GST Fraud Accused Get Bail — Court Cites Long Custody & Prior Bail Orders

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Case Name

Gourav Bansal vs. State of Haryana and Surender @ Bhura vs. State of Haryana

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

Case No.: CRM-M-12357-2022 (O&M) and CRM-M-19224-2022 (O&M) 

Date of Decision: 07.07.2022

Presiding Judge: Hon’ble Mr. Justice Arvind Singh Sangwan

Key Takeaways

1. GST ITC Fraud is Serious: The alleged fraud involved creating a fake firm — M/s Ganesh Trading Co. — issuing invoices worth over ₹1,29,52,83,371/- without any actual supply of goods, resulting in a tax loss of ₹9,68,67,081/- to the public exchequer.

2. Parity Principle in Bail: The Court applied the principle of parity — since a co-accused (Nitish Singhal) had already been granted regular bail in the same FIR, the petitioners were entitled to similar treatment.

3. Long Custody is a Key Factor: Gourav Bansal had been in custody for 10 months and 21 days, and Surender @ Bhura for 09 months and 14 days at the time of the order. The Court considered this a significant factor.

4. Nature of Offences: All the offences were triable by a Judicial Magistrate First Class, which is a relatively lower court — this weighed in favour of bail.

5. Prior Bail in Similar Cases: The petitioners had already been granted bail in other similar FIRs registered against them on the same set of allegations.

6. State Did Not Dispute Custody Facts: The State counsel filed custody certificates but did not dispute the factual position regarding the duration of custody.

Issue

Should the petitioners — Gourav Bansal and Surender @ Bhura — be granted regular bail in a GST input tax credit fraud case, given that a co-accused has already been granted bail and they have been in custody for a significant period?

Facts

• The FIR: FIR No. 337 dated 20.06.2020 was registered at Police Station Chandni Bagh, District Panipat, under Sections 420, 467, 468, 471, 120-B, and 201 of the IPC.

• The Fraud: The Excise Taxation Officer (State Tax), Ward-06, Panipat filed a complaint alleging that a firm called M/s Ganesh Trading Co. had shown huge sales to different dealers and passed undue input tax credit by making invoices without any actual movement of goods, causing a massive revenue loss.

• The Fake Firm: Investigations revealed that no firm by the name M/s Ganesh Trading Co. actually existed at the given address. A person named Yogesh Sharma was summoned as the proprietor, who claimed that Janender Kumar Sisodia had taken his PAN Card, Aadhaar Card, bank passbook, and photographs — supposedly for a bank loan — and had even given him a cheque of ₹2 lakhs (which bounced!). Sisodia then used these documents to fraudulently register the firm.

• The Scale of Fraud: A total of 46 firms had conducted business with M/s Ganesh Trading Co., with invoices amounting to ₹1,29,52,83,371/- and total tax consideration of ₹9,68,67,081/-.

• Recovery Progress: By 27.07.2021, 26 out of 46 firms had deposited ₹6,43,16,298/-. A sum of ₹1,14,51,151/- was blocked on account of suspicious transactions. However, ₹2,10,99,632/- was still awaited.

• The Arrests: Police arrested the petitioners — Gourav Bansal and Surender @ Bhura — along with co-accused Janender Kumar, Yogesh Bhardwaj, and others. A chargesheet was filed after investigation.

• SIT Investigation: A Special Investigation Team (SIT) was constituted under the supervision of Ms. Pooja Vashishth, IPS, Assistant Superintendent of Police, Samalkha. Co-accused Ravinder Sharma was arrested by the SIT on 30.07.2021, and two laptops used in the commission of the offence were recovered from him.

• Prior Bail Orders: The petitioners had already been granted bail in two other similar FIRs. Co-accused Nitish Singhal was granted regular bail by the same Court vide order dated 11.03.2022 in CRM-M-9743-2022.

