Bail in GST fraud cases can be refused on prima facie evidence of fake firms, fake invoices and ineligible input tax credit.

In bail proceedings arising from allegations of fake firms, fake invoices and fraudulent input tax credit under the CGST Act, the HC treated the investigation material, including electronic data, credentials, seals and return data, as sufficient to show a prima facie scheme of circulating ineligible credit without actual supply of goods. Applying the settled approach that economic offences stand on a different footing, the Court considered the seriousness of the allegations, the supporting material, and the risks of absconding or tampering with evidence, and declined to undertake a trial-like appraisal. The absence of a demand under Sections 73 and 74 did not justify release on bail, and bail was refused.

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Issues: Whether the applicant, facing prosecution for alleged creation of fake firms and issuance of fake invoices to avail and pass on fraudulent input tax credit under the Central Goods and Services Tax Act, 2017, was entitled to bail under Section 439 of the Code of Criminal Procedure, 1973.

Analysis: The material collected in investigation, including search results, electronic data, usernames and passwords of fake firms, seals, and the GSTR-1/GSTR-2A data, was treated as sufficient at the bail stage to show a prima facie case that the applicant had created multiple fake entities and used them to generate and circulate ineligible input tax credit without supply of goods. The Court applied the settled approach that economic offences stand on a different footing, and that while considering bail in such matters the Court must assess the nature of accusations, the supporting material, the seriousness of the punishment, the possibility of absconding, and the risk of interference with evidence, without conducting a detailed trial-like evaluation of the evidence. The contention that no demand under Sections 73 and 74 had been raised did not persuade the Court to grant bail in view of the nature of the allegations and the collected material.

Conclusion: Bail was declined. The Court held that the allegations disclosed a serious economic offence and that the applicant had not made out a case for release on bail.

Ratio Decidendi: In bail matters involving serious GST-related economic offences, where investigation material discloses a prima facie scheme of fake firms, fake invoices, and fraudulent input tax credit, bail may be refused on the basis of the gravity of the offence, the prima facie evidence, and the attendant risks of absconding or tampering with evidence.

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