Punjab & Haryana HC Grants Regular Bail in ₹13 Crore GST Fraud Case Involving Fake ITC

Issue

Whether the petitioners, accused of creating fake entities and fraudulently availing Input Tax Credit (ITC) worth approximately ₹13 crores, are entitled to regular bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), considering their prolonged custody since May 2025 and the nature of the evidence.

Facts

The Petitioners: Raman Kumar Chaurasia (Petitioner No. 1) and Devinder Singh (Petitioner No. 2).
Business Entities: They were partners in the firm M/s Aar Dee Enterprises, and Petitioner No. 1 was also the proprietor of M/s Aashi Steel Industries, both engaged in metal scrap trading. Petitioner No. 2 handled the accounts for both concerns.
The Allegation: The Directorate General of GST Intelligence (DGGI) alleged that the petitioners conspired with an associate, Deepanshu Srivastav, to create 41 fake entities. They ostensibly showed purchases from non-existent suppliers (primarily outside Punjab) to avail inadmissible ITC.
The Quantum: The department estimated fraudulent ITC availment of ₹12.31 crores by M/s Aar Dee Enterprises and ₹0.69 crores by M/s Aashi Steel Industries, aggregating to approximately ₹13 crores.
Arrest: The petitioners were arrested on 15.05.2025 under Section 69 of the CGST Act for offences under Section 132. Their bail applications were previously rejected by the Magistrate and the Additional Sessions Judge.

Decision

The High Court allowed the petitions and granted regular bail to both petitioners.
Bail Jurisprudence: The Court reiterated the settled principle that “bail is the rule and jail is the exception,” even in economic offences, unless extraordinary circumstances exist (citing P. Chidambaram v. Directorate of Enforcement and Sanjay Chandra v. CBI).
Prolonged Custody: The Court noted that the petitioners had been in judicial custody since 15.05.2025 (over 5 months). Since the investigation was complete and the complaint had been filed, further custodial interrogation was not required.
Nature of Evidence: The evidence relied upon by the prosecution was primarily documentary and electronic in nature (invoices, returns, bank records), which had already been seized. Therefore, the risk of tampering with evidence was minimal.
Trial Duration: The Court observed that the trial had commenced but would likely take a considerable time to conclude due to the volume of evidence and witnesses. Indefinite pre-trial detention was deemed unjustified.
Conditions: Bail was granted subject to stringent conditions, including the surrender of passports, appearing before the trial court on every date, and not influencing witnesses.

Key Takeaways

Section 483 BNSS Applied: This judgment applies the new bail provision under the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, reinforcing that the principles of liberty remain consistent with the earlier Code (CrPC).
Economic Offences & Bail: While economic offences are grave, the gravity alone cannot be the sole ground to deny bail if the investigation is complete and the accused is not a flight risk.
Documentary Evidence Factor: In GST fraud cases, once the department has secured the digital and documentary trail, the argument for continued custody to prevent tampering becomes weak.
Role of Partners: Both the active partner (proprietor) and the partner handling accounts were granted relief together, treating their roles in the alleged conspiracy on similar footing for the purpose of bail.

HIGH COURT OF PUNJAB & HARYANA

Raman Kumar Chaurasia

Directorate General of GST Intelligence, Ludhiana^*

Mrs. Manisha Batra, J.

CRM-M-35599-2025 (O & M)

OCTOBER 30, 2025

Nikhil Ghai, Adv. for the Petitioner. Sourabh Goel, Sr. Standing Counsel, Ms. Deify Jindal, Adv. and Ms. Sakshi Bakshi, AAG for the Respondent.

ORDER

1. The instant petition has been filed by the petitioners Raman Kumar Chaurasia and Devinder Singh under Section 483 of the Bhartiya Nagarik Suraksha Sanhita 2023 (for short ‘BNS S’) seeking indulgence of this Court for grant of regular bail in case No.202505DNN 50000665556 and No.202505DNN50000333B8D filed under Sections 132 and 69 of the Central Goods and Service Tax Act, 2017 (for short ‘CGST Act’).

