Quick Answer: Fake ITC bail rejected: the Rajasthan High Court refused bail to an accused alleged to have run 294 fake firms passing ITC of about Rs. 1,032 crore, as a five-year, Magistrate-triable Section 132 offence does not mean bail as of course. Bail of a similarly placed co-accused had already been rejected, and the trial court was asked to expedite the trial.
In Ashutosh Garg v. Union of India (S.B. Criminal Miscellaneous Bail Application No. 548/2024), the Rajasthan High Court refused fake ITC bail to an accused alleged to have created 294 fake firms (paras 4, 13–14). Justice Anoop Kumar Dhand held that there is no "straight jacket formula" granting bail because the offence is punishable with five years and triable by a Magistrate (para 12). Following the rejection of a co-accused's bail and the alleged loss of about Rs. 1,032 crore, the application was rejected and the trial court asked to expedite trial (paras 7, 14–15).
Headnote: Fake ITC Bail Rejected
CGST Act, 2017 – Sections 70, 132(1)(b), (c), (f), (j), (l) and 136 – Code of Criminal Procedure, 1973 – Section 439 – Regular bail – Fake firms and fake invoices of menthol – Inadmissible ITC – Parity with co-accused – Economic offence
Held: (i) DGGI investigation and the petitioner's Section 70 statements showed creation of 294 fake firms passing ITC of about Rs. 1,032 crore (para 4).
(ii) A co-accused's bail having been rejected by a Co-ordinate Bench on 19.02.2024, there was no reason to take a different view (paras 6–7).
(iii) Economic offences with deep-rooted conspiracies and huge loss to the exchequer must be viewed seriously (paras 8–9).
(iv) There is no straight-jacket formula granting bail because the offence is punishable with five years and Magistrate-triable (para 12).
(v) Bail must be decided on the nature of accusations and evidence, following Nimmagadda Prasad (para 12).
(vi) Bail rejected; trial court to expedite trial; observations confined to bail (paras 13–16).
(paras 3–16)
Case Details: Ashutosh Garg v. Union of India (S.B. Criminal Miscellaneous Bail Application No. 548/2024)
Final Outcome: Bail application rejected; trial court expected to expedite trial (paras 14–15).
Case: Ashutosh Garg s/o Sh. Krishna Gopal Garg v. Union of India
Neutral Citation: Not available in the copy of the judgment reviewed
Case No.: S.B. Criminal Miscellaneous Bail Application No. 548/2024
Court: Rajasthan High Court, Bench at Jaipur (Single Bench)
Date of Decision: 6 March 2024 (reserved on 1 March 2024)
Bench: Justice Anoop Kumar Dhand
Relevant Acts & Sections: CGST Act, 2017 – Sections 70, 132(1)(b), (c), (f), (j), (l) and 136; Code of Criminal Procedure, 1973 – Section 439
Impugned Order: Order of the court below rejecting bail not stated in the judgment; complaint under Section 132 filed by DGGI, Jaipur Zonal Unit on 30.12.2023 (para 1)
Counsel: Mr. Prateek Kasliwal with Mr. Shubham Bhati and Ms. Mausi Dhadhich for the petitioner; Mr. Kinshuk Jain with Mr. Saurabh Jain for the respondent.
Source: Rajasthan High Court (official website)
Key Holdings of the Rajasthan High Court
- The petitioner allegedly created 294 fake firms to pass inadmissible ITC of about Rs. 1,032 crore (paras 2, 4).
- A co-accused who bought and operated some of these firms had his bail rejected on 19.02.2024 (paras 5–6).
- There was "no reason or occasion" to take a different view from the Co-ordinate Bench (para 7).
- Economic offences with deep-rooted conspiracies pose a serious threat to the financial health of the country (para 9).
- No straight-jacket formula entitles an accused to bail because the offence carries five years and is Magistrate-triable (para 12).
- Each bail application turns on its own facts, the nature of evidence and the accusation (para 12).
Brief Facts of the Case
The petitioner was arrested on 02.11.2023, and a complaint under Section 132(1)(b), (c), (f), (j) and (l) of the CGST Act was filed on 30.12.2023 (para 1). The DGGI, Jaipur Zonal Unit, had information about fake invoices of menthol issued without supply of goods (para 4).
Investigation showed many firms issuing invoices to M/s Kaizan Organics Pvt. Ltd. were run by the petitioner (para 4). In Section 70 statements, he allegedly admitted creating 181 fake firms passing ITC of Rs. 679 crore; this rose to 294 firms and Rs. 1,032 crore (para 4).
Co-accused Anil Garg alias Anil Kumar allegedly bought and operated some of the petitioner's fake firms and passed ITC of Rs. 19.47 crore (para 5). He was arrested on 18.11.2023, and his bail was rejected on 19.02.2024 (paras 5–6).
Issues Before the High Court
- Whether the petitioner was entitled to bail because the offence is punishable with five years and triable by a Magistrate (paras 1, 12).
- Whether the Section 70 statement could be relied on at the bail stage, given the argument under Section 136 (paras 1, 4).
- Whether parity with the co-accused, whose bail was rejected, should apply (paras 6–7).
Court's Findings and Reasoning
Petitioner's case (para 1): The petitioner was implicated on his Section 70 confessional statement, said to be inadmissible under Section 136 absent adjudication on merits (para 1). He relied on the five-year maximum, Magistrate trial and his period of custody, citing several bail orders (para 1).
Revenue's case (para 2): The Union said Section 70 statements revealed 294 fake firms and evasion of Rs. 1,032 crore (para 2). Physical verification of more than 50 fake firms showed one common address (para 2). The co-accused's bail had been rejected (para 2).
