Case Law Details
Mukesh Jalan Vs State of Assam And 2 Ors. (Gauhati High Court)
The Gauhati High Court considered a bail application filed under Section 483 of the BNSS, 2023 by the petitioner, who had been arrested in Case No. CT/ENF/ARST/2026/08 under Section 132(5) of the Assam Goods and Services Tax Act, 2017. The petitioner sought release on bail following his arrest in connection with allegations relating to wrongful availment of input tax credit (ITC).
The petitioner was the Director of M/s. Sadguru Engineering and Allied Services Pvt. Ltd., which had been awarded a highway construction project by NHIDCL. The company had engaged M/s. Shiva Harlalka to execute the work under an agreement under which the company was to provide operational assistance, logistical coordination and materials required for execution of the project. Financial transactions between the parties were carried out through bank accounts.
Subsequently, disputes arose between the parties regarding financial claims, reconciliation of accounts and release of payments.
According to the petitioner, M/s. Shiva Harlalka generated and uploaded nine e-invoiced works contract invoices in its GST returns. Thereafter, without the knowledge or consent of M/s. Sadguru Engineering and Allied Services Pvt. Ltd., the supplier unilaterally issued corresponding credit notes through its own GST registration and statutory return filing mechanism. The petitioner asserted that the company had no role in generating the credit notes or in the subsequent amendments made by the supplier. Out of the nine credit notes, only one was accepted, while the remaining eight were rejected.
The petitioner further stated that the supplier subsequently amended the invoices and credit notes in its GST returns and electronic records by reducing the taxable value reflected against the invoices to Rs. 0.01 per invoice. These amendments were made solely by the supplier using its own GST credentials. According to the petitioner, these unilateral actions resulted in distortions in the company’s GST records, including GSTR-2B and the invoice management system, creating an artificial negative ITC impact and disputes relating to ITC availability, reconciliation of transactions and tax liability.
The petitioner submitted that the company had approached the tax authorities seeking intervention and protection and had filed a complaint against M/s. Shiva Harlalka on 17.03.2026. Thereafter, inspection and search operations were conducted at the supplier’s premises.
The petitioner received a notice under Section 35(3) of the BNSS, 2023 requiring his appearance. He did not appear on the specified date as he was out of Guwahati and was subsequently arrested under Section 69 of the Assam GST Act, 2017.
The tax authorities alleged that the petitioner had wrongfully received and utilised ITC on the basis of fabricated tax invoices without actual receipt or supply of goods or services. It was alleged that he knowingly and wilfully availed fraudulent ITC from non-existent and bogus taxpayers involving a tax amount of Rs. 7,88,94,075.18 and further availed ineligible ITC involving Rs. 713,23,23,339.65, resulting in substantial loss to the Government exchequer.
On behalf of the petitioner, it was argued that the prosecution case rested entirely on documentary evidence and that all relevant documents had already been seized or were available electronically. It was therefore contended that further custodial detention was unnecessary.
The High Court observed that there was no dispute that the prosecution case was based upon documentary evidence and that all documentary materials had already been seized by the investigating agency. The Court also noted that the offence under Section 132(5) of the Assam GST Act, 2017 carried a maximum punishment of five years. Considering that the petitioner had already remained in custody for more than fifteen days, the Court held that continued judicial custody would serve no useful purpose and would adversely impact his business.
Accordingly, the High Court allowed the bail application and directed the petitioner’s release on bail upon furnishing a bail bond of Rs. 7,25,000 with one surety of the like amount to the satisfaction of the Chief Judicial Magistrate, Kamrup (M), Guwahati. The bail application was disposed of accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
Heard Mr. A. Saraf, the learned senior counsel appearing for the petitioner. Also heard Mr. B. Gogoi, the learned Addl. Advocate General, Assam.
2. This is an application under Section 483 of the BNSS, 2023 whereby the petitioner Mukesh Jalan has prayed for releasing him on bail after his arrest in Case No. CT/ENF/ARST/2026/08 under Section 132(5) of the Assam Goods and Services Tax Act, 2017.
3. The petitioner Mukesh Jalan is the Director of M/s. Sadguru Engineering and Allied Services Pvt. Ltd. The allegation brought against him is that he had made fake and ineligible input tax credit.
4. M/s. Sadguru Engineering and Allied Services Pvt. Ltd. was entrusted with the work of finishing the 4 leaning of Jorhat to Jhanji National Highway. The work was given by National Highways and Infrastructure Development Corporation Limited (NHIDCL). The said project involved extensive civil construction activities.
5. M/s. Sadguru Engineering and Allied Services Pvt. Ltd. had employed M/s. Shiva Harlalka to execute the aforesaid work. On the basis of an agreement M/s. Sadguru Engineering and Allied Services Pvt. Ltd. was to provide operational assistance and logistical co-ordination and to supply materials required for execution of the work. Both of them started the work according to their agreement.
6. Since the date they had entered into the agreement on 02.03.2025, M/s. Sadguru Engineering and Allied Services Pvt. Ltd. had paid a substantial amount of money to M/s. Shiva Harlalka. The financial transactions between the two were done through bank accounts.