2. Adumbrated facts as emanating from the record and relevant for the purpose of disposal of this petition are that the petitioners are partners of firm M/s Aar Dee Enterprises and petitioner No.l is proprietor of M/s Aashi Steel Industries. Both these firms are engaged in trading of metal scrap, including iron and steal. The accounting of both these firms was handled by petitioner No.2. On receipt of information regarding fraudulent availment and utilization of Input Tax Credit (ITC) to the tune of Rs.12.31 Crores by M/s Aar Dee Enterprises, Rs.0.69 Crores by M/s Ashish Steel Industries, investigation had been initiated by the respondent and it was noticed that the petitioners in conspiracy with their associate Deepanshu Srivastav had created 41 fake entities showing purchases from several fictitious firms. Majority of the purchases were shown to be made from the suppliers located outside the State of Punjab. Invoices were got issued from bogus firms operated by them and inadmissible ITC to the tune of Rs.8.63 Crores had been availed and utilized through 37 fake firms controlled by Deepanshu Srivastav. Their brokers arranged invoices from bogus firms and supplied goods from local scrap traders without bills. Several suppliers of these firms were found to be non-existent or found to have obtained registrations by means of fraud or wilful mis-statements. The petitioners were arrested on 15.05.2025. Their statements were recorded. Documents were collected, which showed that huge loss to the Government Exchequer had been caused by them in connivance with each other. Formal complaint has been filed against them before the competent Court after completion of necessary investigation/inquiry. The applications for bail moved by the petitioners before the jurisdictional Magistrate and then before the Court of learned Additional Sessions Judge, Ludhiana have been dismissed.

3. It is argued by learned counsel for the petitioners that they have been falsely implicated in this case. Their alleged involvement with Deepanshu Srivastav in evasion of tax has not been established. They had been making all purchases and sales by making advance information to the concerned departments and had been giving payments through banking channels. They had been conducting the business of their firms in normal course. They are neither instrumental in issuance of any fake invoices nor beneficiaries of alleged ITC. The provisions of Section 132(1) of the CGST Act have been wrongly invoked. Their detention is in violation of Articles 14 and 21 of the Constitution of India and has been effected without following due process of law. The trial would take considerable time to conclude. The subject offences are triable by the Magistrate. The evidence to be tendered by the respondent is documentary and electronic in nature. There are no chances of their tampering with such evidence or intimidating or influencing the witnesses, who are official witnesses only. They have been arrested on suspicion. They have clean antecedents with permanent abodes of business. They are no flight risks.

4. It is further argued that punishment provided under Section 132(l)(i) is imprisonment, which might extend to maximum period of 05 years. They are already in custody since 15.05.2025. Their further incarceration is not going to serve any useful purpose. With these broad submissions, it is urged that they deserve to be extended benefit of bail. In support of his contentions, learned counsel for the petitioners has relied upon the following citations:

(i) Ratnambar Kaushik v. Union of India (SC)/2022 INSC 1254

(ii) Ashutosh Garg v. Union of India (SC).

(iii) Vipin Garg Alias Bindu v. State of Haryana (SC).

(iv) Yash Goyal v. Union of India [Criminal Appeal No. 2784 of 2024, dated 28-6-2024].

(v) Deepak Sharma v. State of Punjab (Punj & Har)/2024 NCPHHC 104729.

(vi) Parteek Das Gupta v. State of Haryana [2024 NCPHHC 46670].

(vii) Amit Bansal v. State of Haryana [2024 NCPHHC 19173].

(viii) Tejpal Singh v. Director General of G.S.T. Intelligence (Punj & Har).

(ix) Sunil Mahlawat v. CGST (Punj & Har).

(x) Shamim Akhtar v. Directorate General of GST Intelligence (Punj & Har)/2023 NCPHHC 66070.

(xi) Vineet Jain v. Union of India (SC)/Criminal Appeal No. 2269 of 2025, decided on 28.04.2025.

5. Respondent No.l has filed reply. It is vehemently argued by learned senior standing counsel for the respondent that the petitioners in connivance with each other have evaded tax liability of huge amount of money. They have caused hefty loss to the Government Exchequer by incorporating fake firms and passing fake ITC. Their statements to this effect have also been recorded and there is sufficient evidence to show their actual involvement in the crime. There are chances of their influencing beneficiaries and other accomplices involved in making of fake invoices, if they are released on bail. It is, thus, argued that under the given circumstances, petitioners do not deserve to be extended benefit of bail.

6. This Court has heard rival submissions of learned counsel for the parties and has carefully gone through the record.

7. Before proceeding to decide the prayer made by the petitioners for grant of bail, it would be apt to have a look at the relevant statutory provision contained in Section 132 of CGST Act, which reads as under :

132. Punishment for certain offences.—

(1) Whoever commits any of the following offences, namely:—

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine.

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;

8. A bare perusal of the above mentioned provision leaves no room to doubt that the offences alleged carry minimum punishment of 06 months and a maximum punishment of 05 years of imprisonment. Further, Section 138 of the CGST Act is relevant, as per which, the offences under Section 132 of the Act are compoundable.

9. The law regarding grant of bail has been discussed in several pronouncements of Hon’ble Supreme Court. It will be apposite to refer to some of them. Reference can firstly be made to Dataram Singh v. State of U.P. (2018) 3 SCC 22, wherein Hon’ble Supreme Court had reiterated the law of bail as follows:

“2. A fundamental postulate of criminal jurisprudence is the presumption of innocence, meaning thereby that a person is believed to be innocent until found guilty. However, there are instances in our criminal law where a reverse onus has been placed on an accused with regard to some specific offences but that is another matter and does not detract from the fundamental postulate in respect of other offences. Yet another important facet of our criminal jurisprudence is that the grant of bail is the general rule and putting a person in jail or in a prison or in a correction home (whichever expression one may wish to use) is an exception. Unfortunately, some of these basic principles appear to have been lost sight of with the result that more and more persons are being incarcerated and for longer periods. This does not do any good to our criminal jurisprudence or to our society.

