Regular Bail is granted to Accused in Fake ITC Case amid confessional statement and Trial Delays

The Hon’ble Allahabad High Court in GAURAV, CHANDAN SHARMA VERSUS UNION OF INDIA AND ANOTHER - 2025 (5) TMI 1731 - ALLAHABAD HIGH COURT allowed regular bail applications of accused persons in GST fake invoice cases during trial stage.

Facts:

Gaurav and Chandan Sharma ('the Applicants') are accused in a GST fake billing racket case registered by the Directorate General of GST Intelligence (DGGI), Ghaziabad. They allegedly issued fake tax invoices for copper wires to avail and pass on ineligible input tax credit (ITC) worth approximately Rs. 113 crores through multiple fake firms. Searches led to recovery of electronic devices and incriminating documents.

The applicants were arrested on February 13, 2025 and remained in custody. The prosecution case primarily relies on confessions recorded during custody and documentary evidence. Both accused had earlier bail applications rejected by the Additional District and Sessions Judge, Meerut. The trial had not commenced at the time of the petition. The applicants sought regular bail, contending lack of evidence linking them conclusively to the fake firms and the slow trial progress.

The Respondent opposed bail, alleging the applicants were masterminds behind the fake invoice racket, supported by confessions and recovered evidence.

Issues:

• Whether regular bail can be granted to accused persons in GST fake invoice cases where trial has not commenced and prosecution relies mainly on confessions and documentary evidence?
• Whether continued detention of accused persons would serve any useful purpose pending trial?

Held:

The Hon’ble Allahabad High Court in GAURAV, CHANDAN SHARMA VERSUS UNION OF INDIA AND ANOTHER - 2025 (5) TMI 1731 - ALLAHABAD HIGH COURTheld as under:

• Observed that the prosecution case is mainly based on confessional statements recorded in custody, and the two accused are not connected despite being prosecuted under a common complaint.
• Noted that the investigation has not yet collected evidence showing the applicants managed the affairs of the alleged fake firms.
• Acknowledged that investigation is ongoing since the list of beneficiary firms is incomplete.
• Recognized that the alleged offences are triable by Magistrate with maximum punishment of five years, and the trial has not yet commenced.
• Held that the truthfulness and evidentiary value of confessions will be tested during the trial, which is likely to take considerable time.
• Considering the nature of offences, punishment, and period of custody, the Court deemed it appropriate to grant regular bail.
• Directed the applicants to furnish bail bonds and surety bonds as per trial court’s satisfaction, and comply with bail conditions imposed by the trial court.

Our Comments:

Section 132(1)(b) and (c), of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) criminalize fraudulent availment or utilization of input tax credit by issuing fake invoices or documents, punishable up to five years imprisonment.

The case highlights the reliance on confessional statements under custodial conditions in GST fraud prosecutions. The statutory provision mandates speedy trial, but practical delays often prolong custody. In such cases, granting bail ensures a balance between prosecution interest and personal liberty, particularly where offences carry moderate punishment.

The court’s approach aligns with the fundamental right to liberty and due process under Article 21 of the Constitution, upholding the principle against unnecessary detention before trial conclusion.

Relevant Provision:

Section 132(1) (b), (c), (i) – Offences and penalties under CGST Act, 2017:

“132. Offences and penalties.— (1) Any person who— (b) issues any invoice or bill without supply of goods or services or both; (c) avails input tax credit using such invoice or bill; (i) commits any other offence as prescribed, shall be liable for prosecution and penalty as provided in this Act.”

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