Case Law Details
Mohit Singla Vs Directorate General of Goods and Services Tax Intelligence (Punjab and Haryana High Court)
Punjab & Haryana HC Grants Bail Because Investigation in GST Fake Invoice Case Was Substantially Complete; GST Fraud Accused Entitled to Bail Because Trial Likely to Take Time; Bail Allowed in Fake ITC Case Because Maximum Punishment Was Only Five Years; Punjab & Haryana HC Relies on Supreme Court Judgments to Grant Bail in GST Evasion Case; Documentary Evidence and Clean Antecedents Favoured Bail in GST Case; Bail Granted in Alleged Fake Invoice Case Because No Further Custodial Interrogation Was Needed; Punjab & Haryana HC Says Bona Fide Purchaser Argument Requires Trial in GST ITC Dispute.
The petitions before the Punjab and Haryana High Court sought regular bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 in proceedings initiated by the Directorate General of Goods and Services Tax Intelligence (DGGI), Ludhiana, for offences under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Services Tax Act, 2017.
According to the prosecution, the petitioners were key persons involved in wrongful availment of ineligible Input Tax Credit (ITC) through fake invoices without actual receipt of goods or services, allegedly resulting in tax evasion of ₹23.12 crores in relation to M/s Kanha Concast.
The petitioners were partners of M/s Kanha Concast and had business dealings with various vendors for sale and purchase of scrap and finished goods. The prosecution alleged that ineligible ITC was availed on the basis of fake invoices issued by 58 non-existent or fake firms without actual supply of goods. Based on these allegations, the petitioners were taken into custody.
The petitioners contended that business premises of M/s Kanha Concast as well as residential premises of the partners were searched on 06.11.2025 and 07.11.2025. They submitted that they were taken to the office of DGGI and subsequently arrested on allegations relating to fake invoicing and wrongful ITC availment. The petitioners further argued that the action of the authorities had already been challenged in a pending writ petition.
It was also contended that no recovery proceedings regarding alleged wrongful availment of ITC had yet been initiated under the CGST Act. According to the petitioners, the suppliers had already deposited the applicable tax and all statutory documents supporting such payments were available. They submitted that e-way bills had been duly generated and goods were received through numerous e-way bills.
The petitioners argued that there was no mechanism available to buyers to verify the original source of goods procured by suppliers. If suppliers obtained invoices from one source while supplying goods from another source, liability to pay tax would remain upon the suppliers and not bona fide purchasers. It was further argued that there was no direct evidence linking the petitioners to the alleged offences and that no confessional statements had been made voluntarily. The petitioners alleged that statements were obtained under pressure.
The petitioners also emphasized that the offences under the CGST Act carried a maximum punishment of five years and were triable by a Magistrate. It was pointed out that a complaint had already been filed by the investigating agency and that although certain parts of investigation were still pending, the nature of allegations would not materially change. The petitioners had remained in custody since 08.11.2025 and had undergone nearly three months of custody.
Reliance was placed on judgments of the Supreme Court of India in Vineet Jain v. Union of India and Ratnambar Kaushik v. Union of India, as well as an earlier Punjab and Haryana High Court judgment in Jashanpal Singh v. Union of India, where bail had been granted in similar circumstances involving documentary evidence and offences punishable up to five years.
The respondents did not dispute that similar arguments had been considered in the Jashanpal Singh matter where bail had been granted. The respondents, however, submitted that part of the investigation was still pending and supplementary statements might be filed after conclusion of the remaining investigation.
After hearing the parties, the High Court considered the period of custody already undergone, the documentary nature of the evidence, the fact that investigation against the petitioners had substantially concluded, the nature of allegations, the offences being triable by a Magistrate, and the clean criminal antecedents of the petitioners.
Relying upon the principles laid down in Vineet Jain, Ratnambar Kaushik, and Jashanpal Singh, the High Court held that the petitioners were entitled to regular bail. Accordingly, both petitions were allowed and the petitioners were ordered to be released on regular bail upon furnishing bail and surety bonds to the satisfaction of the concerned Court.
The Court further directed that the petitioners should not threaten or influence prosecution witnesses directly or indirectly. It was clarified that the observations made in the order should not be construed as an expression on the merits of the case and that the trial court would decide the matter independently on the basis of the available material.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
Both these petitions have been filed for grant of regular bail to the petitioner(s) in offence(s) under Sections 132(1)(b), 132(1)(c) of the Central Goods and Services Act, 2017, arising out of the proceedings DGGI/INV/GST/2593/2025-Gr. E/O/o ADG-DGGI-ZU-LUDHIANA, CBIC No. CBIC-DIN-202511DNN5000000F0D2, registered by the DGGI, Ludhiana, pursuant to the memo of arrest dated 07.11.2025. A brief reference of the facts is however being made from CRM-M-400-2026 titled as ‘Mohit Singla Vs. Directorate General of Goods and Services Tax Intelligence’.
