Fictitious Firm, Fake GST ITC, False E-Way Bills & Wrong Bank Accounts: Punjab & Haryana HC Refuses Anticipatory Bail due to Non-Cooperation [Read Order]
The court held that the allegations were serious, the investigation was at a nascent stage, and custodial interrogation was necessary to break down the fraud.
Fake GST ITC - Taxscan
Fake GST ITC - Taxscan
The Punjab & Haryana High Court refused to grant anticipatory bail to a proprietor, who was facing allegations of conducting a large-scale fake input tax credit (ITC) fraud under the GST ( Goods and Services Tax ).
The facts are that the case arose from an investigation into M/s Sona Casting Pvt. Ltd., which had allegedly availed fraudulent ITC worth ₹54.40 crores from fictitious entities. It was shown that M/s Manvi Steels, controlled by the petitioner, Jatinder Singh had passed on fake ITC of ₹3.72 crores, while itself availing fraudulent ITC to the tune of nearly ₹14.7 crores on multiple occasions. The firm was found to be non-existent at its registered premises and appeared to have been floated solely for generating sham transactions.
The investigation revealed huge discrepancies including false e-way bills generated to depict non-existent transportation of goods, bogus suppliers shown in records, rotation of funds between bank accounts without any commercial rationale, and even wrong or non-functional bank account details provided on the GST portal
The field inquiries confirmed that the firm’s address was fake, while RFID toll data analysis indicated no movement of vehicles despite e-way bills suggesting otherwise.
The authorities also pointed out that the petitioner’s own statements reflected ignorance of basic business details, reinforcing the allegation that he was merely a front for a fictitious setup.
However, the GST department argued that the petitioner was a registered taxpayer, had responded to notices, appeared pursuant to summons, and had filed replies, thereby cooperating with the authorities.
It was further contended that his custodial interrogation was unnecessary and that the suspension of the firm’s registration had already been stayed in separate proceedings. However, the prosecution strongly opposed bail, stating the non-cooperation, evasive conduct, and the scale of fraud involving ₹70.19 crores of GST on taxable value exceeding ₹389 crores.
Justice Manisha Batra, after examining the material and rival arguments, held that the allegations were serious, the investigation was at a nascent stage, and custodial interrogation was necessary to break down the fraud.
The Court observed that granting anticipatory bail in such circumstances carried the risk of tampering with evidence, manipulation of records, and influencing witnesses.
While dismissing the bail application, the bench said that “The inquiry is at its nascent stage. The petitioner is alleged to have not cooperated in the investigation/inquiry conducted so far. Huge amount of exchequer is involved. Proper and thorough investigation is required to be conducted in the matter. There is possibility of the petitioner’s misusing the concession of pre-arrest bail.”
The High Court, considering the magnitude of revenue loss and the petitioner’s conduct refused to exercise its discretion in his favour and dismissed the petition. It was clarified, however, that the observations were confined to the decision on bail and would not prejudice the trial on merits .
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