GST Fraud Accused Gets Bail After 2+ Years in Custody Despite ₹22 Crore Scam

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Case Name

Aditya Gupta vs. Union of India

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

Case No.: S.B. Criminal Miscellaneous 5th Bail Application No. 11595/2020

Decided on: 04th December 2020

Key Takeaways

1. Long custody = Strong bail argument: The petitioner had been in jail for over 2 years, which weighed heavily in his favour, even in a serious economic offence case.

2. Maximum punishment matters: Since the maximum sentence for the offences charged is only 5 years, keeping someone in jail indefinitely during a slow trial is hard to justify.

3. Slow trial is a valid concern: The trial court had only recorded statements of 15 out of 45 prosecution witnesses — meaning the trial was far from over.

4. Bail is not a reward or punishment: The court made it clear that granting bail doesn’t mean the accused is innocent — it’s just a practical measure while the trial continues.

5. Stringent bail conditions were imposed: The petitioner had to furnish a bail bond of ₹10 Lakhs with one surety and was not allowed to leave the country without court permission.

6. Economic offences are serious, but bail rights still apply: Even in cases involving large-scale financial fraud, the right to bail cannot be completely denied if the circumstances warrant it.

Issue

Should Aditya Gupta be granted regular bail, given that he has been in custody for over two years, the trial is progressing slowly, and the maximum punishment for the alleged offences is five years?

Facts

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

• What was he accused of? He was accused of committing GST fraud worth ₹22 Crores by creating fictitious/fake firms and fraudulently claiming Input Tax Credit (ITC). This is a serious economic offence.

• Which agency investigated him? The Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit filed the case against him — File No. DGGI/JZU/INU/GST/02/18-19.

• When was he arrested? He has been in custody since 20th June 2018 — so by the time this petition was heard in December 2020, he had been in jail for more than 2 years and 5 months.

• What charges were framed? He was charged under Sections 132(1)(b), (C), (f), (h), (j) and (k) read with Section 132(1)(i) of the Central Goods and Services Tax Act, 2017.

• Where was the trial? The case was listed before the trial court for pre-charge evidence, and only 15 out of 45 prosecution witnesses had been examined so far.

• This was his 5th bail application — meaning he had tried and failed to get bail four times before this.

Arguments

Petitioner’s Arguments (Aditya Gupta’s Side)

Argued by Mr. Sudhir Jain, Advocate (via video conferencing):

1. Long custody period: The petitioner has been in jail since 20th June 2018 — over two years — which is unreasonably long.

2. Maximum punishment is only 5 years: Since the maximum sentence he could receive even if convicted is 5 years, keeping him in jail indefinitely during a slow trial is unjust.

3. Trial is far from over: Only 15 out of 45 witnesses have been examined. There is no possibility of early conclusion of the trial.

4. Relied on Supreme Court precedent: Cited Sanjay Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40, where the Supreme Court held that bail should not be denied merely because of public sentiment against the accused, and that the primary purpose of bail is to ensure the accused appears before the court — not to punish them before conviction.

Respondent’s Arguments (Union of India / DGGI’s Side)

Argued by Mr. Siddharth Ranka, Advocate (via video conferencing):

1. Serious allegations: The accusations against the petitioner are grave in nature — he allegedly committed fraud of ₹22 Crores through fictitious firms and fake ITC claims.

2. Economic offence of huge magnitude: The respondent opposed bail on the grounds that such large-scale economic fraud can jeopardise the economy and should be treated seriously.

Key Legal Precedents

Sanjay Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40

This is the key Supreme Court judgment cited by the petitioner’s counsel. Here’s what it said and why it matters:

• What it held (Para 40): “The grant or refusal to grant bail lies within the discretion of the court… right to bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court…”

• What it held (Para 46): Even in cases involving economic offences of huge magnitude that could jeopardise the economy, once the investigation is complete and the charge-sheet is filed, the accused’s presence in custody may not be necessary. The court held that bail can be granted on stringent conditions.

• What it held (Para 47 & 48): The Supreme Court ordered release on bail with conditions including: not tampering with witnesses, remaining present on hearing dates, surrendering passport, and not leaving the country.

• How it was applied here: The Rajasthan High Court followed the same reasoning — the investigation was complete, the charge-sheet was filed, and the trial was moving slowly. The petitioner had already been in custody for over 2 years. So bail was justified on similar stringent conditions.

Statutory Provisions Referenced

• Section 439 of the Code of Criminal Procedure, 1973 — This is the provision under which the bail application was filed. It gives the High Court and Sessions Court special powers to grant bail.

• Sections 132(1)(b), ©, (f), (h), (j), (k) read with Section 132(1)(i) of the Central Goods and Services Tax Act, 2017 — These are the GST offence provisions under which the petitioner was charged. Section 132 deals with punishment for various GST-related offences including fraudulent ITC claims, issuance of fake invoices, etc.

Judgement

Petitioner Won — Bail Granted

• Hon’ble Mrs. Justice Sabina allowed the petition and granted bail to Aditya Gupta.

• Reasoning: While the court acknowledged the serious nature of the allegations and did not comment on the merits of the case, it found that:
• The petitioner had been in custody for more than two years
• The maximum punishment is 5 years
• The trial was far from conclusion (only 15/45 witnesses examined)
• It would be “just and expedient” to release him on bail
• Bail Conditions imposed:

1. Furnish a bail bond of ₹10,00,000 (Rupees Ten Lakhs) with one surety of the same amount, to the satisfaction of the Trial Court
2. Shall not leave the country without prior permission of the Court

FAQs

Q1: Does getting bail mean Aditya Gupta is innocent?

Absolutely not. The court was very clear that it was not commenting on the merits of the case. Bail is just a temporary release while the trial continues. He still has to face trial.

