GST Fraud Accused Gets Bail After 16 Months — Court Cites Tax Payment & Sentence Cap

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Case Name

Vikas Goel vs. Shankar Prasad Sarma, Deputy Director

Court Name: High Court of Punjab and Haryana at Chandigarh

Case No.: CRM-M-48661-2019

Decision on: 10th January 2020

Key Takeaways

1. Fake Invoice GST Fraud is Serious — The case involved firms allegedly created solely to issue fake invoices and fraudulently avail Input Tax Credit (ITC) of over ₹68.42 crore.

2. Bail is Not a Punishment — Even in serious economic offences, courts consider the duration of custody vs. the maximum sentence when deciding bail.

3. Tax Payment Matters — The fact that the petitioner’s companies had actually paid output tax of ₹80 crore against ITC availed of ₹79.21 crore (and even paid ₹21 lakh in excess) was a significant factor in granting bail.

4. Second Bail Application Can Succeed — Even though the first bail was rejected on 24.07.2019, changed circumstances (16 months in custody, challan presented) led to bail being granted.

5. Section 132 of CGST Act — This is the key penal provision under which the accused was charged, read with Section 20 of the IGST Act, 2017.

Issue

The central legal question here is:

Should Vikas Goel be granted regular bail in a GST fake invoice fraud case, where the alleged fraudulent ITC availed is over ₹68 crore, but the accused has been in custody for 16 months and the maximum sentence is only 5 years?

Facts

• M/s MICA Industries and its associated units claimed to be engaged in trading various commodities and manufacturing GI wires and GI strips.

• Officers from the Directorate General of GST Intelligence (DGGI) raided the premises of these manufacturing units and seized various documents.

• During investigation, it was found that these firms were allegedly created just to issue fake invoices — the whole purpose being to fraudulently avail Input Tax Credit (ITC).

• From GSTR-3B filings, it was found that GST of ₹68,42,30,780/- (approximately ₹68.42 crore) had been paid fraudulently on the basis of these fake invoices.

• A complaint was filed on 13.11.2018 (Complaint Case No. COMA-137-2018) before the Additional Chief Judicial Magistrate, Gurugram.

• Vikas Goel was arrested and his first bail application was dismissed on 24.07.2019.

• By the time of this second bail application, he had been in custody for 16 months, and the challan (charge sheet) had already been presented in court.

Arguments

Petitioner’s Side (Vikas Goel):

1. Circular invoicing, not fake invoices — The counsel argued that invoices were merely moved in a circular manner from one party to another, but goods did not move and no fake invoices were generated at any stage.

2. No revenue loss — The petitioner’s companies availed ITC of ₹79.21 crore and paid output tax of ₹80 crore — meaning they actually paid ₹21 lakh more than what they claimed as credit. So there was no actual loss to the government.

3. Long custody vs. short maximum sentence — The maximum sentence under the offence is 5 years, and the petitioner had already been in custody for 16 months.

4. Relied on precedent — The counsel cited the Division Bench decision in Akhil Krishan Maggu and another vs. Deputy Director, Directorate General of GST Intelligence and others, CWP-24195-2019, decided on 15.11.2019.

Respondent’s Side (Deputy Director, DGGI):

1. Severe economic offence — The respondent argued that this is a serious economic offence of huge magnitude and should not be treated lightly.

2. Earlier bail was rejected — The first bail application was already dismissed on 24.07.2019, indicating the gravity of the case.

Key Legal Precedents

1. Akhil Krishan Maggu and another vs. Deputy Director, Directorate General of GST Intelligence and others

• Citation: CWP-24195-2019, decided on 15.11.2019
• Court: Division Bench of the Punjab & Haryana High Court
• Relevance: This was cited by the petitioner’s counsel to support the bail application. While the judgment doesn’t elaborate on the exact ratio of this case, it was clearly used to argue that bail should be granted in GST-related offences under similar circumstances.

Key Statutory Provisions Referenced:

Section 439 Cr.P.C.

Power of Sessions Court/High Court to grant regular bail

Section 132 of the Central Goods and Services Tax Act, 2017

Punishment for offences including fraudulent availing of ITC

Section 20 of the Integrated Goods and Services Tax Act, 2017

Applies CGST provisions to IGST matters

Judgement

The Petitioner (Vikas Goel) WON — Bail Granted

1. Maximum sentence is only 5 years — The offence alleged carries a maximum punishment of 5 years, which is relatively moderate.

2. 16 months already in custody — The petitioner had already spent a significant portion of time behind bars.

3. Tax was actually paid — After adjustment of ITC, the tax was paid. In fact, the petitioner’s companies paid ₹21 lakh in excess.

