Fake input tax credit claims without actual supply u/s132(1)(b)-(c) allegations, pre-arrest bail granted with conditions

Anticipatory bail under the CGST Act was considered in allegations of fraudulent availment and passing of fake input tax credit without actual supply, attracting s.132(1)(b) and (c). The HC held there is no statutory embargo on pre-arrest bail and, although economic offences are serious, the statutory maximum punishment (up to five years where the amount exceeds the threshold) and the Act's compounding provision (s.138) indicate the offence is not so grave that custody is a sine qua non. As the statute does not mandate custodial interrogation and the Department's information needs could be met through cooperation, arrest was held unnecessary; anticipatory bail was granted subject to conditions.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether an application for anticipatory bail is maintainable/available in relation to alleged offences under Section 132(1)(b) and 132(1)(c) of the CGST Act, in the absence of any statutory embargo.

(ii) Whether, on the facts found by the Court, custodial interrogation and arrest were necessary for investigation in an alleged fake-invoice/fraudulent input tax credit case punishable up to five years, so as to justify denial of anticipatory bail.

(iii) Whether anticipatory bail should be granted subject to conditions to secure cooperation, prevent tampering, and ensure availability of the accused for investigation, given repeated non-appearance to summons.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Availability of anticipatory bail for offences under the CGST Act

Legal framework (as discussed by the Court): The Court examined the CGST Act provisions on arrest and offences. It noted that Section 69 empowers arrest on the Commissioner's "reasons to believe" for specified Section 132 offences, and Section 70 empowers summons for evidence/documents. The Court analysed Section 132, including that offences under Section 132(1)(b) and (c) punishable under Section 132(1)(i) (where the amount exceeds the specified threshold) are cognizable and non-bailable, with maximum imprisonment of five years and fine. It also noted Section 138, under which offences are compoundable subject to statutory conditions.

Interpretation and reasoning: The Court expressly held that there is no embargo under the CGST Act restraining an accused from seeking pre-arrest bail. While economic offences are grave, arrest entails deprivation of liberty and must be subject to safeguards. The Court treated the statutory structure-maximum punishment of five years for the relevant offences and the availability of compounding-as relevant to assessing "heinousness" and whether custody is indispensable.

Conclusion: Anticipatory bail is legally available and can be considered on merits for alleged offences under Section 132(1)(b) and (c) of the CGST Act.

Issue (ii): Necessity of custodial interrogation/arrest in the facts of the case

Legal framework (as discussed by the Court): The Court considered the CGST scheme on arrest (Section 69) and summons (Section 70), and the punishment framework under Section 132. It also considered that offences under the Act are, in general, not punishable beyond five years for the present category, and that compounding under Section 138 is contemplated by the statute.

Interpretation and reasoning: The Court accepted that the allegation is an economic offence concerning fraudulent availment/passing of input tax credit and fake invoicing, with the alleged wrongful ITC amount exceeding the threshold attracting up to five years' imprisonment and fine. However, it reasoned that, under the CGST scheme, despite the economic nature of the offence, the punishment cap of five years and the statutory availability of compounding are material in evaluating whether custody is a sine qua non. The Court specifically found that custodial interrogation was neither warranted nor provided for by the statute in the circumstances presented. It further considered that the Department could obtain required information through cooperation pursuant to summons, and that arrest might not be necessary if cooperation is ensured through conditions.

Conclusion: The Court conclusively determined that custodial interrogation/arrest was not necessary in the case to achieve investigative purposes and could be avoided by ensuring cooperation through stringent bail conditions.

Issue (iii): Grant of anticipatory bail and appropriate conditions

Legal framework (as discussed by the Court): The Court applied general anticipatory bail principles, emphasising protection of personal liberty while ensuring investigation is not hampered, and noted that conditions may be imposed to secure attendance, prevent tampering, and prevent flight risk.

Interpretation and reasoning: The Court noted repeated summons and the Department's concern regarding non-appearance, but held that cooperation could be secured through conditions. It also considered that judicial custody would serve no purpose and could adversely impact business, and that the balance between liberty and investigation could be maintained through stringent safeguards.

Conclusion: Anticipatory bail was granted, subject to conditions requiring cooperation and appearance as summoned, non-interference with witnesses/evidence, continuous availability via operational mobile number and location pin, commission of no offence while on bail, surrender of passport and restriction on leaving India without permission, with liberty to seek cancellation upon breach.

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