GST Fraud Accused Denied Bail — ₹22 Crore Fake ITC Claim Case

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Case Name

Aditya Gupta v. Union of India

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

Case No.: S.B. Criminal Miscellaneous 4th Bail Application No. 1535/2020

Decided on: 14th February 2020

Presided by: Hon’ble Mrs. Justice Sabina

Key Takeaways

1. Serious GST Fraud: The case involves creation of fictitious/fake firms to fraudulently claim Input Tax Credit (ITC) of more than ₹22 Crores — a very serious economic offence.

2. Bail Denied Due to Gravity of Offence: The court found that the seriousness of the allegations was sufficient ground to deny bail, even though the petitioner had been in custody since 20th June 2018.

3. Consistency with Co-accused Orders: The bail petitions of co-accused Sandeep Kumar Agarwal and Ram Kumar had already been dismissed by the same court on merits, which influenced the decision against Aditya Gupta as well.

4. Pre-charge Stage: The case was still at the pre-charge evidence stage before the trial court, meaning the trial hadn’t even formally begun yet.

5. This was the 4th Bail Application: This was Aditya Gupta’s fourth attempt at getting bail, indicating repeated rejections.

Issue

Should Aditya Gupta be granted regular bail under Section 439 of the Code of Criminal Procedure, 1973, given that he is accused of GST fraud involving fictitious firms and fraudulent ITC claims of over ₹22 Crores?

In simpler terms: Should the court let this accused out on bail while the trial is pending? The court said NO.

Facts

• Who is Aditya Gupta? He’s a 38-year-old resident of Ghaziabad, Uttar Pradesh, who was lodged in Central Jail, Jaipur at the time of this application.

• What is he accused of? The Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit filed a case against him (File No. DGGI/JZU/INU/GST/02/18-19) for offences under Sections 132(1)(b), ©, (f), (h), (j) and (k) read with Section 132(1)(i) of the Central Goods and Services Tax Act, 2017. These are serious criminal offences under GST law related to fraud and fake ITC claims.

• What exactly did he allegedly do? He and his co-accused allegedly created fictitious (fake) firms and used them to fraudulently claim Input Tax Credit (ITC) of more than ₹22 Crores. This is a classic GST fraud scheme.

• How long has he been in jail? He has been in custody since 20th June 2018 — that’s quite a long time!

• Where does the trial stand? The case was still listed before the trial court for pre-charge evidence — meaning witnesses were being examined even before formal charges were framed.

• What about his co-accused? Some co-accused were granted bail under Section 167(2) Cr.P.C. (default bail due to delay in filing chargesheet), but the bail petitions of co-accused Sandeep Kumar Agarwal and Ram Kumar were dismissed by the High Court on merits.

• Previous bail attempts: Aditya Gupta’s own earlier bail petition was dismissed on 22nd October 2018, partly because the co-accused’s bail petitions had been dismissed. This was his 4th bail application.

Arguments

Petitioner’s Side (Aditya Gupta):

1. He claimed he was falsely involved in the case.

2. He pointed out that he had been in custody since 20th June 2018 — a very long period.

3. He argued that the witness statements recorded so far did not make out any case against him.

4. He highlighted that other co-accused were on bail, suggesting he should also be granted bail on parity grounds.

Respondent’s Side (Union of India):

1. The fraud is massive — involving over ₹22 Crores in fake ITC claims.

2. The petitioner and co-accused created fictitious firms to commit this fraud — a premeditated and organized crime.

3. The bail petitions of co-accused Sandeep Kumar Agarwal and Ram Kumar were already dismissed on merits by the High Court — so the parity argument doesn’t hold.

4. The co-accused who got bail received it under Section 167(2) Cr.P.C. (default/statutory bail), which is a different legal basis — not on merits.

5. Given the seriousness of the allegations, bail should not be granted.

Key Legal Precedents

The judgment is quite brief and does not cite any specific case law precedents by name. However, it does reference the following important legal provisions:

Section 439, Code of Criminal Procedure, 1973

This is the provision under which the bail application was filed — it gives the High Court the power to grant bail to any person accused of an offence.

Sections 132(1)(b),(C), (f), (h), (j), (k) read with Section 132(1)(i) of the Central Goods and Services Tax Act, 2017

These are the criminal offence provisions under GST law. They deal with serious offences like issuing invoices without actual supply of goods/services, fraudulent ITC claims, and other tax evasion activities.

