GST Fraud Bail Denied: ₹80 Crore Bogus Billing Scheme Lands Accused in Jail

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Case Name

Vikas Goel and Another v. Central Goods and Services Tax Commissionerate, Gurugram

Court: High Court of Punjab and Haryana at Chandigarh

Case No.: CRM No. M-45649 of 2018 (O&M)

Date of Decision: December 13, 2018

Key Takeaways

1. Bogus Billing is a Serious Offence: Creating fake invoices and claiming fraudulent Input Tax Credit (ITC) without actual movement of goods is treated as a grave offence under the CGST Act, 2017.

2. Arrest Without Assessment is Valid: The petitioners argued that no tax assessment had been made before their arrest. However, the court found that there were justifiable grounds to arrest them under Section 69 of the CGST Act, and assessment proceedings are separate from criminal proceedings.

3. ₹80 Crore Threshold Matters: The scale of the alleged fraud — over ₹80 crores — was a key factor in denying bail. The offence is punishable with imprisonment up to five years.

4. Criminal Complaint Already Filed: The fact that a complaint had already been filed strengthened the case against granting bail.

5. Court’s Opinion on Merits Reserved: The court was careful to note that nothing in its order should be taken as an opinion on the merits of the case — meaning the accused still have the right to a fair trial.

Issue

The central legal question here is:

Should the petitioners (Vikas Goel and Raju Singh) be granted regular bail when they have been arrested under Section 69 of the CGST Act, 2017 for allegedly evading GST of more than ₹80 crores through bogus billing?

In simpler terms — can someone accused of a massive GST fraud get bail at this stage? The court said NO.

Facts

• The Accused: Vikas Goel and Raju Singh were arrested by the Director General of Goods and Services Tax Intelligence (DGGI), Gurugram Zonal Unit.
• The Arrest: They were arrested under Section 69 of the CGST Act, 2017, and a judicial remand application was filed before the Chief Judicial Magistrate, Gurugram on September 14, 2018.
• The Investigation: Officers from the DGGI visited the registered premises of M/s Sriram Industries and found it closed for the last five years! On further inquiry, it turned out the premises was actually being controlled and used by Vinay Kumar Gupta, Director of M/s MICA Industries.
• The Search: A search was conducted at the premises, leading to the recovery and seizure of a large number of incriminating documents indicating evasion of CGST duty.
• Statements Recorded: The following statements were recorded during the investigation:
• Vinod Kumar, proprietor of M/s Sriram Industries
• Vinay Gupta, Director of M/s MICA Industries Limited
• Rajiv Gupta, Account Head of M/s MICA Industries Limited
• Raju Singh, proprietor of M/s Galaxy Metails Products
• The Fraud: The investigation revealed that the accused had made bogus billing — creating fake paper transactions without any actual transportation or sale of goods — and had wrongly claimed ITC relief of more than ₹80 crores.
• The Bail Petition: Vikas Goel and Raju Singh then filed this petition under Section 439 of the Code of Criminal Procedure (Cr.P.C.) seeking regular bail.

Arguments

Petitioners’ Arguments (Vikas Goel & Raju Singh):

1. No Assessment Made: They argued that they were taken into custody under Section 69 of the CGST Act without any assessment being made by the competent authority first.

2. Assessment is Appealable: They contended that even if an assessment is made, it can be appealed and quashed, and they also have the option to compound the order by paying the tax.

3. Only a Trial Remains: Since a complaint has already been filed, the petitioners argued they are only required to face trial in the complaint case, implying there’s no need to keep them in custody.

Respondent’s Arguments (CGST Commissionerate, Gurugram):

1. Serious Allegations: The respondent argued that the allegations against the petitioners are extremely serious in nature.

2. Bogus Billing: They made fake invoices and paper transactions without any actual movement or sale of goods, and wrongly claimed ITC of more than ₹80 crores.

3. Assessment and Criminal Proceedings are Independent: The respondent clarified that assessment proceedings are completely separate from the criminal complaint case — one doesn’t affect the other.

4. Ghost Premises: The registered premises of M/s Sriram Industries was found closed for five years, and was actually being used by someone else entirely — a clear indicator of fraudulent activity.

5. Incriminating Evidence: A search led to the seizure of incriminating documents, and multiple statements were recorded confirming the fraud.

Key Legal Precedents

The judgment in this case is relatively brief and does not cite any specific case law precedents from prior court decisions. However, it does reference the following key legal provisions:

Section 69 of the CGST Act, 2017

This provision empowers a Commissioner to authorize the arrest of a person if they have reasons to believe that the person has committed a cognizable and non-bailable offence under the Act. This was the basis of the petitioners’ arrest.

Section 439 of the Code of Criminal Procedure (Cr.P.C.)

This is the provision under which the petitioners filed their bail application before the High Court. It gives the High Court and Sessions Court special powers to grant bail.

Note: The court did not cite any prior case law judgments in this order. The decision was based purely on the facts, the gravity of the offence, and the applicable statutory provisions.

Judgment

The Respondent (CGST Commissionerate, Gurugram) won. The bail petition was dismissed.

The Court’s Reasoning:

The Hon’ble Justice Inderjit Singh dismissed the bail petition based on the following reasoning:

1. Justifiable Grounds for Arrest: The court found that there were justifiable grounds to arrest the petitioners under Section 69 of the CGST Act.

