Anticipatory Bail Denied in Rs. 1349 Crore GST Fraud Case Due to Serious Economic Offence, Prima Facie Involvement, and Need for Custodial Interrogation.
Issue:
Whether anticipatory bail should be granted to an applicant accused in a large-scale Goods and Services Tax (GST) fraud case involving fake firms, bogus Input Tax Credit (ITC) claims, and significant financial transactions, particularly when the investigation is at a preliminary stage, custodial interrogation is deemed crucial, and there’s a possibility of tampering with evidence or influencing witnesses.
Facts:
An FIR was registered against the applicant-accused and co-accused for offenses under Sections 420, 465, 467, 468, 471, and 120B of the Indian Penal Code (IPC), alleging involvement in fake/bogus/non-existent firms to fraudulently avail and pass on ITC without actual supply of goods or services. A detailed investigation revealed that 145 fictitious firms were used to generate fake invoices and e-way bills, leading to a fraudulent transaction volume exceeding Rs. 1349 crore, with ITC claims amounting to approximately Rs. 30 crore. On March 11, 2024, a key co-accused provided a statement admitting to generating fake invoices under the instructions of a person allegedly introduced by the applicant. The applicant subsequently filed an application seeking anticipatory bail.
Decision:
In favor of the revenue: The application for anticipatory bail was dismissed. The court reiterated that economic offenders gravely harm the entire community by deliberately committing crimes for personal gain, showing a disregard for the consequences to the economy and society. It was emphasized that custodial interrogation is crucial in economic offenses to trace diverted funds and uncover complex financial transactions. The court also noted that the object of anticipatory bail is to prevent harassment or humiliation, and in the instant case, there was no indication that the FIR was filed maliciously to harass, defame, or target the applicant.
Furthermore, the court observed that there was prima facie material linking the applicant to a large-scale GST fraud involving bogus firms and fake invoices. The applicant could not claim parity with a co-accused who was granted regular bail, as anticipatory bail involves different considerations, and the applicant’s role appeared more central. The investigation was still at a preliminary stage. Lastly, the court found a real possibility that the applicant might destroy or conceal critical digital evidence or influence witnesses if granted bail. Therefore, considering the serious nature of the offense, the need for custodial interrogation, the prima facie involvement of the accused, and the possibility of tampering with evidence, the applicant was held not to be entitled to the protection of anticipatory bail under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (formerly Section 438 CrPC).
Key Takeaways:
- Economic Offenses and Anticipatory Bail: Courts generally take a stricter view on anticipatory bail applications in cases involving serious economic offenses. The rationale is that such crimes impact the national economy and society at large, and custodial interrogation is often essential for a thorough investigation to unravel complex financial trails.
- Cruciality of Custodial Interrogation: For economic offenses, the need for custodial interrogation to trace money trails, recover diverted funds, and identify all conspirators is a significant factor weighing against the grant of anticipatory bail.
- Prima Facie Involvement: The presence of prima facie material linking the applicant to the alleged crime, especially through statements of co-accused or documentary evidence, strengthens the prosecution’s case against granting anticipatory bail.
- No Parity with Regular Bail: Anticipatory bail (pre-arrest bail) and regular bail (post-arrest bail) operate on different legal considerations. An applicant cannot automatically claim parity for anticipatory bail simply because a co-accused has been granted regular bail, especially if their roles in the crime differ.
- Risk of Tampering with Evidence/Influencing Witnesses: The potential for the accused to tamper with evidence (especially digital) or influence witnesses is a strong ground for denying anticipatory bail, particularly when the investigation is at an initial stage.
- Malice as a Factor: While the absence of malicious intent to harass is a consideration for anticipatory bail, its presence is not a prerequisite for denial. The merits of the case and the gravity of the offense often outweigh this.
HIGH COURT OF GUJARAT
Imran Abdulkadar Chugda
v.
State of Gujarat
HASMUKH D. SUTHAR, J.
R/CRIMINAL MISAPPLICATION (FOR ANTICIPATORY BAIL) NO. 15993 of 2024
APRIL 22, 2025
Chetan K Pandya, Adv. for the Petitioner. Nikunt K Raval, Adv. and H.K. Patel, APP for the Respondent.
