Fake GST credit fraud accused gets bail despite confessing to creating 77 bogus firms

Allahabad HC granted bail to applicant in fake input tax credit case involving Rs. 144.14 crore fraud. Despite applicant's confessional statements (later retracted) admitting creation of 77 fake firms and selling them to co-accused for illegal GST credits, court noted co-accused already granted bail and applicant's lesser role. Department made no request for custodial interrogation during remand. Given advanced investigation stage and applicant's custody since March 2024, HC found bail justified with adequate conditions to ensure cooperation.

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Issues Involved:
1. False implication and lack of sufficient basis/material for arrest.
2. Legality of arrest without assessing tax liability.
3. Allegations of involvement in creating fake firms and claiming false input tax credit.
4. Necessity of further detention and custodial interrogation.
5. Comparative role of the applicant and co-accused in the alleged crime.
6. Conditions for granting bail.

Summary:

False Implication and Lack of Sufficient Basis/Material for Arrest:
The applicant, Mohit Kumar, contends that he has been falsely implicated without sufficient basis or material. The arrest was made without assessing any tax liability, which is against the scheme of the Central Goods and Services Tax Act, 2017 (the "Act of 2017"). The arrest memo did not justify the arrest, and the applicant was cooperating with the investigation.

Legality of Arrest Without Assessing Tax Liability:
The applicant's counsel argued that the arrest was made without recording any satisfaction or opinion by the Principal Commissioner/Commissioner, CGST, as required by law. The arrest violated the law laid down by the Supreme Court in Arnesh Kumar Vs. State of Bihar and another (2014) 8 SCC 273 and Satender Kumar Antil Vs. Central Bureau of Investigation and another (2021) 10 SCC 773.

Allegations of Involvement in Creating Fake Firms and Claiming False Input Tax Credit:
The Department alleged that the applicant was involved in creating 97 fake firms and selling them to the main accused, Deepanshu Srivastava, who used these firms to generate false invoices and claim fake input tax credits. The applicant's counsel denied these allegations, stating that no incriminating documents or devices were recovered from the applicant's possession.

Necessity of Further Detention and Custodial Interrogation:
The applicant was produced before the Special Chief Judicial Magistrate (Custom), Lucknow, and no further custodial interrogation was sought by the Department. The applicant has been in jail since 29.03.2024, and no formal complaint or FIR has been lodged. The applicant undertakes to cooperate with the investigation and trial.

Comparative Role of the Applicant and Co-Accused in the Alleged Crime:
The applicant's role in the alleged crime is argued to be much lesser than that of the co-accused, Deepanshu Srivastava, who has already been granted bail. The applicant's involvement was limited to creating and selling fake firms, while the main accused used these firms to claim fake input tax credits.

Conditions for Granting Bail:
The court allowed the bail application, subject to conditions including depositing the passport, not selling any property under investigation, not tampering with prosecution evidence, cooperating with the investigation and trial, and not indulging in any criminal activity. Breach of any conditions would be grounds for cancellation of bail.

Conclusion:
The bail application was allowed, and the applicant was granted bail on furnishing a personal bond with two sureties, subject to specific conditions to ensure cooperation with the investigation and trial. The observations made were solely for the purpose of disposing of the bail application and not on the merits of the case.

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