Arguments

Petitioners’ Arguments (Gourav Bansal & Surender @ Bhura):

1. Not Named in FIR: The petitioners were not named in the original FIR and no allegations were made against them even by reference. They were implicated later based on statements of co-accused.

2. Planted Evidence: The alleged recovery of photocopies of identity proofs was claimed to be planted on them and did not show their involvement in the offences.

3. Not Proprietors or Beneficiaries: The petitioners were neither proprietors nor partners of the fake firm, nor were they beneficiaries of the defrauded amounts.

4. No Knowledge of Fraud: The petitioners claimed they were not aware of the fraudulent tax evasion.

5. Parity with Co-Accused: Co-accused Nitish Singhal had already been granted regular bail in the same FIR vide order dated 11.03.2022 in CRM-M-9743-2022.

6. Prior Bail in Similar FIRs: The petitioners had already been granted regular bail in two other similar FIRs vide orders dated 26.08.2020 and 23.07.2020 passed in CRM-M-52922-2019 and CRM-M-53063-2019 respectively.

7. Long Custody: Gourav Bansal had been in custody for about 10 months and 21 days, and Surender @ Bhura for about 09 months and 14 days.

8. Lower Court Triable Offences: All offences are triable by the Judicial Magistrate First Class, indicating they are not the most serious category of offences.

9. Trial Will Take Long: The trial was likely to take a long time, making continued detention unproductive.

State’s Arguments (State of Haryana):

1. Serious Fraud: The petitioners, along with co-accused, created a fake firm and issued invoices in huge amounts without movement of goods for wrongful claim of input tax credit, causing a loss of more than ₹9.68 crores to the public exchequer.

2. Mobile Phone Used: The petitioner’s mobile phone was used for creating the e-mail account of the fake firm — showing direct involvement.

3. Bail Should Be Denied: Given the seriousness of the offence and the evidence against the petitioners, they do not deserve regular bail.

4. Custody Certificates Filed: The State filed custody certificates confirming the period of custody but did not dispute the factual position.

Key Legal Precedents

1. CRM-M-9743-2022 — Nitish Singhal vs. State of Haryana (Order dated 11.03.2022)

This was the most directly relevant precedent. The Court had granted regular bail to co-accused Nitish Singhal in the same FIR No. 337. The petitioners relied on this order to argue parity — that since a co-accused in the same case had been granted bail, they should be too.

2. CRM-M-31101-2020 — Gaurav Bansal vs. State of Haryana (Order dated 25.08.2021)

This order had granted regular bail to the petitioner in another FIR No. 259 dated 09.03.2019 under Sections 420, 467, 468, 471 IPC, Police Station Chandni Bagh, Panipat — a case with a very similar set of allegations involving fake firms and GST ITC fraud.

3. CRM-M-52922-2019 — Gaurav Bansal vs. State of Haryana (Order dated 26.08.2020)

Regular bail was granted to the petitioner in another similar FIR.

4. CRM-M-53063-2019 — (Order dated 23.07.2020)

Regular bail was granted to the petitioner in yet another similar FIR.

5. Section 439 of the Code of Criminal Procedure (CrPC)

This is the legal provision under which the bail petitions were filed. Section 439 CrPC gives the High Court and Sessions Court special powers to grant bail.

6. Sections 420, 467, 468, 471, 120-B, and 201 of the Indian Penal Code (IPC)

These are the sections under which the FIR was registered:

• Section 420 IPC — Cheating and dishonestly inducing delivery of property
• Section 467 IPC — Forgery of valuable security, will, etc.
• Section 468 IPC — Forgery for purpose of cheating
• Section 471 IPC — Using as genuine a forged document
• Section 120-B IPC — Criminal conspiracy
• Section 201 IPC — Causing disappearance of evidence

Judgment

The Petitioners Won — Bail Granted

Justice Arvind Singh Sangwan allowed both petitions and ordered the release of Gourav Bansal and Surender @ Bhura on regular bail. Here’s the reasoning:

1. Parity with Co-Accused: Since co-accused Nitish Singhal had already been granted regular bail in the same FIR, denying bail to the petitioners would be inconsistent.