ORDER
(1) By way of present application under Section 482 of the BNSS, the applicant-original accused has prayed to grant anticipatory bail in the event of his arrest in connection with the FIR being C.R.No.11210015240010 of 2024 registered at DCB Police Station, Surat, for the offences punishable under Sections 420, 465, 467, 468, 471 and 120B of Indian Penal Code, 1860.
(2) Case of the prosecution is that, the applicant along with other coaccused have indulged in fake /bogus / non existent firms and indulged in fraudulently availing input tax credit and passed on inadmissible input tax credit on the strength of issuance of invoices without underlined supply of goods or service or both. In this regard, FIR came to be filed.
(3) Learned counsel for the applicant submits that the applicant has been falsely implicated in the offence; he is not named in FIR; one written complaint has been filed by the Superintendent of CGST and after investigation and based on the statement of co-accused, applicant has been arraigned as an accused. He further submitted that, in the chargesheet, there is no whisper about the involvement of the applicant. Even statement under section 169 is not filed. Without investigating with regard to alleged 8 firms, straightway based on the statement of one co-accused, who was arrested and released on regular bail, has been impleaded as accused. The said co-accused stated that he has received ID and password to operate the firms and generated tax bills through his laptop, but no any evidence is collected or annexed with the chargesheet papers. It is further submitted that, the alleged offence under CGST Act, however, upon making investigation under Section 72, FIR has been registered. The applicant has not received any show-cause notice under Sections 61 and 73 or 74 under the CGST Act. Hence, it cannot be termed that the applicant has committed any offence of forgery. Though civil remedy is available, the offence is converted into criminal one. The applicant is ready and willing to cooperate with the investigation. He has no past antecedent. Furthermore, the nature of the allegations is such that custodial interrogation is not necessary at this stage. The applicant is available for the investigation and will not flee from justice. In view of the above, it is prayed that the applicant be granted anticipatory bail.
(4) The Learned Additional Public Prosecutor, appearing on behalf of the respondent-State, has opposed the grant of anticipatory bail, citing the nature and gravity of the offense. He has submitted that the complaint is filed at the instance of respondent No.2, wherein, it is clearly stated that bogus and fictitious firms were involved in fraudulently availing and passing on of input tax credit to unscrupulous supply of goods. Several fictitious firms were visited by the officers of CGST and CE, Surat Commissionerate and found that those taxpayers firms were not in existence at declared principal place of business and uploaded fabricated documents for GST registration purpose.
(5) Ld. APP further submitted that, without any physical movement of goods, using common mobile number and generating e-way bills, they have taken credit of more than 145 firms. In this regard, complaint of forgery under Indian Penal Code has been filed and not under the GST Act. Hence, this is not a simple case of evading input tax credit and wrong calculation of tax credit. In fact, there is no any firm as shown does exist. This is a clear cut case of fraud only with a view to defraud the government. Hence, offence under the Indian Penal Code, 1860 in aid of Section 120 of Indian Penal Code, 1860 is made out.
(6) It is submitted on behalf of the ld. APP that, during investigation, statement of co-accused were recorded, more particularly an Accountant and sufficient material is collected. During recording the statement of one Mahamad Raja Vajirani at Lajpore Central Jail, Surat, under Section 70 of CGST Act, he has stated that, he used to work for Imran and Sultan and he generated e-way bills without movement of the goods. He generated such e-way bills through Whats App to Imran and Sultan. The said facts were ascertained by DCB Police Station, Surat during investigation and identified that Imran had created various fake / bogus firms by using the documents of unwitting person, declared receipts and supply of the goods by merely issuing /receiving the tax invoices without the physical movement of the goods mentioned in GST returns.
(7) Having heard learned counsel for the respective parties and perusal of the record, it appears that conspiracy has been entered into by all the accused persons to cheat the government and thereby, made dummy firms and shown the same on GST portal and thereafter, by uploading bogus purchase-sale bills, took credit of GST input. It further appears that, bogus bills worth of 200 crore have been shown and 30 Crores of I.T.C. benefit has taken by the accused persons.
