GST Fraud Accused Get Bail as Trial Stalls & Law’s Validity Challenged

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Case Name

Rajinder Bassi & Others vs. State of Punjab

Court Name: High Court for the States of Punjab and Haryana at Chandigarh

Case No.: CRM-M-17019-2020, CRM-M-1695-2020, and CRM-M-12871-2020

Date of Decision: August 7, 2020

Presiding Judge: Hon’ble Mr. Justice Gurvinder Singh Gill

Key Takeaways

1. Fake ITC Fraud: The petitioners allegedly availed Input Tax Credit (ITC) of approximately ₹19.83 crores based on invoices without any actual sale of goods — a classic GST fraud scenario.

2. Bail Granted Despite Large Amount: Even though the State argued it was a “huge scam,” the Court still granted bail. This shows that the amount involved alone is not sufficient to deny bail.

3. Validity of the Punjab GST Act Challenged: One of the accused, Tarun Bassi, had separately challenged the constitutional validity (vires) of the Punjab Goods and Service Tax Act, 2017 in CWP No. 8004-2020, and a Division Bench had already issued a notice of motion in that matter. This was a significant factor in the bail decision.

4. Prolonged Custody + Slow Trial = Bail: The Court took note of the fact that the petitioners had been in custody for more than 9 months and the trial was virtually at a standstill — a key principle in bail jurisprudence.

5. Maximum Sentence Consideration: Since the maximum sentence for the offence under Section 132(1)(b)© of the Punjab Goods and Service Tax Act, 2017 is only 5 years, continued detention was not justified.

Issue

Should the petitioners (accused of a ₹19.83 crore GST fraud) be granted regular bail, given their prolonged custody, the slow pace of trial, and the fact that the very law under which they are charged is being challenged?

Facts

• The Complaint: A criminal complaint bearing No. 40/2019, dated 21.11.2019 was filed against the petitioners under Section 132(1)(b)© of the Punjab Goods and Service Tax Act, 2017.

• The Allegation: The petitioners allegedly availed Input Tax Credit (ITC) of about ₹19.83 crores on the basis of invoices that did not correspond to any actual sale of goods. In simple terms — they claimed tax credits using fake bills.

• The Accused: Three individuals were involved:
• Rajinder Bassi (CRM-M-17019-2020)
• Tarun Bassi (CRM-M-1695-2020)
• Manish Paul (CRM-M-12871-2020)

• Custody Period: By the time the matter came up before the High Court, the petitioners had already been in custody for more than 9 months.

• Challenge to the Law: Separately, Tarun Bassi had filed CWP No. 8004-2020 challenging the constitutional validity of the Punjab GST Act, 2017 itself. The Division Bench had issued a notice of motion and the matter was fixed for 23.9.2020.

• Interim Bail Already Granted: On earlier dates (10.7.2020, 18.5.2020, and 6.7.2020), the Court had already released the petitioners on interim bail, and this order made those interim directions absolute (i.e., permanent regular bail).

Arguments

Petitioners’ Side (Rajinder Bassi, Tarun Bassi & Manish Paul):

1. Challenge to the Law Itself: The Punjab GST Act, 2017 — the very law under which they are being prosecuted — has been challenged in CWP No. 8004-2020, and the Division Bench has issued a notice of motion. So the legal foundation of the prosecution is itself shaky.

2. Long Custody Period: The petitioners had already been in custody for more than 9 months, which is a significant period, especially when the maximum sentence is only 5 years.

3. Trial at a Standstill: The trial proceedings were virtually at a standstill, meaning there was no realistic prospect of the trial concluding anytime soon. Keeping them in jail under these circumstances serves no useful purpose.

State of Punjab’s Side:

1. Huge Scam: The State argued that this is a massive fraud involving more than ₹19 crores, and therefore no case for bail is made out.

2. Affidavit Filed: The State filed a reply by way of affidavit of Arvind Sharma, State Tax Officer, Department of Punjab, State GST, Fatehgarh Sahib, Ludhiana in CRM-M-12871-2020.

Key Legal Precedents

This judgment is quite brief and does not cite any specific case law precedents by name. The Court’s reasoning was based on:

• Section 132(1)(b)© of the Punjab Goods and Service Tax Act, 2017 — the provision under which the petitioners were charged, which prescribes a maximum sentence of 5 years.

• CWP No. 8004-2020 — a writ petition filed by Tarun Bassi challenging the constitutional validity (vires) of the Punjab Goods and Service Tax Act, 2017, pending before the Division Bench of the same High Court.

• The Court applied well-established bail jurisprudence principles — namely that prolonged pre-trial detention, a slow-moving trial, and the quantum of maximum sentence are all relevant factors in deciding bail — though no specific precedent cases were named in this judgment.

