GST Fake Invoice Accused Get Bail After 2+ Years in Custody

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Case Name

Sandeep Goyal vs. Union of India (Connected with Rajesh Arora vs. Union of India)

Case No.: Criminal Miscellaneous Fourth Bail Application No. 9096/2020 (connected with Criminal Miscellaneous Fifth Bail Petition No. 11621/2020)

Court Name: High Court of Judicature for Rajasthan, Bench at Jaipur

Decision on: 13th October 2020

Key Takeaways

1. Long custody strong bail argument: The petitioners had been in jail for over two years, which weighed heavily in their favour.

2. Investigation completed = no need to stay in custody: The investigation was wrapped up in July 2020, meaning there was no investigative purpose served by keeping them behind bars.

3. Maximum punishment is only 5 years: Under the CGST Act, the maximum sentence for these offences is five years. Having already spent two years in jail, the court found continued detention hard to justify.

4. Trial is far from over: The case was only at the pre-charge evidence stage before the trial court, meaning a conclusion was not in sight anytime soon.

5. Serious allegations don’t automatically mean no bail: Even though the fraud was massive (over ₹1,163 crore in fake invoices!), the court balanced this against the personal liberty of the accused.

6. Bail granted with strict conditions: The court didn’t just let them walk free — it imposed financial conditions and travel restrictions.

Issue

The central legal question was:

Should the petitioners — accused of a large-scale GST fraud — be granted regular bail under Section 439 of the Code of Criminal Procedure, 1973, given that they had been in custody for over two years, the investigation was complete, and the trial was unlikely to conclude soon?

Facts

• Who are the accused?
• Sandeep Goyal, aged about 35 years, resident of Abohar, District Fazilka, Punjab — lodged in Central Jail, Jaipur.
• Rajesh Arora, resident of Abohar, District Fazilka, Punjab — also lodged in Central Jail, Jaipur.
• What’s the alleged fraud?
• After thorough investigation, it came out that the accused had allegedly created 75 fake firms and issued GST invoices of a taxable value of ₹1,163,13,39,281/- (that’s over ₹1,163 crore!) involving GST of ₹102,18,27,034/- (over ₹102 crore) — all without any actual physical movement of goods. In simple terms, they allegedly created fake paper trails to fraudulently claim GST benefits.
• When were they arrested?
• Both petitioners have been in custody since 03.08.2018 — that’s August 3, 2018.
• What is the FIR?
• The case is registered as FIR No. 15/2018 at Police Station DGGI, GST, Jaipur (Raj.)
• What offences are alleged?
• Offences under Sections 132(1)(b)©(d)(f)(i) and (l) read with Section 132(1)(i)(iv) and read with sub-section (5) of the Central Goods and Services Tax Act, 2017
• Where does the case stand?
• The complaint was filed in 2018.
• Investigation was concluded in July 2020.
• The case is now listed before the trial court for recording of pre-charge evidence — meaning the trial hasn’t even properly started yet!

Arguments

Petitioners’ Arguments (Sandeep Goyal & Rajesh Arora)

The lawyers for the petitioners made the following points:

1. Long custody: The petitioners have been in jail since 03.08.2018 — over two years at the time of this hearing.

2. Maximum punishment is only 5 years: Given that the maximum sentence under the law is five years, keeping them in jail indefinitely while the trial drags on is disproportionate.

3. Investigation is complete: Since the investigation was concluded in July 2020, there’s no reason to keep them in custody for investigative purposes.

4. Trial won’t conclude soon: The case is only at the pre-charge evidence stage, so there’s no early end in sight.

5. Relied on Supreme Court precedent: The petitioners’ lawyers cited the landmark Supreme Court judgment in Sanjay Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40, which held that bail should not be denied merely because of public sentiment against the accused, and that once investigation is complete and charge-sheet is filed, custody may not be necessary.

Respondent’s Arguments (Union of India / DGGI)

The government’s lawyer opposed bail on these grounds:

1. Serious and grave allegations: The accused allegedly created 75 fake firms and generated fake GST invoices worth over ₹1,163 crore without any actual movement of goods — this is a massive economic fraud.

2. Threat to the economy: Such large-scale GST fraud, if proved, could jeopardise the country’s economy.

Note: While the respondent opposed bail, the court ultimately found the custody period and the state of the trial to be compelling factors in favour of bail.

Key Legal Precedents

1. Sanjay Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40

This is the key Supreme Court judgment relied upon by the petitioners’ lawyers. Here’s what it said that was relevant:

“The grant or refusal to grant bail lies within the discretion of the court. The grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused.”