Investigation findings (paras 4–5): The Court noted the DGGI information on fake menthol invoices and the link to firms invoicing M/s Kaizan Organics Pvt. Ltd. (para 4). The co-accused's statements of 17.11.2023 and 18.11.2023 showed he availed ITC on invoices from the petitioner's firms (para 5).
Parity (paras 6–7): The Court quoted the co-accused's bail rejection, which treated economic offences as a class apart (para 6). Given the alleged loss of Rs. 10,32,91,88,876, there was "no reason" to take a different view (para 7).
Economic offences (paras 8–11): The petitioner's acts allegedly obstructed national development and caused huge loss to the exchequer (para 8). Such offences, committed with "calculated design", must be viewed seriously as "white-collar crimes" (paras 9–11).
No straight-jacket formula (para 12): The Court found "no substance" in the argument for bail based on the five-year sentence and Magistrate trial (para 12). Applying Nimmagadda Prasad, it held each application turns on its facts and evidence (para 12).
Application to facts (paras 13–14): Considering the allegations, DGGI's evidence, seriousness and the co-accused's rejection, the Court declined bail (paras 13–14).
Final Outcome and Directions
- The bail application was rejected (para 14).
- The trial court was expected to expedite the trial (para 15).
- Observations were confined to the bail application; the trial court must decide independently (para 16).
- The order is silent on costs.
Legal Principle Laid Down
In a Section 132 CGST prosecution for large-scale fake invoicing, bail is not a matter of course merely because the offence is punishable with up to five years and triable by a Magistrate. The Court weighs the nature of the accusations, the evidence and the loss to the exchequer, and gives weight to rejection of a similarly placed co-accused's bail (paras 7, 12–13).
Precedents Relied Upon
- Nimmagadda Prasad v. Central Bureau of Investigation, (2013) 7 SCC 466 – Relied upon – Factors for bail, including nature of accusations and evidence. Discussed at para 12.
- Anil Kumar v. Union of India, S.B. Criminal Misc. Bail Application No. 15833/2023, decided 19.02.2024 (Rajasthan High Court) – Relied upon – Co-accused's bail rejected; parity. Discussed at paras 2, 6–7, 13.
- Lalit Goyal v. Union of India, S.B. Criminal Misc. Bail Application No. 13042/2021, decided 07.09.2021; SLP dismissed 26.08.2022 – Referred (within the Anil Kumar extract). Discussed at paras 2, 6.
- Ratnambar Kaushik v. Union of India, 2023 (2) SCC Online 621 – Cited by the petitioner; distinguished in the Anil Kumar extract as not a fake-ITC case. Discussed at paras 1, 6.
- Surjeet Singh Chhabra v. Union of India, 1997 (1) SCC 508; Naresh J. Sukhawani v. Union of India, 1995 Supp (4) SCC 663 – Cited by the respondent. Referred at para 2.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 7: "Once the bail application of the similarly situated accused Anil Kumar has been rejected by the Co-ordinate Bench of this Court vide order dated 19.02.2024, there is no reason or occasion available with this Court to take a different view..."
Para 9: "The economic offence, having deep rooted conspiracies and involving huge loss of public exchequer, needs to be viewed seriously and considered as grave offence, affecting the economy of the Nation as a whole and thereby posing serious threat to the financial health of the Country."
Para 12: "There cannot be any straight jacket formula to decide the bail applications in favour to the accused merely because the alleged offence is triable by the Court of Judicial Magistrate First Class and the same is punishable with an imprisonment of five years only. Every bail application is required to be decided on its own facts and circumstances and the merits of the case."
Para 14: "Accordingly, this bail application deserves to be rejected and the same is hereby rejected."
Practical Impact of the Ruling
- For accused in fake-ITC cases: The five-year cap and Magistrate trial do not by themselves secure bail (para 12).
- For defence counsel: Distinguish co-accused rejections on role and facts; parity can cut both ways (paras 6–7).
- For DGGI: Physical verification of firms and Section 70 statements carried weight at the bail stage (paras 2, 4).
- For trial courts: The High Court expects such trials to be expedited (para 15).
FAQs on Fake ITC Bail Rejected
1. What did the Rajasthan High Court hold in Ashutosh Garg v. Union of India?
It rejected bail to an accused alleged to have run 294 fake firms passing ITC of about Rs. 1,032 crore. A five-year, Magistrate-triable offence does not mean bail as of course (paras 4, 12, 14).
2. Is bail automatic because a Section 132 offence carries only five years?
No. The Court said there is no "straight jacket formula"; each case turns on its own facts and evidence (para 12).
3. How did the co-accused's case affect the decision?
A Co-ordinate Bench had rejected the co-accused's bail on 19.02.2024. The Court saw no reason to take a different view (paras 6–7).
4. How are GST fake-invoice offences viewed at the bail stage?
As grave economic offences with deep-rooted conspiracies and huge loss to the exchequer, needing a different approach (paras 8–9).
5. What direction was given about the trial?
The trial court was expected to expedite the trial and decide independently of the bail observations (paras 15–16).
Keywords: fake ITC bail rejected, Ashutosh Garg v. Union of India, S.B. Criminal Misc. Bail Application No. 548/2024, Section 132 CGST Act, Section 70 statement, Section 136 CGST Act, fake firms, menthol fake invoices, DGGI Jaipur, economic offence bail, GST prosecution lawyer, Rajasthan High Court, Justice Anoop Kumar Dhand
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Source: Rajasthan High Court (official website).
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