(8) The applicant was handling the work of billing. It further appears that there are necessary recovery of laptop, mobile phone, Aadhar card, registration certificate of firm, have been made from co-accused. Also, in mobile phone, there was one number of foreign country and investigation of such mobile number is going on. It appears that looking to the aforesaid observations, it appears that it is a serious economic crime which is committed by all the accused persons and the same appears to be against Economy of Nation. Further, ld. advocate for the applicant has submitted that offence is pertaining to CGST Department and according to law, it has to file any complaint/FIR, however, CGST Department has not done any proceeding and also they have not given any direction to police to do investigation and D.C.B. Police has no right to file any such complaint. It is required to be noted that if the offences are covered under the provisions of Indian Penal Code then, it cannot be said that D.C.B. police has no right to file any such complaint.
(9) The brief facts of the case are that on the basis of intelligence received from the Central Intelligence Unit, CGST, Vadodara Zone and intelligence further developed by the officers of CGST & CE, Surat Commissionerate, it was noticed that some firms were involved in fraudulently availing and passing on of Input Tax Credit (ITC) to unscrupulous recipients by issuing invoices without any underlying supply of goods. To actualize the above intelligence, the registered business premises of (i) M/s. Skay Enterprise, GSTN-24FHBPM0316Q1Z9, (ii) M/s. Barad Enterprise, GSTIN- 24FWQPB9075R1ZI), (iii) M/s. Ganesh Enterprise, GSTIN- 24FYAPP7012L1ZB, (iv) M/s. Boos Enterprise, GSTIN- 24FMDPR5223N1ZP, (vi) M/s. Silver Enterprise, GSTIN-24HHJPM8943P1ZC, (vii) M/s. Prupali Enterprise, GSTIN-24CDFPV1930G1ZM, M/s. Hardik Enterprise, GSTIN-24GVXPP8567D1ZO, (ix) M/s. Alex Enterprise, GSTIN-24BKGPH3090A1ZQ and (x) M/s Bhagavati Enterprise, GSTIN-24HKEPD4271B1ZN was visited by the officers of CGST & CE, Surat Commissionerate and found that the above mentioned taxpayers were not in existence at declared principal place of business and uploaded fabricated documents for GST registration purpose.
(10) Perusing the statement of Shri Mohammad Raza Vajirali Gabharani was also recorded by the officers of Central GST and Central Excise, Surat on 11.03.2024 at Lajpore Central Jail, Surat with the permission of the Hon’ble Court, Surat wherein he inter alia stated that he was working as an Accountant of Imran Diamond and Sultan from his residence; that he used to file GSTR-1 and GSTR-3B returns, generation of sale invoice on laptop, generation of E-way bill for various GSTIN which were provided by Imran Diamond and Sultan on his mobile number 919054583223; that he used mobile numbers 917433993290, 919157234651, 919104392874 and 917041264376 for filing GSTR-1 and GSTR-3B returns, generation of E-way bill for various firms; that no goods were supplied by these fake firms; the details of Vehicle number and Lorry Receipt of the transporter was provided by Imran Diamond, Aadil, Vishal and Sultan etc. via whats App on his mobile number +919054583223; that he contacted Imran Diamond via his maternal uncle Aashikbhai Jamani who residing at Jafri Society, Shishu Nagar, Bhavnagar; that he met with Imran at Moti Bakery situated at Arshad Park, Juhanpura, Ahmedabad; that he contacted Sultan through Imran; that he didn’t know complete address of Imran and Sultan; that Imran use to pay Rs.25,000/- per month as salary through Angadia/G-pay; that he used 3 Laptops for filing of GST returns, generation of E-way bill and generation of invoices; that all the financial records were maintained in Saral software and installed on the seized laptop.