2. As per the case of the prosecution, the petitioners have been key persons involved in wrongful availment of ineligible input tax credit on account of fake invoices and without any actual receipt of goods or services or both and thus involving a tax evasion of Rs.23.12 crores in M/s Kanha Concast.
3. The petitioners are the partners in M/s Kanha Concast and had dealt with various vendors for sale and purchase of scrap and finished goods. There were thus utilization of ineligible ITC, on fake invoices, without receipt of underlying goods, issued by 58 non-existent/fake firms. Hence, the petitioners were taken in custody
4. Learned Senior counsel appearing on behalf of the petitioners contends that the business premises of M/s. Kanha Concast as well as the residential premises of the partners were inspected on 06.11.2025 and the same were continued till 07.11.2025. He contends that the petitioners were taken to the office of DGGI and later arrested on allegations that they were involved in wrongful availment of Input Tax Credit on account of fake invoicing and without any actual receipt of goods or services or both. It is contended that action of the respondents has already been challenged by the petitioner herein by way of CWP-36739-2025, which is still pending. It is contended that no recovery proceeding qua alleged wrongful availment of Input Tax Credit has been initiated against M/s. Kanha Concast by the respondents under the provisions of CGST Act. He further contends that the tax which was payable, has been duly deposited by the suppliers of M/s. Kanha Concast and the firm is in possession of all the statutory documents supporting such payment. He contends that e-way bills were duly generated by the suppliers and impugned firms of the buyer received goods via hundreds of e-way bills. It is submitted that no mechanism is available to the buyer to verify the source of goods of the suppliers. If the supplier was getting the invoices from one source while supplying the goods taken from another source, it is the liability of the supplier to pay the tax. A bona fide purchaser cannot be made a scapegoat or penalized on account of any default on the part of the supplier having not verified the source of availing the goods. He further contends that there is no direct evidence with respect to the involvement of the petitioners and no confessional statement has ever been made. The petitioners were rather pressurized by the respondents and bullied into getting their statements recorded. It is vehemently argued that the offences in question are punishable with a maximum imprisonment of five years and triable by a Court of Magistrate.
5. It is further argued that the Investigating Agency has already filed a complaint and even though the respondents contend that certain part of the investigation is still pending, however, the same would not make much difference as the flavour of the offence, for which the petitioners are being charged, would not undergo any material change. He contends that the petitioners in both the cases have been in custody since 08.11.2025 and have already undergone an actual custody of nearly 03 months and whence the offence is predominantly civil and pertains only to recovery of Input Tax, hence, further custodial detention of the petitioners is unwarranted. The investigation qua the petitioners stands completed. He places reliance on the judgment passed by the Hon’ble Supreme Court in the matter of ‘Vineet Jain Vs. Union of India’ reported as 2025 SCC Online SC 2331; wherein the Hon’ble Supreme Court granted the benefit of bail when the accused reflected no criminal antecedents and after noticing the prosecution was based on the documentary evidence and the maximum sentence was 5 years. Reference is also made to the judgment of the Hon’ble Supreme Court in ‘Ratnambar Kaushik Vs. Union of India’ reported as 2023(2) SCC 621, wherein similar benefits had been extended to the petitioner(s) therein. Reference is also made to the judgment dated 02.02.2026 passed by this Court in CRM-M-53422-2025 titled as ‘Jashanpal Singh Vs. Union of India’ and another connected matter.
6. Learned counsel appearing on behalf of the respondents do not dispute that the arguments of the respondents were taken into consideration by this Court in the matter of Jashanpal Singh (supra) and concession of bail was granted to the accused therein. They, however, contend that some part of the investigation is pending and they would file supplementary statement before the authorities as and when the said investigation is concluded. The rest of the arguments are not disputed.
7. Having heard the learned counsel for the parties and taking into consideration the period of custody already undergone, the case being based on documentary evidence, the investigation having been concluded, the nature of allegations levelled, the offence being triable by the Court of Magistrate, clean criminal antecedents of the petitioners and the law clarified as per the judgments passed in the matters of Vineet Jain (supra), Ratnambar Kaushik (supra) and Jashanpal Singh (supra), I deem it appropriate to allow the instant petitions.
8. Accordingly, both the petitions are allowed and the petitioners are ordered to be admitted to regular bail subject to their furnishing bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate/Illaqa Magistrate concerned.
9. It is made clear that the petitioners shall not extend any threat and shall not influence any prosecution witness in any manner directly or indirectly.
10. The observation made hereinabove shall not be construed as an expression on the merits of the case and the trial Court shall decide the case on the basis of available material.
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