The Supreme Court in that case also noted:

“We are conscious of the fact that the accused are charged with economic offences of huge magnitude. We are also conscious of the fact that the offences alleged, if proved, may jeopardise the economy of the country. At the same time, we cannot lose sight of the fact that the investigating agency has already completed investigation and the charge-sheet is already filed… Therefore, their presence in the custody may not be necessary for further investigation. We are of the view that the appellants are entitled to the grant of bail pending trial on stringent conditions…”

How was this applied here?

The facts of the present case were strikingly similar — investigation complete, charge-sheet filed, trial pending. The Rajasthan High Court found this precedent directly applicable and followed the same reasoning to grant bail to Sandeep Goyal and Rajesh Arora.

2. Statutory Provisions Applied:

• Section 439 of the Code of Criminal Procedure, 1973 — This is the provision under which the bail applications were filed. It gives the High Court special powers to grant bail.

• Sections 132(1)(b)©(d)(f)(i) and (l) read with Section 132(1)(i)(iv) and read with sub-section (5) of the Central Goods and Services Tax Act, 2017 — These are the offence provisions under which the accused were charged, relating to fraudulent invoicing, fake firms, and tax evasion.

Judgement

The Petitioners (Sandeep Goyal and Rajesh Arora) won — both were granted bail.

The Court’s Reasoning:

The Hon’ble Justice Sabina of the Rajasthan High Court, Jaipur Bench, reasoned as follows:

1. Custody period is significant: The petitioners had been in jail for more than two years, which is a substantial period.

2. Investigation is over: Since the investigation concluded in July 2020, keeping them in custody serves no investigative purpose.

3. Trial is far away: The case is only at the pre-charge evidence stage, and an early conclusion of trial is not expected.

4. Balanced approach: The court acknowledged the seriousness of the allegations but chose not to comment on the merits of the case. It simply found that continued detention was not justified at this stage.

5. Followed Supreme Court guidance: The court applied the principles from Sanjay Chandra vs. CBI, (2012) 1 SCC 40 to conclude that bail was appropriate.

Orders Made:

The court allowed both petitions and directed:

• Both petitioners to be admitted to bail
• Each petitioner to furnish a bail bond of ₹10,00,000/- (Rupees Ten Lakhs) with one surety in the like amount to the satisfaction of the Trial Court
• Petitioners shall not leave the country without prior permission of the Court

FAQs

Q1: Does getting bail mean the accused are innocent?

Absolutely not! The court was very clear that it was not commenting on the merits of the case. Bail simply means they don’t have to stay in jail while waiting for the trial to conclude. The trial will continue, and guilt or innocence will be decided then.

Q2: Why did the court grant bail despite such a massive fraud?

The court balanced two things — the seriousness of the alleged offence on one hand, and the personal liberty of the accused on the other. Since the investigation was complete, the trial was far from over, and they had already spent over two years in jail, the court felt continued detention wasn’t justified. This follows the Supreme Court’s approach in Sanjay Chandra vs. CBI.

Q3: What happens if the accused violate the bail conditions?

If they violate conditions (like leaving the country without permission), the bail can be cancelled and they can be sent back to jail. The Supreme Court in Sanjay Chandra vs. CBI also reserved liberty to the investigating agency to apply for modification or recall of bail if conditions are violated.

Q4: What is the maximum punishment for these GST offences?

Under the Central Goods and Services Tax Act, 2017, the maximum punishment for the offences alleged here is five years imprisonment.

Q5: What are “fake firms” and “fake GST invoices” in this context?

According to the prosecution, the accused allegedly created 75 fictitious/fake firms on paper and issued GST invoices showing sales/purchases worth over ₹1,163 crore — but no actual goods were physically moved. This is done to fraudulently claim Input Tax Credit (ITC) or to launder money through the GST system.

Q6: What is Section 439 CrPC?

Section 439 of the Code of Criminal Procedure, 1973 gives the High Court and Sessions Court special powers to grant bail, even in cases where bail was earlier refused by a lower court. This is the provision under which these bail applications were filed.

Q7: What is DGGI?

DGGI stands for Directorate General of GST Intelligence — it’s the premier intelligence and investigation agency under the GST framework in India, responsible for detecting and investigating GST fraud cases.

Vide this order, abovementioned two bail petitions would be disposed of.

Petitioners have filed these petitions under Section 439 of

Code of Criminal Procedure, 1973 seeking regular bail in F.I.R. No.