4. Nature of the case — The court noted it was essentially a case of rotating turnover for availing credit facility from banks, rather than a straightforward tax evasion.

5. Challan already presented — The investigation was complete and the charge sheet had been filed, reducing the risk of evidence tampering.

Order: Regular bail was granted to the satisfaction of the Chief Judicial Magistrate/Duty Magistrate, Gurugram.

FAQs

Q1: What is “fake invoice fraud” in GST?

It’s when businesses create invoices for goods/services that were never actually supplied, just to claim Input Tax Credit (ITC) — essentially getting a tax refund for transactions that never happened.

Q2: Why was bail granted despite this being a serious economic offence?

The court balanced the seriousness of the offence against practical factors — 16 months in custody, a 5-year maximum sentence, the challan already being filed, and the fact that taxes were actually paid after ITC adjustment.

Q3: What is Input Tax Credit (ITC)?

ITC is a mechanism under GST where businesses can reduce their tax liability by the amount of GST they’ve already paid on their purchases/inputs. Fraudulent ITC means claiming this credit without actual purchases.

Q4: Does getting bail mean Vikas Goel is innocent?

Absolutely not. The court was very clear that it was not commenting on the merits of the case. Bail simply means he doesn’t have to stay in jail while the trial continues.

Q5: What is Section 132 of the CGST Act?

It’s the penal provision under the GST law that prescribes punishment for serious offences like fraudulent availing of ITC, issuing fake invoices, etc. The maximum punishment can go up to 5 years imprisonment.

Q6: What was the significance of the Akhil Krishan Maggu case?

It was a Division Bench precedent from the same High Court that the petitioner’s lawyer used to support the argument that bail should be granted in GST-related offences.

Q7: What happens next?

The trial continues before the Additional Chief Judicial Magistrate, Gurugram. Vikas Goel will be out on bail but must comply with bail conditions and attend court hearings.

This is a second petition under Section 439 Cr.P.C. for grant of regular bail in a complaint case No. COMA-137-2018 registered on 13.11.2018 (Annexure P.2) pending before the Additional Chief Judicial Magistrate, Gurugram under Section 132 of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act, 2017.

In the present case, the complaint has been filed by the Deputy Director, Directorate General of Goods and Service Tax Intelligence with the averments that M/s MICA Industries with their more units had shown themselves to be engaged in the trading of various commodities and also manufacturer of GI

wires and GI strip. The Officers of the agencies raided the premises of the manufacturing units and upon search being made, various documents were taken into possession. During investigation, it was found that the firms had been created to issue fake invoices with the intention of availing fraudulent ITC and from GSTR-3B, it was found that vide ITC, GST of Rs.68,42,30,780/- had been paid fraudulently on the basis of fake invoices.

I have heard the learned counsel for the petitioner

and the learned counsel appearing for the respondent.

Learned counsel appearing for the petitioner has

argued that the allegations against the petitioner are that

invoices were moved in circular from one party to another party

whereas goods did not move nor fake invoices were generated at

any stage and even as per the respondent, the Companies of

the petitioner availed ITC amounting to Rs.79.21 crore and paid

output tax amounting to Rs.80 crore.

It is further argued that the petitioner made book

entry of Input Tax Credit as well as payment of GST out of

the Inpute Tax Credit and there is no loss of revenue and

resultantly, the petitioner credited Rs.18.16 crore and paid

Rs.18.37 crore i.e. Rs.21 lacs in excess. Learned counsel has

relied upon a decision of the Division Bench of this Court in

Akhil Krishan Maggu and another Vs. Deputy Director,

Directorate General of GST Intelligence and others, CWP-

24195-2019, decided on 15.11.2019.

It is further pointed out that the maximum sentence

in the present case is 5 years and the petitioner has been in

custody for the last 16 months and the challan has since been

presented.

Learned counsel for the respondent has stated that

it is a severe economic offence of huge magnitude and earlier

bail application of the petitioner was dismissed on 24.07.2019.

Keeping in view the above assertions that the

maximum sentence for the offence alleged is 5 years and the petitioner has been in custody for the last 16 months and the

fact that it is a case of rotating the turn over for availing credit

facility from the Banks and further the tax after adjustment of ITC

was also paid, without commenting on the merits of the case, I

deem it appropriate to grant regular bail to the petitioner.

Ordered accordingly. Bail to the satisfaction of Chief Judicial

Magistrate/Duty Magistrate Gurugram.

Allowed in the above terms.

(HARNARESH SINGH GILL)

JUDGE

10.01.2020