Alleged ₹33 Crore GST Invoice Scam: Patna HC Grants Bail to Accused due to Lack of Proper Evidence [Read Order]

The Patna High Court has released on bail a person accused in a purported ₹33 crore bogus GST invoice and e-way bill generation scam on grounds of lack of proper evidentiary support. The authorities failed to produce sufficient evidence with regards to the alleged fake firms and e-way bills.

The accused had moved a regular bail petition in relation to a case registered under Section 132(1)(a) or (b) or (c) or (d), read with Section 132(5) of the Central Goods and Services Tax (CGST) Act, 2017.

According to the prosecution, a complaint was filed on August 23, 2024, by a Senior Intelligence Officer of the Directorate General of GST Intelligence (DGGI), Zonal Unit, Patna. It was alleged that iron and miscellaneous scrap were transported from Bihar to Punjab using fake invoices and e-way bills. The prosecution claimed that multiple fake supplier firms were created for this purpose, facilitating fraudulent supply to recipients in Punjab.

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A search of the home of the accused resulted in police taking into custody four mobile phones, a laptop, documents, and invoices. The seized evidence, upon scanning, showed participation by at least ten companies alleged to be operating fake invoices and e-way bills. The accused was also traced to companies M/s Neha Enterprises and M/s MR Enterprises, which were claimed to have been operated by him through WhatsApp. The estimated loss of revenue to the exchequer is reported to be more than ₹33 crore.

The petitioner’s counsel argued that he was innocent and had been falsely accused. The lawyer argued that the arrest was done on mere suspicion and that the FIR was registered without verification. It was also presented that in the GST regime, the petitioner had made disclosures and paid tax based on turnover disclosures, with no suppression or evasion. The defense also brought to the fore that the petitioner had no previous criminal antecedents and has been under judicial custody since August 23, 2024.

It was also submitted that the monetary limit which is specified in section 132 regarding period of conviction as per the amount of tax evasion but in the arrest memo of the petitioner the amount of tax evasion is not specified. It means that the arresting of the petitioner is merely on the basis of suspicion or there is nothing in this case.

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The bench observed that as per Section 69 and 132 of the CGST Act, an arrest could be made only when there is a reasonable belief of evasion of tax based on certain evidence. The court noted the submission of the petitioner that, in the present case, the arrest memo did not state the quantum of tax evasion, which meant that the arrest was done on mere suspicion.

The bench also considered the petitioner’s submission that the Ministry of Finance's GST Investigation Guidelines, such as Instruction No. 2/2022-2023, were not complied with, namely those stipulating conditions precedent to arrest and procedural protections.

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Dependent on the Supreme Court's decision, it was reiterated that arrest should not be automatic and only be done when absolutely necessary for investigation, to avoid tampering with witnesses, or in case of danger of fleeing. As the petitioner had cooperated with the investigation to the fullest, the arrest was unjustified.

The Union of India argued that the accused amounted to a loss of revenue exceeding ₹33 crore. The Court, however, observed that maximum punishment under Section 132 of the CGST Act is five years.

To Read the full text of the Order CLICK HERE

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