Q2: Why was bail granted despite such a serious ₹22 Crore fraud allegation?

The court balanced two things: the seriousness of the offence vs. the petitioner’s fundamental right to liberty. Since the investigation was complete, the charge-sheet was filed, and the trial was moving very slowly, keeping him in jail indefinitely wasn’t justified — especially when the maximum sentence is only 5 years.

Q3: What is Input Tax Credit (ITC) fraud?

Under GST, businesses can claim credit for taxes paid on purchases (inputs) to reduce their tax liability. ITC fraud involves creating fake invoices or fictitious firms to claim this credit without actually making real purchases — essentially stealing money from the government.

Q4: What happens if Aditya Gupta violates the bail conditions?

The bail can be cancelled. As seen in the Sanjay Chandra precedent, the prosecution (here, DGGI/Union of India) can make an application to the court for modification or recall of the bail order if conditions are violated.

Q5: What is Section 132 of the CGST Act, 2017?

Section 132 of the Central Goods and Services Tax Act, 2017 deals with punishment for GST-related offences. The specific sub-sections charged here — (b), ©, (f), (h), (j), (k) read with (i) — cover offences like issuing invoices without supply of goods/services, fraudulent ITC claims, and other serious tax evasion activities. The maximum punishment under this section is 5 years imprisonment along with a fine.

Q6: This was his 5th bail application — why did it succeed now?

The passage of time was the key factor. With each passing month in custody, the argument for bail gets stronger — especially when the trial is moving slowly and the maximum sentence is limited. The court found that after 2+ years in custody, it was now “just and expedient” to grant bail.

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 is in custody since 20.6.2018. Maximum punishment that can be awarded is sentence of five years. Hence, the petitioner was entitled to be released on bail. Case is listed for pre-charge evidence before the trial court and statements of fifteen witnesses out of forty-five prosecution witnesses have been recorded so far. There is no possibility of conclusion of trial at an early date. In support of his arguments, learned counsel has placed reliance on judgment of the Hon’ble Supreme Court in Sanjay Chandra Vs. Central Bureau of Investigation, (2012) 1 SCC 40, wherein it was held as under:

“40. The grant or refusal to grant bail lies within the

discretion of the court. The grant or denial is

regulated, to a large extent, by the facts and

circumstances of each particular case. But at the

same time, right to bail is not to be denied merely

because of the sentiments of the community against

the accused. The primary purposes of bail in a

criminal case are to relieve the accused of

imprisonment, to relieve the State of the burden of

keeping him, pending the trial, and at the same time,

to keep the accused constructively in the custody of

the court, whether before or after conviction, to

assure that he will submit to the jurisdiction of the

court and be in attendance thereon whenever his

presence is required.

46. We are conscious of the fact that the accused are

charged with economic offences of huge magnitude.

We are also conscious of the fact that the offences

alleged, if proved, may jeopardise the economy of

the country. At the same time, we cannot lose sight

of the fact that the investigating agency has already

completed investigation and the charge-sheet is

already filed before the Special Judge, CBI, New

Delhi. Therefore, their presence in the custody may

not be necessary for further investigation. We are of

the view that the appellants are entitled to the grant

of bail pending trial on stringent conditions in order

to ally the apprehension expressed by CBI.

47. In the view we have taken, it may not be

necessary to refer and discuss other issues

canvassed by the learned counsel for the parties and

the case laws relied on in support of their respective

contentions. We clarify that we have not expressed

any opinion regarding the other legal issues

canvassed by the learned counsel for the parties.

48. In the result, we order that the appellants be

released on bail on their executing a bond with two

solvent sureties, each in a sum of Rs 5 lakhs to the

satisfaction of the Special Judge, CBI, New Delhi on

the following conditions :-

(a) The appellants shall not directly or indirectly

make any inducement, threat or promise to any

person acquainted with the facts of the case so as to

dissuade him to disclose such facts to the Court or to

any other authority.

(b) They shall remain present before the court on the

dates fixed for hearing of the case. If they want to

remain absent, then they shall take prior permission

of the court and in case of unavoidable circumstances

for remaining absent, they shall immediately give

intimation to the appropriate court and also to the

Superintendent, CBI and request that they may be

permitted to be present through the counsel.

(c) They will not dispute their identity as the accused

in the case.

(d) They shall surrender their passport, if any (if not

already surrendered), and in case, they are not a

holder of the same, they shall swear to an affidavit. If

they have already surrendered before the learned

Special Judge, CBI, that fact should also be

supported by an affidavit.

(e) We reserve liberty to CBI to make an appropriate

application for modification/recalling the order passed

by us, if for any reason, the appellants violate any of

the conditions imposed by this Court.”

Learned counsel for the respondent has opposed the

petition and has submitted that allegations levelled against the

petitioner were serious in nature. After thorough investigation of

the case it transpired that accused had committed fraud to the

tune of Rs. 22 Crores by creating fictitious firms and had claimed

tax input credit.

Although in the present case allegations levelled

against the petitioner are serious in nature but the fact remains

that the petitioner is in custody for the last more than two years

and admittedly maximum punishment to be imposed on the

accused, if convicted, is five years. Now the case is listed before

the trial court for recording of pre-charge evidence and the trial

may not be concluded at an early date.

Considering the custody period of the petitioner, but

without commenting on the merits of the case, it would be just

and expedient to order release of the petitioner on bail.

Accordingly, petition is allowed. Petitioner be admitted

to bail subject to furnishing bail bond in the sum of Rs.

10,00,000/- (Rupees Ten Lacs) with one surety in the like amount

to the satisfaction of the Trial Court. Petitioner shall not leave the

country without prior permission of the Court.

(SABINA),J