7. Thereafter, disputes arose between both of them. The disputes related to financial claims, reconciliation of accounts and release of payment.
8. In the month of February, 2025, M/s. Shiva Harlalka generated and uploaded 9 e-invoiced works contract invoices amounting to 767,43,45,236/-, involving GST amount of 710,28,66,222/-. Those invoices were uploaded and reported by the supplier in its statutory GST returns into the GSTR-1/IFF and GSTR-2B in accordance with the procedure contemplated by the GST laws.
9. In the meantime, without knowledge and consent of M/s. Sadguru Engineering and Allied Services Pvt. Ltd., M/s. Shiva Harlalka unilaterally proceeding to issue corresponding credit notes against the aforesaid invoices. The said notes were generated and reported by the supplier through its own GST registration and statutory returns filing mechanism without any authorization, approval from M/s. Sadguru Engineering and Allied Services Pvt. Ltd.
10. M/s. Sadguru Engineering and Allied Services Pvt. Ltd. claimed that it had no role whatsoever in the generation of the aforesaid credit notes or in the subsequent amendment of the invoices and returns filed by M/s. Shiva Harlalka.
11. Out of the said 9 credit notes, M/s. Sadguru Engineering and Allied Services Pvt. Ltd. accepted only 1 credit note considering the fact that the payment of the said invoice was not made and rejected the other 8 credit notes.
12. In the month of September, 2025, M/s. Shiva Harlalka further undertook amendments to the aforesaid invoices and credit notes in its GST returns and electronic records maintained on the GST portal. By virtue of such amendments, the supplier reduced the taxable value reflected against the said invoices to a nominal amount of Rs.0.01 per invoice. The said amendments were carried out solely by the supplier using its own GST credentials and were entirely within the control and domain of the supplier.
13. The unilateral conduct of M/s. Shiva Harlalka, resulted in serious distortion and discrepancies within the GST records pertaining to M/s. Sadguru Engineering and Allied Services Pvt. Ltd. and generated artificial and adverse consequences in the auto populated statement and electronic records available to the company including GSTR-2B and invoice management system maintained under the GST framework resulting in artificial negative input tax credit impact.
14. The unilateral issuance of credit notes and subsequent amendment of the invoices by M/s. Shiva Harlalka gave rise to an abnormal and disputed position with respect to the availability of input tax credit, reconciliation of transactions and determination of tax liabilities.
15. Faced with the aforesaid unprecedented situation and apprehending serious misuse of GST system by the supplier, M/s. Sadguru Engineering and Allied Services Pvt. Ltd. had approached the tax authorities seeking intervention and protection. In fact, on 17.03.2026, M/s. Sadguru Engineering and Allied Services Pvt. Ltd. filed a complaint before the authorities against M/s. Shiva Harlalka.
16. Thereafter, inspection and search operation was conducted within the premises of M/s. Shiva Harlalka.
17. On 20.05.2026, the present petitioner received the notice under Section 35(3) of the BNSS, 2023 which required him to appear on 21.05.2026 at the premises of M/s. Shiva Harlalka. At that time, he was out of Guwahati and therefore, he could not appear and on subsequent occasion i.e. on 28.05.2026, the petitioner was arrested under Section 69 of Assam GST Act, 2017.
18. The respondent tax authorities claimed that the petitioner Mukesh Jalan is involved in wrongful receipt and utilization of input tax credit on the strength of fabricated tax invoices without actually receiving or supply of goods or services. It is claimed that the petitioner had knowing and willfully availed fraudulent input tax credit from non-existent and bogus tax payers involving a total tax amount of 788,94,075.18 and availed ineligible input tax credit involving a total tax amount 713,23,23,339.65. Thereby, causing substantial loss to the Government exchequer and indicating deliberate tax evasion.
19. Saraf has submitted that entire case of the respondent State is based on documentary evidence and all the documents are already seized or available electronically. According to Mr. Saraf, under this circumstance, the petitioner no longer deserves to be detained in custody.
20. I have considered the submissions made by the learned counsels of both sides.
21. There is no doubt that the case of the prosecution rests upon documentary evidence. All the documentary evidence and other materials are already seized by the investigating agency. The offence under Section 132(5) of the Act of 2017 prescribes punishment of 5(five) years only. For the last more than 15 days the petitioner Mukesh Jalan has been in custody. Now, detaining the petitioner in judicial custody would serve no purpose rather it would adversely impact his business only. Under the given circumstances, this Court is of the opinion that the petitioner no longer deserves to be detained in custody.
22. The bail application of the petitioner is allowed.
23. The petitioner, namely- Mukesh Jalan, who was arrested in Case No. CT/ENF/ARST/2026/08 under Section 132(5) of the Assam Goods and Services Tax Act, 2017, shall be released on bail of 725,000/- with a surety of like amount to the satisfaction of the learned Chief Judicial Magistrate, Kamrup(M) at Guwahati.
With the above direction, the bail application is disposed of.
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