(11) Thus, the argument made by ld. advocate for the applicant that, based on the statement of the co-accused, applicant has been falsely arraigned as an accused is not acceptable in view of the law laid down in case of Mohammed Fasrin v. State (CR.MA/ 296/2014), wherein, the Apex Court observed that “..The confessions of a co-accused gives a clue to the investigating authorities as to how to investigate the matter and against whom to investigate the matter. Thereafter, it is for the investigating officers to collect evidence against the said person who has been made by the co-accused.” Therefore, for the purpose of investigation, custodial interrogation of the applicant is required.
(12) Further, learned counsel for the applicant has contended that the applicant is not involved in the offence and in the chargesheet, there is no whisper about the involvement of the applicant. But it is needless to say that investigation is in progress. So far applicant is concerned, investigation is yet to be carried out. Once the investigation is over and chargesheet is filed by the investigating agency against the applicant, then the applicant may say that no whisper is uttered about his involvement. Therefore, at this stage, the argument of learned counsel for the applicant is very premature.
(13) So far alleged accused Nos. 1 to 8, whose names have been mentioned in the complaint, are concerned, investigation has been carried out against them individually. It is pertinent to note that, during the investigation, it was revealed that those eight firms named/involved are bogus, fictitious, and engaged in sham transactions. Forged Aadhaar cards, mobile numbers, and pseudonymous names were used in furtherance to commit an offence. Therefore, the question of filing a charge sheet against such non-existent firms/bogus firms or submitting any report under Section 169 of the Cr.P.C., does not arise against said firms at this stage. Accordingly, the argument advanced on this point is not acceptable.
(14) Another limb of the argument advanced by the learned counsel for the applicant Mr. Pandya is that the offence falls under the CGST Act, and the maximum punishment prescribed is only up to five years. However, this argument is merely an eyewash, as there are specific allegations in the complaint—substantiated by an investigation conducted by the Superintendent of CGST—that fraudulent and fictitious firms were used, and forged documents were created to unlawfully avail input tax credit. It is alleged that 145 such firms were used without any actual transportation of goods, and forged e-way bills were generated. Thus, offences involving more than Rs.200 crore have been committed, amounting to forgery. Therefore, no offence has been registered under the CGST Act alone. In fact, the question of initiating any proceedings under the GST Act does not even arise, as no such entity or firm does exist.
(15) It is also pertinent to note that while a specific query was posed to the learned advocate for the applicant regarding how the Department under GST Act is expected to initiate proceedings against the non-existent firms, the learned counsel for the applicant argued that the applicant is merely an abettor. Even if we accept the applicant’s limited role as an abettor as per the argument made by learned counsel, in absence of principal accused, how abetement took place ? Here in the present case, the applicant is a mastermind on whose behest, merely using a GST portal and forging documents availed benefit of ITC without any actual transportation and thereby defrauded the government.
(16) From the report filed by the investigating agency, it is revealed that from co-accused Mohammad Raza Gabhrani, three laptops, five mobile phones, two routers, and four stamps of different firms were recovered. The investigation further disclosed that total 145 fictitious firms were used, and sale-purchase bills amounting to Rs.1349,94,30,296/- were found. Moreover, Whats App chats between the co-accused and the present applicant have come to light, which establish a livelink and connection between the applicant and the offence. In order to unearth the truth regarding the bills and transactions conducted through various bank accounts along with identifying the account holders and investigating the use of over 200 mobile numbers allegedly involved in the offence, custodial interrogation of the applicant is absolutely essential. If bail is granted at this stage, there is a strong likelihood that the applicant may destroy evidence by withholding mobile devices or tampering with other crucial evidence.
(17) The criteria to grant anticipatory bail and regular bail has been laid down by the Apex Court in various decisions. While criminal administration of justice disturbed, arrest is a part of investigation. After the arrest of the accused when substantial part of the investigation including remand gets over, then the Court has to exercise jurisdiction considering the evidence collected during investigation. It is needless to say that Section 482 of the BNSS is pre-arrest bail as there is a part of investigation and importance of the arrest is time and again discussed by the Hon’ble Apex Court. When the involvement of the accused is prima facie revealed and if allegation is not levelled that to defame him or to tarnish his image, the Court has to exercise jurisdiction, but to seek anticipatory bail is not an extraordinary jurisdiction and absolute right of the accused.
