whether cooperation with a stayed registration-cancellation and filing of replies to summons was sufficient to negate the need for custodial interrogation.

Petitioner's Arguments

  • The petitioner was a regular taxpayer who had appeared before the officers on summons, filed a reply to the show cause notice, and tendered a voluntary statement.
  • The suspension of his firm's registration had already been stayed by the High Court in a separate writ petition, and he had cooperated fully with the investigation so far, making custodial interrogation unnecessary.

Respondent's Arguments

  • The firm availed fraudulent ITC of Rs.14,69,94,129/- and Rs.14,70,59,558/- and passed on fake ITC of Rs.3.72 crores to M/s Sona, using a fictitious, non-existent address.
  • Wrong bank account numbers were furnished, e-way bills showed no corroborating toll movement of vehicles, and money was rotated between accounts without profit or margin — indicating an accommodation-entry racket causing a GST loss of about Rs.70.19 crores on taxable value of Rs.389.90 crores, attracting Section 132(1)(b) and (c) of the CGST Act.
  • The petitioner had not cooperated fully and had not produced required documents; his presence was necessary for further inquiry.

Court Order / Findings

  • The Court examined the departmental reply in detail, noting the non-existent firm address, the dummy nature of the petitioner's role, non-cooperation after the initial statement, and the scale of the alleged fraud.
  • Given the serious and specific allegations of floating a fictitious firm to pass fake ITC, the huge exchequer loss involved, the nascent stage of investigation, and the risk of the petitioner tampering with evidence or influencing witnesses if granted anticipatory bail, the Court held the petition did not deserve to be allowed and dismissed it.
  • The Court clarified that its observations were confined to deciding the bail application and were not an expression of opinion on the merits of the case.

Important Clarification

  • Courts weigh the specificity and scale of fake-ITC allegations, non-existence of the registered business address, and non-cooperation with investigation heavily against anticipatory bail in GST fraud cases under Section 132.
  • A stayed registration-cancellation order or an earlier voluntary statement does not, by itself, establish the cooperation needed to avoid custodial interrogation once fresh non-cooperation is shown.
  • Observations made while deciding a bail application are expressly not findings on the merits of the underlying GST fraud allegations.

Sections Involved

  • Section 132, CGST Act, 2017 – prosecution for specified offences including fraudulent availment of ITC without invoice/supply, invoked here under clauses (b) and (c).
  • Section 70, CGST Act, 2017 – power to summon persons to give evidence and produce documents, under which the petitioner was originally summoned.
  • Section 67(2), CGST Act, 2017 – power of inspection, search and seizure, under which the investigation into Manvi Steels was initiated.
  • Section 73, CGST Act, 2017 – notice issued to the petitioner for demand determination alongside the criminal investigation.

Decision – In Favour of

The bail petition was dismissed, a decision in favour of the department/investigating authority; the Court expressly left the merits of the fraud allegations open for trial.

Case Details

Court: High Court of Punjab and Haryana at Chandigarh. Case No.: CRM-M-39132-2025 (O&M). Coram: Hon'ble Mrs. Justice Manisha Batra. Date of Order: 25th September, 2025.

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