GST Fraud Accused Denied Anticipatory Bail — Fake Invoices, ₹1 Crore Scam

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Case Name

Nitin Goyal v. State of Haryana

Court Name: High Court of Punjab and Haryana at Chandigarh

Case No.: CRM-M-35355-2022

Reserved on: 09.08.2022 | Pronounced on: 08.09.2022

Presided by: Hon’ble Mr. Justice Anoop Chitkara

Key Takeaways

1. Anticipatory bail is not a right — it is an exceptional remedy, granted only when the court is prima facie satisfied that the applicant has been falsely implicated.

2. Serious financial fraud = custodial interrogation — When the alleged fraud amount is massive (here, over ₹1 crore), courts tend to favour custodial interrogation over anticipatory bail.

3. Parity argument rejected — Just because a co-accused got bail doesn’t mean the petitioner is automatically entitled to it. The court looks at the specific role and amount involved for each accused individually.

4. GST system loopholes exploited — The court noted that the petitioner took advantage of defects in the GST software and the system to commit the fraud.

5. Confession of co-accused — The petitioner’s counsel argued that the confession of co-accused Hemraj Ahuja was not admissible against the petitioner, but this did not sway the court.

Issue

The central legal question was:

Should Nitin Goyal be granted anticipatory bail under Section 438 CrPC, given the allegations of GST fraud involving fake invoices and fraudulent input tax credit claims worth over ₹1.1 crore?

The court answered: No.

Facts

• An FIR No. 160 was registered on 30.04.2019 at Civil Lines Police Station, Sonipat, District Sonipat.

• The FIR was initially filed under Section 420 IPC (cheating), and later Sections 467, 468, 471, 120-B IPC (forgery-related offences) and Section 132 of the GST Act were added.

• The allegations against Nitin Goyal were that he cheated the State by:
• Claiming input tax credit (ITC) through fake GST invoices
• Using fake addresses of firms
• Creating firms through different proprietors as a cover
• Defrauding the State to the tune of ₹1,10,35,701 (approximately ₹1.1 crore)
• The petitioner claimed he had no criminal antecedents (no prior criminal record).

• He approached the High Court seeking anticipatory bail under Section 438 CrPC, fearing arrest.

• A co-accused named Shrawan had already been granted bail under Section 439 CrPC (CRM-M-26610-2022), but his alleged share was only ₹10 lakhs, and he had already undergone 5 months of custody.

Arguments

Petitioner’s Arguments (Nitin Goyal):

1. Confession not admissible: The primary evidence was the confession of co-accused Hemraj Ahuja, which the petitioner’s counsel argued was not inculpatory (not incriminating) against the petitioner and hence not admissible against him.

2. Custodial interrogation unnecessary: The petitioner argued that keeping him in custody would serve no purpose and that the investigation could be conducted without arresting him.

3. Irreversible injustice: Pre-trial incarceration would cause irreversible injustice to the petitioner and his family.

4. Parity with co-accused: Since co-accused Shrawan was granted bail, the petitioner argued he should also be entitled to bail on the same grounds.

State of Haryana’s Arguments:

1. Custodial interrogation needed: The State strongly opposed bail and demanded custodial interrogation to fully unearth the scam.

2. Government officials may be involved: The State argued that custodial interrogation was necessary to rule out the involvement of government officials in the fraud.

3. Prima facie case exists: The FIR and investigation clearly pointed to a prima facie case against the petitioner.

Key Legal Precedents

1. Jai Prakash Singh v. State of Bihar and another, (2012) 4 SCC 379

“Parameters for grant of anticipatory bail in a serious offence are required to be satisfied and further while granting such relief, the court must record the reasons therefor. Anticipatory bail can be granted only in exceptional circumstances where the court is prima facie of the view that the applicant has falsely been enroped in the crime and would not misuse his liberty.”

How it was applied: The court used this precedent to establish that anticipatory bail is not a routine remedy — it requires exceptional circumstances. Since there was a prima facie case against Nitin Goyal, this threshold was not met.

