Arrest Over ₹8.36 Crore Fake ITC Claim Using Bogus GST Invoices: Punjab & Haryana HC Grants Bail Citing Completed Investigation and Five Month Custody [Read Order]

The High Court of Punjab and Haryana granted bail citing completed investigation and five-month custody in a matter involving arrest over ₹8.36 crore fake Input Tax Credit (ITC) claim using bogus Goods and Service Tax (GST) invoices.

Sarthak Jain, petitioner-assessee, was accused of fraudulently claiming fake Input Tax Credit (ITC) of about ₹8.36 crores using bogus GST invoices worth ₹98.81 crores through three firms under his control. He was alleged to have passed on the wrongfully claimed ITC to other firms, causing loss to the government.

Based on intelligence inputs, it was found that he had claimed ITC using invoices from 38 fake entities whose GSTregistrations were later cancelled for being non-existent. Searches were conducted on February 21, 2024, and incriminating documents and electronic devices were recovered from his premises.

He was arrested on February 22, 2025. His bail plea was rejected by the Additional Sessions Judge, Ludhiana on May 6, 2025, after which he approached the High Court.

The petitioner’s counsel argued that the petitioner was falsely implicated and arrested without following legal procedures. He said the petitioner was called to the department’s office on February 21, 2025, and was secretly detained, though the arrest was officially shown on February 22. He claimed the arrest was illegal as the reasons for arrest were not given, and no proper enquiry was done before arresting him.

He also said the maximum punishment in the case was five years, and the petitioner had already spent five months in jail. With no criminal history and the investigation already complete, he requested bail, saying the case was based only on documents.

The state counsel opposed the bail plea, saying the petitioner fraudulently claimed ₹8.36 crores in fake ITC using invoices from 38 bogus firms. Using data tools and intelligence, it was found that the petitioner controlled three firms involved in the fraud.

The state said he was the main person behind the scam and added that his wife, also linked to one firm, had not joined the investigation. Hence, bail was not justified.

Justice Rajesh Bhardwaj heard both sides and reviewed the case record. It noted that the petitioner was prosecuted for tax evasion under Sections 132(1)(b) and 132(1)(c) of the CGST Act. As per the reply, he had claimed ₹2.75 crores in ITC through M/s Sarthak Enterprises and ₹3.98 crores along with his wife through M/s Disha Enterprises. The investigation was complete and a complaint had already been filed.

The Court observed that the issues raised would be decided during trial. It also noted that the petitioner had no past criminal record and had been in custody for about five months. The judgments cited by the petitioner’s counsel were found relevant.

Considering these facts, the bench held that the petitioner deserved bail. It allowed the petition and directed that he be released on bail after furnishing bonds to the satisfaction of the trial Court. It clarified that the order did not reflect any opinion on the merits of the case.

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