In such circumstances and considering the gravity of offence, if anticipatory bail is granted to the applicant, there is a possibility that he could tamper with evidence or influence witnesses. Hence, custodial interrogation of the applicant is required.
(18) Considering the aforesaid fact and keeping in the mind and after going through the investigation papers, prima facie, it appears that the present applicant is actively involved in the offense. Therefore, if bail is granted, then it may adversely affect the case of prosecution as investigation is at preliminary stage. This Court has considered the interest of the prosecution and the applicant’s personal liberty, it cannot over-side the larger public interest and accused facing charge of organized crime syndicate. Prior to give weightage to personal liberty, the Court has to strike balance between personal liberty and a larger interest of society.
(19) So far the submission of parity is concerned, even the applicant cannot claim parity because the co-accused is released on regular bail and this is an anticipatory bail. Without proper investigation, it is impossible to unearth the large scale scam, the syndicate and to find out the modus operandi, if bail is granted at this primary stage, which would amount to premium to unethical and immoral personality. The public confidence in the system undermines, keeping in mind sensitivity of matter and if in cavalier fashion benefit of parity extended or bail granted, then not only wrong message will travel in the public but hamper the investigation and tampered with an evidence which is nothing but amounts to premium to wrongdoers.
(20) In aforesaid backdrop, custodial interrogation and detail inquiry is necessary. When serious offences are disclosed and involvement of an accused prima facie established then, the Court would be loath to lean in favour of grant of pre-arrest bail in absence of any other overriding considerations. The alleged offence is in nature of white collar and economic offence, this Court is conscious with the safeguards provided under Section 482 of BNSS and concept of the personal liberty. Arrest is part of the process of investigation and intended to secure several purposes. In which the accused may provide information, during the the discovery of material facts and to relevant information.
(21) At the time of deciding the bail application, the Court should refrain from appreciating the evidence. However, considering the submissions made by the learned advocates for the respective parties and the fact and specific stand taken by the applicant to extend the benefit of parity as the co-accused is released on regular bail. Hence, this Court has considered the material collect during the course of investigation with a view to examine the applicability of parity. The reference is required to be made in a cases of Tarun Kumar v. Asst. Director, Directorate of Enforcement, 2023 INSC 1006 and Ramesh Bhavan Rathod v. Vishanbhai Hirabhai Makwana, reported in AIR 2021 SC 221, wherein, the Hon’ble Apex Court held that when deciding a bail application and extending the benefit of parity, the Court has to examine the exact role attributed to the accused. If the accused played a similar role, then the Court should extend the benefit of parity. Merely some words or any observation made in the order are not enough, such approach is erroneous and inappropriate for considering the benefit of parity. As co-accused is released on regular bail, the applicant is not entitled to claim parity in anticipatory bail.
(22) Further, in the case of Pratibha Manchanda v. The State of Haryana, reported in AIR 2023 SC 3307, wherein the Hon’ble Apex Court has held in Para 19 as under:
19. The relief of Anticipatory Bail is aimed at safeguarding individual rights. While it serves as a crucial tool to prevent the misuse of the power of arrest and protects innocent individuals from harassment, it also presents challenges in maintaining a delicate balance between individual rights and the interests of justice.
The tight rope we must walk lies in striking a balance between safeguarding individual rights and protecting public interest. While the right to liberty and presumption of innocence are vital, the court must also consider the gravity of the offence, the impact on society, and the need for a fair and free investigation. The court’s discretion in weighing these interests in the facts and circumstances of each individual case becomes crucial to ensure a just outcome.”
(23) In such circumstances, when investigation is at preliminary stage and anticipatory bail is granted, it may hamper the investigation and to collect the material in the more information, and find out the involvements of another person custodial interrogation is also necessary, therefore, keeping in mind the law laid down by the Honourable Supreme Court in the case of (i) State Rep. by the CBI v. Anil Sharma reported in 1997 (7) SCC 187, (ii) Adri Dharan Das v. State of W.B. reported in 2005 (4) SCC 303 and (iii) P. Chidambaram v. Directorate of Enforcement reported in AIR 2019 SC 4198, application does not deserve any consideration.