The Supreme Court in this case also referred to:

• D.K. Ganesh Babu v. P.T. Manokaran, (2007) 4 SCC 434
• State of Maharashtra v. Mohd. Sajid Husain Mohd. S. Husain, (2008) 1 SCC 213
• Union of India v. Padam Narain Aggarwal, (2008) 13 SCC 305

2. State rep. by CBI v. Anil Sharma, (1997) 7 SCC 187

“Custodial interrogation is qualitatively more elicitation oriented than questioning a suspect who is well ensconced with a favourable order under Section 438 of the code. In a case like this effective interrogation of suspected person is of tremendous advantage in disinterring many useful informations and also materials which would have been concealed. Succession such interrogation would elude if the suspected person knows that he is well protected and insulted by a pre-arrest bail during the time he interrogated. Very often interrogation in such a condition would reduce to a mere ritual.”

How it was applied: The court used this landmark precedent to justify the need for custodial interrogation in financial fraud cases. The Supreme Court’s reasoning here is that if an accused knows they are protected by anticipatory bail, they are less likely to cooperate meaningfully during interrogation — making the process a mere formality.

Judgment

The petition was dismissed. Here’s how the court reasoned its way to this decision:

1. Prima facie case established: A review of the FIR and investigation clearly showed a prima facie case of fraud against the petitioner.

2. Massive amount involved: The fraud amount of over ₹1 crore was considered significant enough to warrant custodial interrogation.

3. GST system exploited: The court specifically noted that the petitioner took “enormous advantage of the loopholes and defects in the GST software” and the system’s lack of efficient safeguards.

4. Parity argument rejected: The co-accused Shrawan’s bail was granted under Section 439 CrPC (regular bail, not anticipatory bail), his alleged share was only ₹10 lakhs, and he had already served 5 months in custody. The petitioner’s situation was entirely different, so parity could not be claimed.

5. Custodial interrogation required: Given the nature and scale of the allegations, the court held that custodial interrogation was necessary and bail was not warranted at this stage.

Final Order: “Petition dismissed in aforesaid terms. All pending applications, if any, stand disposed.”

The court also clarified that its observations should not be treated as an opinion on the merits of the case, and neither the regular bail court nor the trial court should be influenced by these comments.

FAQs

Q1: What is anticipatory bail, and why did Nitin Goyal seek it?

Anticipatory bail under Section 438 CrPC is bail granted before a person is arrested. Nitin Goyal sought it because he feared imminent arrest in connection with the GST fraud FIR.

Q2: What exactly was the fraud alleged against Nitin Goyal?

He allegedly created fake firms with bogus addresses, used different proprietors as fronts, and generated fake GST invoices to fraudulently claim Input Tax Credit (ITC) worth over ₹1.1 crore from the State.

Q3: Why was the confession of Hemraj Ahuja not enough to get bail?

The petitioner’s counsel argued the confession was not admissible against the petitioner. However, the court found that the FIR and investigation independently pointed to a prima facie case, so this argument alone wasn’t sufficient to grant bail.

Q4: Why couldn’t Nitin Goyal claim bail on parity with co-accused Shrawan?

Because the situations were very different. Shrawan’s alleged share was only ₹10 lakhs (vs. ₹1.1 crore for Nitin), Shrawan had already served 5 months in custody, and Shrawan’s bail was a regular bail under Section 439 CrPC — not anticipatory bail.

Q5: Does this judgment mean Nitin Goyal is guilty?

Absolutely not! The court was very clear that its observations are not an opinion on the merits of the case. This is just a bail order. The trial court will determine guilt or innocence independently.

Q6: What sections of law were invoked in this case?

• Section 420 IPC — Cheating
• Section 467 IPC — Forgery of valuable security
• Section 468 IPC — Forgery for purpose of cheating
• Section 471 IPC — Using forged document as genuine
• Section 120-B IPC — Criminal conspiracy
• Section 132 of the GST Act — Offences and penalties under GST
• Section 438 CrPC — Anticipatory bail

Q7: Can Nitin Goyal apply for regular bail after this?

Yes! This order only dismisses the anticipatory bail petition. He can still apply for regular bail under Section 439 CrPC after arrest, and that court will consider the matter afresh.

1. The petitioner apprehending arrest in the FIR captioned above has come up

before this Court under Section 438 CrPC seeking anticipatory bail.

