Punjab & Haryana High Court Holds Bail Appropriate in GST Input Tax Credit Fraud Cases Primarily Based on Documentary Evidence

In a significant decision, the Punjab & Haryana High Court addressed the issue of bail in cases involving alleged fraudulent availment of input tax credit under the Central GST Act, 2017. The petitioner sought regular bail after being accused of fraudulently availing input tax credit amounting to approximately Rs. 27.35 crores without any actual inward supply of goods.

The petitioner, represented by senior counsel, argued that he was merely an employee of the implicated firm and had no control over its business affairs or knowledge of the alleged fraudulent activities. It was further submitted that no incriminating material was recovered from the petitioner, and the case was based primarily on documentary evidence already in the possession of the authorities. The petitioner had been in custody since November 2025, and the maximum punishment for the alleged offences was five years.

The respondent, representing the Directorate General of GST Intelligence, contended that the investigation established the petitioner’s involvement in the fraudulent availment of input tax credit. The respondent highlighted that the firm’s declared bank account did not reflect payments commensurate with the value of the invoices, indicating a lack of genuine financial transactions and supporting the allegation of fraud.

The Court, after hearing both parties, noted that while the allegations were serious, the GST Act provides for specific statutory proceedings for recovery in addition to criminal prosecution. The Court relied on precedents, including the Supreme Court’s decision in Vineet Jain v. Union of India, which emphasized that when offences are triable by a Magistrate, the sentence is limited, and the evidence is documentary, prolonged detention is unwarranted. The Court also referred to Radhika Aggarwal v. Union of India, reiterating that assessment proceedings under Sections 73 and 74 of the CGST Act should generally precede criminal prosecution, except in exceptional circumstances.

Justice Sanjay Vashisth observed that the petitioner had already undergone significant custody and that further detention would not serve any meaningful purpose, especially since the investigation was documentary in nature and the trial was likely to be protracted. The Court underscored the importance of personal liberty and found it appropriate to grant regular bail to the petitioner, subject to furnishing bail or surety bonds to the satisfaction of the trial court.

The judgment clarifies that the discussion should not be construed as an expression of opinion on the merits of the case, and the trial court is expected to decide the matter independently based on the evidence. The petition was accordingly disposed of, with the petitioner ordered to be released on bail.

This decision reinforces the principle that in GST-related offences primarily based on documentary evidence, prolonged pre-trial detention is not justified, and statutory remedies for recovery remain available to the authorities.