Judgment

The Petitioners Won — Bail Granted

Decision: All three petitions were accepted, and the petitioners were granted regular bail. The interim bail directions dated 10.7.2020, 18.5.2020, and 6.7.2020 were made absolute on the same terms and conditions.

Reasoning: Justice Gurvinder Singh Gill considered the following factors:

1. Custody Period: The petitioners had already been in custody for more than 9 months — a substantial period.

2. Maximum Sentence: The maximum sentence for the offence under Section 132(1)(b)© of the Punjab GST Act, 2017 is only 5 years. Keeping them locked up when the trial isn’t moving doesn’t make sense.

3. Trial Standstill: The trial proceedings were virtually at a standstill, meaning there was no imminent conclusion in sight.

4. Validity of the Law Under Challenge: The vires (constitutional validity) of the Punjab GST Act, 2017 was itself under challenge before a Division Bench in CWP No. 8004-2020. This added another layer of uncertainty to the prosecution.

Date of Order: August 7, 2020

FAQs

Q1: What is Input Tax Credit (ITC) fraud?

ITC fraud involves claiming tax credits on purchases using fake or bogus invoices — where no actual goods were bought or sold. The accused here allegedly claimed ₹19.83 crores in such fake credits.

Q2: Why did the Court grant bail despite such a large amount being involved?

The Court balanced multiple factors — the long custody period (9+ months), the slow pace of the trial, the maximum sentence being only 5 years, and the fact that the law itself was being challenged. The amount alone wasn’t enough to deny bail.

Q3: What does “vires of the Act” mean?

“Vires” refers to the constitutional validity of a law. Tarun Bassi challenged whether the Punjab GST Act, 2017 was legally valid in the first place. If the law is struck down, the entire prosecution could collapse.

Q4: What is Section 132(1)(b)© of the Punjab GST Act, 2017?

This section deals with criminal offences under the GST law, specifically related to fraudulent availing of ITC and issuance of invoices without actual supply of goods. The maximum punishment is 5 years imprisonment plus a fine.

Q5: Does getting bail mean the accused are innocent?

Absolutely not! Bail is just a temporary release pending trial. The trial will continue, and the Court will eventually decide guilt or innocence. Bail simply means they don’t have to stay in jail while waiting for the trial to conclude.

Q6: What happens next in this case?

The petitioners are out on bail (on the same terms and conditions as the interim bail). The trial will continue. Also, the constitutional challenge to the Punjab GST Act in CWP No. 8004-2020 was scheduled to be heard on 23.9.2020, which could have significant implications for the case.

Q7: Were all three petitioners treated the same way?

Yes! The Court disposed of all three petitions together in a single order, granting bail to all three — Rajinder Bassi, Tarun Bassi, and Manish Paul — on the same reasoning.

1. This order shall dispose of the above mentioned three petitions

wherein petitioner Rajinder Bassi, Tarun Bassi and Manish Paul,

have approached this Court seeking grant of regular bail in respect of

a case Criminal complaint No.40/2019, dated 21.11.2019, under

Section 132(1)(b)(c) of the Punjab Goods and Service Tax Act, 2017.

2. Reply by way of affidavit of Arvind Sharma, State Tax Officer,

Department of Punjab, State GST, Fatehgarh Sahib, Ludhiana has

been filed in CRM-M-12871-2020. The same is taken on record.

3. The allegations, in nutshell, are that the petitioners had availed Input

Tax Credit (ITC) to the tune of about `19.83 crores on the basis of

invoices without there being actual sale of goods.

4. Learned counsel for the petitioners have submitted that the vires of

the Act i.e. Punjab Goods and Service Tax Act, 2017 has itself been

challenged in CWP No.8004-2020 by one of the accused namely

Tarun Bassi wherein notice of motion has been issued by the Hon’ble

Division Bench of this Court and which presently stands fixed for

23.9.2020.

5. The aforestated position regarding challenge of vires is not disputed

by the learned State counsel.

6. On the last date of hearing while noticing the aforesaid contention of

the petitioners, this Court had ordered for release of the petitioners on

interim bail.

7. Learned counsels for the petitioners have submitted that since

petitioners have undergone custody of a period of about more than 9

months and that the maximum sentence provided for the offence in

question is 5 years, therefore, no useful purpose would be served by

detaining the petitioners behind bars as the trial in any case is not

likely to be immediately concluded since proceedings of the trial are

virtually at a stand still.

8. On the other hand learned State counsel has submitted that since it is

a huge scam involving a colossal amount of more than `19 crores, no

case for grant of bail is made out.

9. I have considered rival submissions addressed before this Court.

Keeping in view the aforesaid custody period and also the fact that

the maximum sentence provided for the offence in question is 5 years

and that the vires of the Act is itself under challenge, the petitions

merits acceptance and are hereby accepted and the interim directions

dated 10.7.2020, 18.5.2020 and 6.7.2020 are hereby made absolute

on the same terms and conditions.