2. In paragraph 23 of the bail petition, the accused declares that he has no criminal antecedents.

3. The allegations are of fraud related to GST invoices and getting credits to the extent of Rs. 1,10,35,701/- (Rs. One crore ten lacs, thirty-five thousand seven hundred and one).

4. Mr. Vinod Ghai, Ld. Senior Advocate appearing for the petitioner had argued that the primary evidence is by way of the confession made by Hemraj Ahuja, which is not admissible against the petitioner because it was not inculpatory, and that the custodial investigation would serve no purpose whatsoever, and the pre-trial incarceration would cause an irreversible injustice to the petitioner and family.

5. Ld. counsel representing the State opposes bail and seeks custodial interrogation to unearth the scam and to rule out the involvement of government officials.

REASONING:

6. The allegations against the petitioner are of cheating the State by claiming input credit through fake invoices by using fake addresses of the firms created through different proprietors and defrauded the State to the extent of more than Rs. One crore. A perusal of the FIR and investigation points out towards the existence of a primafacie case against the petitioner.

7. When the allegations against an accused are of cheating and the amount involved is massive, like the present case, where it is more than rupees one crore, the investigating agency's demand for custodial interrogation is based on the following judicial precedents, which bind all the investigating agencies.

8. In Jai Prakash Singh v. State of Bihar and another (2012) 4 SCC 379, Hon’ble Supreme Court holds,

[19]. Parameters for grant of anticipatory bail in a serious offence are

required to be satisfied and further while granting such relief, the

court must record the reasons therefor. Anticipatory bail can be

granted only in exceptional circumstances where the court is prima

facie of the view that the applicant has falsely been enroped in the

crime and would not misuse his liberty. [See D.K. Ganesh Babu v. P.T.

Manokaran (2007) 4 SCC 434, State of Maharashtra v. Mohd. Sajid

Husain Mohd. S. Husain (2008) 1 SCC 213 and Union of India v. Padam

Narain Aggarwal (2008) 13 SCC 305].

9. In State rep. by CBI v. Anil Sharma, (1997) 7 SCC 187, Hon’ble Supreme Court holds,

[6]. We find force in the submission of the CBI that custodial

interrogation is qualitatively more elicitation oriented than

questioning a suspect who is well ensconded with a favourable order

under Section 438 of the code. In a case like this effective

interrogation of suspected person is of tremendous advantage in

disinterring many useful informations and also materials which would

have been concealed. Succession such interrogation would elude if

the suspected person knows that he is well protected and insulted by

a pre-arrest bail during the time he interrogated. Very often

interrogation in such a condition would reduce to a mere ritual. The

argument that the custodial interrogation is fraught with the danger

of the person being subjected to third degree methods need not be

countenanced, for, such an argument can be advanced by all accused

in all criminal cases. The court has to presume that responsible Police

Officers would conduct themselves in task of disinterring offences

would not conduct themselves as offenders.

9. The petitioner took enormous advantage of the loopholes and defects in the GST software, the system put in place, and the lack of efficient standards to ensure that it becomes impossible to misuse the scheme.

10. The argument that the co-accused was granted bail and even the petitioner is entitled to bail on parity, is not sustainable because the specific allegations against the co-accused Shrawan were that a sum of rupees ten lacs had fallen to his share and he had undergone custody of five months. Thus, the bail granted to the co-accused was in an application filed under section 439 CrPC, (CRM-M-26610-2022), and the petitioner had undergone custody of five months viz-a-viz the alleged amount of Rs. Ten lacs.

Thus, the petitioner is not entitled to bail on parity.

11. Given the nature of allegations, custodial interrogation is required. An analysis of the allegations and evidence collected does not warrant the grant of bail to the petitioner.

12. Without commenting on the case's merits, in the facts and circumstances peculiar to this case, and for the reasons mentioned above, the petitioner fails to make a case for bail at this stage.

13. Any observation made hereinabove is neither an expression of opinion on the case's merits, neither the court taking up regular bail nor the trial Court shall advert to these comments.

Petition dismissed in aforesaid terms. All pending applications, if any, stand disposed.

(ANOOP CHITKARA)

JUDGE

08.09.2022

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