15/2018 registered at Police Station DGGI, GST, Jaipur (Raj.) for

offences under Sections 132(1) (b) (c) (d) (f) (i) and (l) read with

Section 132 (1) (i) (iv) and read with sub-section (5) of the Central

Goods and Services Tax Act, 2017.

Learned counsel for the petitioners have submitted that

the petitioners are in custody since 03.08.2018. Maximum

punishment that can be awarded is sentence of five years. Hence,

the petitioners were entitled to be released on bail. Case is listed for

pre-charge evidence before the trial court. Investigation in the

present case was completed in July, 2020. Hence, there is no

possibility of conclusion of trial at an early date. In support of their

arguments, learned counsel have placed reliance on judgment of the

Hon’ble Supreme Court in Sanjay Chandra Vs. Central Bureau of

Investigation, (2012) 1 SCC 40, wherein it was held as under:

“40. The grant or refusal to grant bail lies within the

discretion of the court. The grant or denial is regulated,

to a large extent, by the facts and circumstances of

each particular case. But at the same time, right to bail

is not to be denied merely because of the sentiments of

the community against the accused. The primary

purposes of bail in a criminal case are to relieve the

accused of imprisonment, to relieve the State of the

burden of keeping him, pending the trial, and at the

same time, to keep the accused constructively in the

custody of the court, whether before or after

conviction, to assure that he will submit to the

jurisdiction of the court and be in attendance thereon

whenever his presence is required.

46. We are conscious of the fact that the accused are

charged with economic offences of huge magnitude. We

are also conscious of the fact that the offences alleged,

if proved, may jeopardise the economy of the country.

At the same time, we cannot lose sight of the fact that

the investigating agency has already completed

investigation and the charge-sheet is already filed

before the Special Judge, CBI, New Delhi. Therefore,

their presence in the custody may not be necessary for

further investigation. We are of the view that the

appellants are entitled to the grant of bail pending trial

on stringent conditions in order to ally the

apprehension expressed by CBI.

47. In the view we have taken, it may not be necessary

to refer and discuss other issues canvassed by the

learned counsel for the parties and the case laws relied

on in support of their respective contentions. We clarify

that we have not expressed any opinion regarding the

other legal issues canvassed by the learned counsel for

the parties.

48. In the result, we order that the appellants be

released on bail on their executing a bond with two

solvent sureties, each in a sum of Rs 5 lakhs to the

satisfaction of the Special Judge, CBI, New Delhi on the

following conditions :-

(a) The appellants shall not directly or indirectly make

any inducement, threat or promise to any person

acquainted with the facts of the case so as to dissuade

him to disclose such facts to the Court or to any other

authority.

(b) They shall remain present before the court on the

dates fixed for hearing of the case. If they want to

remain absent, then they shall take prior permission of

the court and in case of unavoidable circumstances for

remaining absent, they shall immediately give

intimation to the appropriate court and also to the

Superintendent, CBI and request that they may be

permitted to be present through the counsel.

(c) They will not dispute their identity as the accused in

the case.

(d) They shall surrender their passport, if any (if not

already surrendered), and in case, they are not a

holder of the same, they shall swear to an affidavit. If

they have already surrendered before the learned

Special Judge, CBI, that fact should also be supported

by an affidavit.

(e) We reserve liberty to CBI to make an appropriate

application for modification/recalling the order passed

by us, if for any reason, the appellants violate any of

the conditions imposed by this Court.”

Learned counsel for the respondent has opposed the

petitions and has submitted that allegations levelled against the

petitioners were serious in nature. After thorough investigation of

the case it transpired that accused had created 75 fake firms and

had issued GST invoices of taxable value of Rs. 1163,13,39,281/-

involving GST of Rs. 102,18,27,034/- without any physical

movement of goods.

Although in the present case allegations levelled against

the petitioners are serious in nature but the fact remains that the

petitioners are in custody for the last more than two years and

admittedly maximum punishment to be imposed on the accused, if

convicted, is five years. Complaint in the present case was filed in

the year 2018, whereas, the investigation has been concluded in

July, 2020. Now the case is listed before the trial court for recording

of pre-charge evidence and the trial may not be concluded at an

early date.

Considering the custody period of the petitioners, but

without commenting on the merits of the case, it would be just and

expedient to order release of the petitioners on bail.

Accordingly, petitions are allowed. Petitioners be admitted

to bail subject to each of them furnishing bail bond in the sum of Rs.

10,00,000/- (Rupees Ten Lacs) with one surety in the like amount to

the satisfaction of the Trial Court. Petitioners shall not leave the

country without prior permission of the Court.

(SABINA),J