Section 167(2), Code of Criminal Procedure

This is the “default bail” provision — if the police/investigating agency fails to file a chargesheet within the prescribed time (60 or 90 days), the accused is entitled to bail as a matter of right. Some co-accused got bail on this ground.

Note: The court did not cite any judicial precedents (past case judgments) in this order. The decision was based purely on the facts, the gravity of the offence, and the prior orders in the co-accused’s bail applications.

Judgment

• Hon’ble Mrs. Justice Sabina dismissed the bail application with a single word: "Dismissed."

• Why was bail denied?

a. The seriousness of the allegations — a ₹22 Crore GST fraud using fictitious firms is a grave economic offence.

b. The bail petitions of co-accused Sandeep Kumar Agarwal and Ram Kumar had already been dismissed on merits by the High Court — so the petitioner couldn’t claim parity with them.

c. The co-accused who were on bail had received it under Section 167(2) Cr.P.C. (default bail) — a completely different legal ground, not comparable to a regular bail application on merits.

d. The court found no ground for grant of bail given the overall circumstances.

FAQs

Q1: Why was Aditya Gupta denied bail even though he had been in jail since 2018?

A: The court felt that the gravity of the offence — a ₹22 Crore GST fraud — outweighed the period of custody. Long custody alone is not always sufficient to get bail in serious economic offence cases.

Q2: Why couldn’t Aditya Gupta claim bail on the basis that his co-accused were on bail?

A: The co-accused who were on bail had received it under Section 167(2) Cr.P.C. — which is a default/statutory bail given when the chargesheet isn’t filed on time. That’s a different legal right. The co-accused whose bail was decided on merits (Sandeep Kumar Agarwal and Ram Kumar) had their bail rejected, just like Aditya Gupta. So there was no parity argument available to him.

Q3: What are the offences under Section 132 of the CGST Act, 2017?

A: Section 132 of the Central Goods and Services Tax Act, 2017 deals with criminal punishment for GST offences. The specific sub-sections invoked here — (b), ©, (f), (h), (j), (k) read with (i) — relate to offences like issuing fake invoices, fraudulent ITC claims, and other serious tax fraud activities. These can attract imprisonment of up to 5 years in serious cases.

Q4: What is a “fictitious firm” in the context of GST fraud?

A: A fictitious firm is a fake business entity created on paper (often using someone else’s identity or forged documents) with no real business activity. These firms are used to generate fake invoices and claim Input Tax Credit (ITC) without any actual supply of goods or services — essentially stealing money from the government’s tax revenues.

Q5: What happens next after this bail rejection?

A: Aditya Gupta can either:

• Continue to remain in custody and wait for the trial to proceed, or
• File a fresh bail application if there is a change in circumstances (e.g., significant delay in trial, health grounds, etc.), or
• Approach the Supreme Court for bail under Article 136 of the Constitution.

Q6: Was this the first time Aditya Gupta applied for bail?

A: No! This was his 4th bail application (as indicated by “4th Bail Application” in the case title). His earlier bail petition was dismissed on 22nd October 2018.

Petitioner has filed this petition under Section 439 Code of Criminal Procedure, 1973 seeking regular bail in File No. DGGI/JZU/INU/GST/02/18-19 filed by the Directorate General of GST Intelligence, Jaipur Zonal Unit for offences under Sections 132(1), (b), (c), (f), (h), (j) and (k) read with Section 132(1)(i) of Central Goods and Services Tax Act, 2017.

Learned counsel for the petitioner has submitted that the petitioner has been falsely involved in this case. Petitioner is in custody since 20.6.2018 and till date, case is listed before the trial court for pre-charge evidence. A perusal of the statement of the witnesses recorded so far, reflects that no case is made out against the petitioner. Other co-accused of the petitioner are on bail.

Learned counsel for the respondent Union of India has opposed the petition and has submitted that the present case relates to fraud committed by the accused to the tune of Rs.22 Crores. Petitioner and his co-accused had created fictitious firms and had claimed tax input credit more than Rs.22 Crores. Bail petitions filed by the co-accused Sandeep Kumar Agarwal and

Ram Kumar were dismissed by this Court on merits. Bail petition filed by the petitioner was dismissed by this Court vide order dated 22.10.2018 in view of the fact that bail petitions filed by the co-accused had been dismissed by the co-ordinate Bench of this Court. Other co-accused were granted bail under Section 167(2) Cr. P.C.

Keeping in view the seriousness of allegations levelled against the petitioner, no ground for grant of bail to him is made out.

Dismissed.

(SABINA),J