5. The historical background of the provision for bail has been elaborately and lucidly explained in a recent decision delivered in Nikesh Tarachand Shah v. Union of India [(2018) 11 SCC 1] going back to the days of the Magna Carta. In that decision, reference was made to Gurbaksh Singh Sibbia v. State of Punjab [(1980) 2 SCC 565] in which it is observed that it was held way back in Nagendra v. King-Emperor [AIR 1924 Cal 476] that bail is not to be withheld as a punishment. Reference was also made to Emperor v. Hutchinson [AIR 1931 All 356] wherein it was observed that grant of bail is the rule and refusal is the exception. The provision for bail is therefore age-old and the liberal interpretation to the provision for bail is almost a century old, going back to colonial days.”

10. It will also be proper to refer to Sanjay Chandra v. CBI (2012) 1 SCC 40, wherein Sessions Court and the High Court had refused the requests of the persons accused of committing offences of cheating and forgery and use of forged documents, for grant of bail on the grounds that offences alleged against them were serious involving deep rooted planning, causing huge loss to the State exchequer and that there was possibility of the accused persons tampering with the evidence. The Hon’ble Supreme Court observed as under :

“The grant or refusal to grant bail lies within the discretion of the court. The grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court, whether before or after conviction, to assure that he will submit to the jurisdiction of the court and be in attendance thereon whenever his presence is required.

X XXX XXX

46. We are conscious of the fact that the accused are charged with economic offences of huge magnitude. We are also conscious of the fact that the offences alleged, if proved, may jeopardise the economy of the country. At the same time, we cannot lose sight of the fact that the investigating agency has already completed investigation and the charge-sheet is already filed before the Special Judge, CBI, New Delhi. Therefore, their presence in the custody may not be necessary for further investigation. We are of the view that the appellants are entitled to the grant of bail pending trial on stringent conditions in order to ally the apprehension expressed by CBI.”

11. Reference must also be made to P. Chidambaram v. Directorate of Enforcement (SC)/(2020) 13 SCC 791, wherein Hon’ble Supreme Court observed that even economic offences would fall under the category of ‘grave offence’ and while considering the application for bail in such matters, the Court has to be sensitive to the nature of the allegations made against the accused as well as the term of sentence i.e. prescribed for the offence that the accused is alleged to have committed. It was also observed that the reasonable apprehension of tampering with evidence or apprehension of threat to the complainant or the witnesses as well as character, behavior and standing of the accused and the circumstances that are peculiar to the accused and the larger interest of the public should also be taken into consideration.

12. Reference should also be made to Satender Kumar Antil v. CBI AIR 2022 SC 3386, wherein the Hon’ble Supreme Court dealt extensively with the rights of the accused in economic offences by observing that the law laid down in P. Chidambaram‘s case (supra) still governed the field. The gravity of the offence, the object of the Special Act and the attending circumstances are a few of the factors to be taken note of along with the period of sentence. After all, an economic offence cannot be classified as such, as it may involve various activities and may differ from one case to another. Therefore, it is not advisable on the part of the Court to categorise all the offences into one group and deny bail on that basis.

13. In view of the above discussion, it emerges that the position of law regarding grant of bail is that the basic jurisprudence relating to bail in economic offences remains the same in as much as the grant of bail is the rule and its refusal is the exception, so as to ensure that an accused has the opportunity to get fair trial. However, at the same time, it is not advisable to categorize all the economic offences into one group and deny bail on that basis. While considering the question of grant of bail, the gravity of offences is an aspect, which is required to be taken into consideration. The gravity has to be gathered from the facts and circumstances arisen in each case. One of such circumstances is also the term of sentence that is prescribed for the offence the accused is alleged to have committed. While considering the prayer for grant of bail in any offence, including economic offences, it is not a rule that bail should be denied in every case where the allegation is one of grave economic offences since there is not such bar created in the relevant enactment passed by the Legislature nor does the jurisprudence provide so. The broad parameters to be considered while deciding prayer of an accused for grant of bail can be enumerated as under :

(i) whether there is anyprima facie or reasonable ground to believe that the accused had committed the offence;

(ii) nature and gravity of the charge;

(iii) severity of the punishment in the event of conviction;

(iv) danger of accused absconding or fleeing if released on bail;

(v) character, behaviour, means, position and standing of the accused;

(vi) likelihood of the offence being repeated;

(vii) reasonable apprehension of the witnesses being tampered with; and

(viii) danger, of course, of justice being thwarted by grant of bail.