2. Nature and Gravity of the Offence: The court took into account the serious nature and gravity of the offence — a ₹80 crore GST fraud is not a minor matter.

3. Punishment: The offence is punishable with imprisonment for a period of five years, making it a serious criminal matter.

4. Complaint Already Filed: The fact that a criminal complaint had already been filed further weighed against granting bail.

5. No Merit Found: The court found no merit in the petition and dismissed it outright.

Important Caveat:

The court specifically stated that “nothing stated above shall constitute my opinion on merits of the case” — meaning the accused still get a fair trial and this bail rejection doesn’t mean they are guilty.

FAQs

Q1: Why was the bail rejected even though no tax assessment had been made?Great question! The petitioners argued that no assessment was done before their arrest. However, the court clarified that arrest under Section 69 of the CGST Act and tax assessment proceedings are two separate and independent processes. The arrest was based on justifiable grounds of tax evasion, not on a completed assessment.

Q2: What is “bogus billing” in the context of GST?

Bogus billing refers to creating fake invoices for transactions that never actually happened — no goods were transported, no actual sale took place. The purpose is to fraudulently claim Input Tax Credit (ITC), which reduces the tax liability. In this case, over ₹80 crores was allegedly claimed this way.

Q3: What is Section 69 of the CGST Act?

Section 69 of the CGST Act, 2017 empowers a Commissioner to authorize the arrest of a person if there is reason to believe they have committed a cognizable and non-bailable offence under the Act — such as large-scale tax evasion. This was the legal basis for arresting Vikas Goel and Raju Singh.

Q4: Does this judgment mean the petitioners are guilty?

No! The court was very clear that this bail rejection does not constitute an opinion on the merits of the case. The petitioners still have the right to a fair trial where they can present their defense.

Q5: Can the petitioners apply for bail again?

Yes, generally speaking, a bail rejection doesn’t permanently bar someone from seeking bail again. They can approach the court again if there is a change in circumstances or present new grounds. However, given the gravity of the offence (₹80 crore fraud, 5-year imprisonment), it would be challenging.

Q6: What happened to the other individuals whose statements were recorded?The judgment only deals with the bail petition of Vikas Goel and Raju Singh. The statements of Vinod Kumar (M/s Sriram Industries), Vinay Gupta and Rajiv Gupta (M/s MICA Industries) were recorded as part of the investigation, but their legal status is not discussed in this particular order.

Q7: Is this judgment reportable (can it be used as precedent)?

The court itself marked this judgment as “Not Reportable”, which means it is not intended to be used as a binding precedent in future cases. It is specific to the facts of this case.

Petitioners Vikas Goel and Raju Singh have filed this petition under Section 439 Cr.P.C. for grant of regular bail in arrest made by Director General of Goods and Services Tax Intelligence, Gurugram Zonal Unit under the provisions of Section 69 of CGST Act, 2017 as per application for judicial remand dated 14.09.2018 filed before learned Chief Judicial Magistrate, Gurugram, in view of the facts and circumstances of the present case.

Notice of motion was issued. Learned counsel for the respondent appeared and contested the petition. Reply was also filed by the respondent.

Learned counsel for the petitioners argued that petitioners have been taken into custody under Section 69 of the CGST Act without making any assessment by the competent authority. Furthermore, if the respondent makes assessment, that assessment firstly, is appealable and can be quashed, secondly, the petitioners have remedy to compound that order by paying the tax etc. He next argued that a complaint has been filed and the petitioners are only to face trial in the complaint case.

On the other hand, learned counsel for the respondent argued

that there are serious allegations against the present petitioners. They have made bogus billing and adjusted the amount without any transportation of the goods or sale of goods etc. Only paper transactions were done and

amounts have been adjusted and wrongly claimed relief of more than `80

crores. He further argued that assessment proceedings are independent

proceedings and have nothing to do with the complaint case. As per learned

counsel for the respondent, the officer from the office of Director General of Goods and Services Tax Intelligence visited the registered premisses of M/s Sriram Industries and said premises was found closed and on enquiry from

the person available in the close vicinity, it was ascertained that the said

premises was closed for the last five years. It was found further found that

premises was controlled and used by Vinay Kumar Gupta, Director of M/s

MICA Industries. Then search was conducted leading to recovery and

seizure of a large number of incriminating documents indicating evasion of

CGST duty. Statement of Vinod Kumar, proprietor of M/s Sriram

Industries was recorded. Similarly, statements of Vinay Gupta, Director and

Rajiv Gupta, Account Head, M/s MICA Industries Limited were recorded.

Statement of Raju Singh, proprietor of M/s Galaxy Metails Products was

also recorded and in view of the statements, further investigation was

conducted from transporters etc.

I have heard learned counsel for the parties and have gone

through the record.

Keeping in view the facts and circumstances of the present

case, nature and gravity of the offence and in view of the fact there were

justifiable grounds to arrest the petitioners under Section 69 of the CGST

Act and further in view of the fact that case involves evasion of more than

`80 crores of tax under the CGST and offence is punishable with

imprisonment for a period of five years and complaint is stated to have

already been filed, I do not find any ground to grant benefit of regular bail to the petitioners.

Therefore, finding no merit in the present petition, the same is

dismissed.

However, nothing stated above, shall constitute my opinion on

merits of the case.

(INDERJIT SINGH)

JUDGE