9 Shell Firms and ₹23.66 Crore GST ITC Fraud: Faridabad Sessions Court denies Bail to Accused [Read Order]

The Faridabad Sessions Court recently dismissed a bail application filed by an accused who was deemed to have orchestrated a large-scale fraud involving the creation of nine shell firms to fraudulently avail Input Tax Credit (ITC) amounting to ₹23.66 crores under the Central Goods and Services Tax (CGST) Act, 2017.

The bail applicant, Arun Garg, was summoned by the GST Department on January 27, 2025 in due course of inquiry. However, while inquiry remained pending, the accused was arrested the very next day and has been in judicial custody since January 28, 2025. Subsequently, a complaint was filed against him before the Magistrate at Faridabad.

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Represented by Ankur Gosain, the accused contended that the statements of merely five to six labourers were recorded to allege that he was running fake firms in collusion with others. He further argued that the GST Department failed to substantiate its claims with corroborate evidence to prove that the labourers had any bank accounts or not.

It was further submitted that the prosecution's witnesses were officials of the GST Department who could not be influenced and so, the trial was likely to be prolonged. In light of such submissions, the accused sought bail relying on several judicial precedents.

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Public Prosecutor Ankit Chaudhry, along with the Senior Standing Counsel of the GST Department Jai Ahuja and Harpreet Singh, opposed the application contending that the applicant had created nine fictitious firms without conducting any real business to fraudulently avail and pass on Input Tax Credit worth ₹23.66 crores.

It was further contended that the applicant’s brother was also implicated, investigation was still ongoing, and there existed a strong possibility that, if released, the applicant would tamper with evidence, influence witnesses, or abscond, thereby obstructing the course of justice.

Additional Sessions Judge Jyoti Lamba observed that the allegations prima facie disclosed an economic offence committed with a premeditated design to cause wrongful loss to the Government and unlawful gain to the accused and his associates.

Referencing the decision of the Supreme Court in P.Chidambaram Vs. Directorate of Enforcement (2019), the Court held that economic offences stand as a class apart as they affect the economic fabric of society.

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Noting that the grant of judicial custody should be assessed by weighing down the instances of ‘the right to individual liberty’ and ‘the interest of the Society’, the Sessions Court held that it can not be said that because a long period of imprisonment has expired, bail must necessarily be granted.

An interesting observation was made in terms of Inderjeet Singh @ Laddy and others Vs. Punjab (2014) where it was held that there cannot be any settled precedents, especially in criminal cases.

Noting that there was every danger of the course of justice being derailed, should the accused be enlarged on bail, the Sessions Court proceeded to reject the bail application of Arun Garg.

To Read the full text of the Order CLICK HERE
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