2. Prior Bail in Similar Cases: The petitioners had already been granted bail in other FIRs registered on the same set of allegations.

3. Long Custody Period: Gourav Bansal had been in custody for 10 months and 21 days and Surender @ Bhura for 09 months and 14 days — a significant period.

4. Nature of Offences: All offences are triable by the Judicial Magistrate First Class, which is a lower court — suggesting the offences, while serious, are not in the highest category.

5. Long Trial Timeline: The trial was expected to take a long time, making continued detention unproductive.

6. State Did Not Dispute Facts: The State filed custody certificates but did not dispute the factual position.

The Court’s Order: Both petitioners were directed to be released on regular bail upon furnishing bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate concerned. The Court expressly stated it was not commenting on the merits of the case.

FAQs

Q1: What exactly is the alleged fraud in this case?

The accused allegedly created a fake firm — M/s Ganesh Trading Co. — and issued invoices worth over ₹1.29 crores (total tax ₹9.68 crores) to 46 firms without any actual movement of goods. This allowed those firms to fraudulently claim GST Input Tax Credit, causing a massive loss to the government.

Q2: Why did the Court grant bail despite such a large fraud?

The Court considered several factors: the petitioners had already been in custody for nearly 10 months, a co-accused in the same FIR had already been granted bail, the petitioners had been granted bail in similar FIRs earlier, the offences are triable by a lower court (Magistrate), and the trial was expected to take a long time. The Court balanced these factors against the seriousness of the allegations.

Q3: Does granting bail mean the petitioners are innocent?

Absolutely not! The Court was very clear that it was not commenting on the merits of the case. Bail simply means the petitioners are released from custody while the trial continues. They still have to face trial.

Q4: What is the “parity principle” in bail cases?

The parity principle means that if one accused in a case has been granted bail, co-accused persons in the same case with similar roles and allegations should generally also be considered for bail, to ensure fairness and consistency. Here, since co-accused Nitish Singhal was granted bail in CRM-M-9743-2022, the petitioners argued — successfully — that they deserved the same treatment.

Q5: What conditions were placed on the bail?

The petitioners were required to furnish bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate concerned. The judgment doesn’t mention any other specific conditions.

Q6: How much of the defrauded amount has been recovered?

As of 27.07.2021, out of the total tax consideration of ₹9,68,67,081/-, about ₹6,43,16,298/- had been deposited by 26 firms, ₹1,14,51,151/- had been blocked, but ₹2,10,99,632/- was still awaited.

Q7: What happens next in this case?

The trial will continue before the Judicial Magistrate First Class. The petitioners, now out on bail, will have to appear before the court as required. The investigation was still ongoing at the time of this order, with a supplementary police report to be filed.

This common order shall dispose of above noted two petitions as they arise out of the same FIR.

Prayer in these petitions, filed under Section 439 of the Code of Criminal Procedure, is for grant of regular bail to petitioners Gourav Bansal and Surender @ Bhura in case FIR No. 337 dated 20.06.2020, registered under Sections 420, 467, 468, 471, 120-B and 201 of the IPC at Police Station Chandani Bagh, District Panipat.

Learned counsels for the petitioners have relied upon order dated 11.03.2022 passed in CRM-M-9743-2022, vide which co-accused Nitish Singhal has been granted the concession of regular bail by this Court.