14. Now, let us refer to the citations relied upon by the petitioners in support of their prayer for grant of bail. In Ratnambar Kaushik‘s case (supra), the High Court had dismissed an application filed by the accused for grant of regular bail in the proceedings for the offences alleged against him under Sections 132(1) read with Section 132(5) of the CGST Act. While observing that the alleged evasion of tax by the accused was to the extent as provided under Section 132(l)(i) and the punishment provided was imprisonment which might extend to 05 years and fine, the fact that the accused had already undergone incarceration for 04 months and completion of trial was likely to take time and further that the evidence to be tendered was of documentary nature, the Hon’ble Supreme Court had passed an order for release of the accused on bail. In Ashutosh Garg‘s case (supra), the High Court of Judicature for Rajasthan at Jaipur had dismissed the prayer made by the petitioner, who was accused of creating and operating 294 fake firms and evaded tax liability of Rs. 1032 crores. The Hon’ble Supreme Court allowed the Special Leave Petition filed by the accused by taking into consideration the fact that he was in custody for a period of 09 months and that the offence carried maximum punishment for 05 years of imprisonment. It was observed that it was not appropriate to keep him in custody any further.

15. Further, in Vipin Garg Alias Bindu‘s case (supra), there was allegation of misuse of ITC leading to loss of State exchequer. Chargesheet had been submitted. It was observed by Hon’ble Supreme Court that though heavy loss to the exchequer was alleged to be caused by the accused and no recovery had been effected but further detention of the accused during trial was not necessary and he was extended benefit of bail. In Yash Goyal‘s case (supra), the petitioner was in custody for a period of 06 months for commission of offence punishable under Section 132 of the CGST Act. While considering that the maximum sentence which would be awarded was 05 years and that the trial was likely to take time, Hon’ble Supreme Court directed the appellant to be released on bail. Reliance can also be placed upon a recent pronouncement of Hon’ble Supreme Court in Vineet Jain‘s case (supra), wherein a person accused of committing offence under Section 132(1) of the CGST Act was denied grant of bail. The Hon’ble Supreme Court allowed the appeal filed by the accused by taking into consideration the fact that he was in custody for a period of 07 months, chargehseet had been filed and that the offence carried maximum punishment for 05 years of imprisonment. While granting bail to the accused, the Hon’ble Supreme Court had made following observations:

“We are surprised to note that in a case like this, the appellant has been denied the benefit of bail at all levels, including the High Court and ultimately, he was forced to approach this Court. These are the cases where in normal course, before the Trial Courts, the accused should get bail unless there are some extra ordinary circumstances.”

16. Similar observations were made by the co-ordinate Benches of this Court in Deepak Sharma‘s case (supra), Parteek Das Gupta‘s case (supra), Amit Bansal‘s case (supra), Tejpal Singh‘s case (supra) and Sunil Mahlawat‘s case (supra).

17. As per the allegations, the petitioners in connivance with each other and one Deepanshu Srivastav was involved in the business of fake invoices and bills by creating several fake and bogus firms with an intent to and thereby causing loss to the Government Exchequer through fraudulently GST Input Tax Credit claims. Trial has commenced but will take considerable time to conclude. The petitioners are in custody since 15.05.2025. There is nothing on record to justify further detention of the petitioners in prison. The evidence to be adduced by the respondent would be essentially documentary and electronic, which will be through official witnesses and as such, there can be no apprehension of the petitioners’ tampering with evidence, intimidating or influencing the witnesses. The subject offences are punishable for maximum punishment upto 05 years. It appears justified to strike a fine balance between the need for further detention of the petitioners when no custodial interrogation has been claimed at all by the respondent No.1.

18. In view of the above discussed facts and circumstances, this Court is of the considered opinion that the petitioners are entitled to be released on bail subject to certain conditions.

19. As a result of above discussion, the petitions moved by both the petitioners are hereby allowed and they are ordered to be released on regular bail on their furnishing personal bonds with two sureties in the like amount each to the satisfaction of the Court concerned/Duty Magistrate. The concession of bail granted to the petitioners shall be subject to following conditions:

(a) They shall deposit their passports, if any, before the learned trial Court;

(b) They shall cooperate in trial without seeking any unnecessary adjournments;

(d) They shall not dispose of any of their property or of the firms/companies in which they have substantial interest and which are also under investigation;

(e) They shall not indulge in any criminal activity or in commission of any crime after being released on bail.

(f) They shall provide the details of their Aadhar Cards as well as their contact numbers to the trial Court.

20. Breach of any of the above conditions shall be a ground for cancellation of bail granted to the petitioners.

21. It is made clear that the observations made herein above are only for the purpose of deciding the present petitions and the same shall not be construed as an expression of opinion by this Court on the merits of the case.