(24) In the case of Central Bureau of Investigation v. Vikas Mishra @ Vikash Mishra, reported in (2023)6 SCC 49, the right of custodial interrogation is very important right of the investigating agency to unearth the truth and which the accused has purposely and successfully tried to frustrate. Hence, police custody for interrogation is necessary. Here in the case on hand, complainant has lost his hard earned income and to recover the said amount, custodial interrogation is necessary. It is also important to refer the decision of Manik Madhukar Sarve v. Vithal Damuji Meher, reported in 2024 INSC 636. In the case of economic offence, many time amount is diverted or siphoned off in different accounts and for that custodial interrogation is required which is an important tool to trace out the amount. It is apt to refer the decision of the Hon’ble Supreme Court of India delivered in case of State of Gujarat v. Mohanlal Jitmalji Porwal & Anr., reported in 1987 (2) SCC 634, wherein the Hon’ble Apex Court in para 5 held as under:-
“5. The entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white colour crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest.”
(25) Further, keeping in mind Law laid down by the Hon’ble Supreme Court in the case of Siddharam Satlingappa Mhetre v. State of Maharashtra and Others reported in (2011) 1 SCC 694. Herein, I have gone through the material available against the accused very carefully and it appears that herein, no complaint has been made with view to humiliating or tarnish the image of the present applicant. Even in Jai Prakash Singh v. State of Bihar and another, reported in (2012) 4 SCC 379, Honourable Supreme Court pleased to hold:
“Parameters for grant of anticipatory bail in a serious offenceare required to be satisfied and further while granting such relief, the court must record the reasons therefore. Anticipatory bail can be granted only in exceptional circumstances where the court is prima facie of the view that the applicant has falsely been enroped in the crime and would not misuse his liberty.”
(26) The object of anticipatory bail is that person should not be harassed or humiliated in order to satisfy the grudge or personal vendetta of the complainant. In present case, no any such sort of allegation or bias is found out it is needless to say that order under Section 482 of the BNSS is not a passport to the commission of trial nor a shield against any serious accusation, which adversely affects the society. Here duped and defrauded offence is not under the GST Act, but offence of forgery under IPC/BNS is committed. Hence, argument of learned counsel for the applicant that offence punishable under Section 132 is 5 years is not acceptable while larger societal interest is adversely affected and that extent of quantum of punishment is not a ground to allow the anticipatory bail.
(27) In view of the law laid down in the case of Vijay Madanlal Chaoudhary v. Union of India, 2022 SCC Online (SC) 929, merely offence is punishable maximum upto 5 or 7 years is not a criteria to grant anticipatory bail when custodial interrogation of the accused is required. Further, when the involvement of the accused is prima facie revealed and if allegation is not levelled that to defame him or to tarnish his image, the Court has to exercise jurisdiction, but to seek anticipatory bail is not an extraordinary jurisdiction and absolute right of the accused. In this regard, reference is required to be made on the decision of the Apex Court in the case of State of Madhya Pradesh v. Ram Kishna Balothia, reported in 1995 (3) SCC 221.
(28) This Court is of the considered view that if the present accused is equipped with protective order, it would obviously adversely affect the case of the prosecution and the qualitative investigation as applicant is having trained legal mind and he will tamper with evidence and witnesses of prosecution and here co-accused are still out of reach, who are directly connected with the present accused and other co-accused.
(29) In the above facts and circumstances and considering the observations on the legal aspect of the matter, this Court has absolutely no doubt that if applicant is equipped with such an order before he is interrogated by the Police, it would greatly harm the investigation and would impede the prospects of unearthing all the ramifications involved in the conspiracy. Having considered nature and seriousness of the charge, prima facie involvement of accused and possibility of tempering with evidences, it does not appear to be just and proper to exercise the discretion in favour of the applicant and accordingly, the application for anticipatory bail is dismissed.
However, it is needless to say that, the observations made in this order are tentative in nature.