The operative part of the order reads as under:

“Learned counsel for the petitioner relies upon the

order dated 25.08.2021 passed in CRM-M-31101-2020,

granting regular bail to the petitioner, in another FIR No.259

dated 09.03.2019 under Sections 420, 467, 468, 471 IPC,

Police Station Chandni Bagh, Panipat. The operative part of

the order reads as under: -

“...The above said FIR was registered on

written complaint sent by Excise Taxation Officer

(State Tax), Ward-06, Panipat. In the complaint

Excise Taxation Officer (State Tax) alleged that

firm M/s Ganesh Trading Co. has shown sales in

huge amount to different dealers of the State and

passed undue input tax credit by making invoices

without movement of goods and caused loss of

revenue. Enquiries revealed that no firm by the said

name existed at the address given. Summons were

issued to Yogesh Sharma, Proprietor of the said

firm who alleged that Janender Kumar Sisodia had

taken his PAN Card, Aadhaar Card, bank passbook

and his passport size photographs for providing

bank loan and had given a cheque for an amount of

Rs.2 lakhs which was dishonoured. Janender

Kumar Sisodia got the firm registered on the basis

of documents and deceived the authorities by

wrongly passing input tax credit to other

firms/taxable persons and issuing invoices with the

dishonest intention to evade payment of taxes.

Pursuant to registration of the above said FIR, the

police investigated the case, arrested the petitioner

and his co-accused Surender @ Bhura, Janender

Kumar, Yogesh Bhardwaj and Gaurav Bansal and

on completion of investigation filed chargesheet

against them.

The petition has been opposed by learned

State Counsel in terms of reply filed by way of

affidavit of Satish Kumar, HPS, Deputy

Superintendent of Police, Head Quarter, Panipat.

Vide order dated 15.03.2021, learned State

Counsel was granted time to file additional reply

with better particulars and personal appearance of

S.P., Panipat and concerned D.E.T.C., Panipat

before this Court through video conferencing was

ordered.

Mr. Mohd. Akil, DGP Crime, Haryana, Mr.

Shashank Kumar Sawan, IPS, SP, Panipat, Mr.

Anurag Rastogi, Addl. Chief Secretary to Govt. of

Haryana, Excise and Taxation Department, Mr.

Surat Singh Malik, DETC, Sales Tax, Panipat and

Mr. Siddarth Jain, AETC, GST, Haryana have

appeared before this Court through video

conferencing.

Status report by way of affidavit of Mr.

Shashank Kumar Sawan, IPS, Superintendant of

Police, Panipat has been filed in CRMM-35679-

2020 titled as 'Gaurav Bansal Vs. State of

Haryana'.

Learned State Counsel has submitted that

photostat copy of the same may be taken on record

in the present case also.

The request is allowed and photostat copy of

the above said status report is ordered to be placed

on record in the present case.

In the status report it has been mentioned

that a Special Investigation Team (SIT) under the

supervision of Assistant Superintendant of Police,

Samalkha Ms. Pooja Vashishth, IPS and consisting

of Inspector-Incharge, Special Detective Unit,

Panipat and SI Surender Singh was constituted to

conduct the remaining investigation of the case. Co-

accused Ravinder Sharma was arrested by the SIT

on 30.07.2021 and recovery of two laptops used in

the commission of offence was made from him in

accordance with his disclosure statement.

It has been further mentioned in the status

report that Excise and Taxation Department,

Panipat has informed that a total of 46 firms have

conducted business with M/s Ganesh Trading Co.,

raising invoices amounting to Rs.1,29,52,83,371/-,

resulting in total tax consideration of

Rs.9,68,67,081/-.

In the status report it has also been

mentioned that as per information of the Excise and

Taxation Department, Panipat till 27.07.2021, 26

firms, out of 46 firms, had deposited a sum of

Rs.6,43,16,298/-. This deposition was in lieu of ITC

claimed by these firms. A sum of Rs.1,14,51,151/-

on account of GST input Tax Credit of 14 firms has

been blocked on account of suspicious transactions.

However, recovery of balance amount of

Rs.2,10,99,632/- is still awaited.

Mr. Mohd. Akil, DGP Crime, Haryana has

submitted that steps have been taken for proper

investigation of the case and collection of the

evidence available and supplementary police report

will be filed before the Court on completion of

further investigation.

Mr. Anurag Rastogi, Addl. Chief Secretary

to Govt. of Haryana, Excise and Taxation

Department has stated that requisite proceedings

have been carried out for realization of the tax or

attachment of the properties for realization of tax

amounting to more than Rs.8 crores and requisite

amendments are being made in the relevant

provisions as well as in the software for preventing

GST Input Tax Credit frauds.

I have heard learned Counsel for the

petitioner and learned State Counsel and gone

through the relevant record.

Learned Counsel for the petitioner has

submitted that the petitioner was not named in the

FIR and no allegation was made against the

petitioner in the FIR even by reference. The

petitioner has been falsely implicated in the case

subsequently on statement of co-accused. Alleged

recovery of the photocopies of identity proofs was

planted on him. The same also does not show his

involvement in commission of the alleged offences.

The petitioner is neither the proprietor nor partner

of the firm. The petitioner is also not the beneficiary

of the defrauded amounts. The petitioner was not

aware about the fraudulent evasion of the taxes.

The petitioner has not committed any offence and

has no concern with the alleged offences. The

petitioner was nominated as accused in two other

cases of similar nature but the petitioner has been

granted regular bail in both the cases by this Court

vide order dated 26.08.2020 and 23.07.2020 passed

by CRM-M-52922-2019 and CRMM-53063-2019

respectively. The offences alleged to have been

committed by the petitioner are triable by the

Judicial Magistrate First Class. The petitioner is in

custody for more than two years. The trial is likely

to take long time and no useful purpose will be

served by further detention of the petitioner in

custody. Therefore, the petitioner may be granted

regular bail.

On the other hand, learned State Counsel

has submitted that the petitioner along with his co-

accused created fake firm and issued invoices in

huge amounts without movement of goods for

wrongful claim of input tax credit and thereby

caused loss of huge amount of more than Rs.9.68

crores to the public exchequer. His mobile phone

was used for creating e-mail account of the firm.

The petitioner does not deserve grant of regular

bail. Therefore, the petition may be dismissed.

In view of the facts and circumstances of the

case, nature of accusation and evidence against the

petitioner, the period of his custody, the fact that all

the offences are triable by the Judicial Magistrate

First Class and also the fact that the trial is likely to

take long time due to restrictions imposed to

prevent spread of infection of Covid-19, but without

commenting on the merits of the case, I am inclined

to extend the concession of regular bail to the

petitioner...”

Learned counsel further submits that on similar set of

allegations, four FIRs were registered against the petitioner

and it is already noticed in the aforesaid order that he has

already been granted regular bail in two cases as well as in

FIR No.259. It is also submitted that the allegations in all the

FIRs are that by using mobile phone of the complainant, his

firm evaded the GST. Learned counsel further submits that the

petitioner is in custody for the last about 07 months and it will

take some time in conclusion of the trial, as the offences are

triable by the Court of Magistrate.

Learned State counsel, on the basis of custody

certificate dated 10.03.2022 filed in the Court today, has not

disputed the factual position. As per custody certificate, the

petitioner is in custody for the last more than 07 months and

challan stands presented.”

Learned counsels for the petitioners further submitted that all

the four FIRs were registered on the same set of allegations and even the

petitioners have been released on regular bail by the co-ordinate Bench in

two FIRs as noticed above.

Learned State counsel has filed the custody certificates and has

not disputed the factual position. As per custody certificates, petitioner

Gourav Bansal is in judicial custody for the last 10 months and 21 days;

whereas petitioner Surender @ Bhura is in judicial custody for the last 09

months and 14 days and he is already on bail in other FIRs.

I have heard learned counsel for the parties.

Without commenting upon the merits of the case, considering

the aforesaid facts and circumstances, the instant petitions are allowed.

Petitioners Gourav Bansal and Surender @ Bhura are ordered to be released

on regular bail on their furnishing bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate concerned.

A photocopy of this order be placed on the file of other

connected case.

07.07.2022 (ARVIND SINGH SANGWAN)

Waseem Ansari JUDGE