No Mercy from High Court: Rs. 704 Cr GST Scam Kingpin Denied Bail

Directorate General of GST intelligence (hereinafter shall be referred as ‘DGGI’), while conducting investigation in relation to a firm, namely M/S Om Sai Traders and Suppliers, found out that the Firm was engaged in trading of grains by showing exempted supply in monthly GST returns (GSTR–3B) as well as in GSTR – 2A. By analysing the bank accounts, it was observed that there were transactions from different Firms mainly dealing in trade of scrap was shown in the accounts. However, many of such Firms were Suo motu cancelled by GST department on account of being fake/nonexistent Firms. Fictitious transactions were shown to have taken place from such fake/non-existent firms. During course of investigation, as many as 19 accounts were searched by DGGI, carrying huge transaction amounting to Rs. 1800 crores in last 1–2 years and quite suspiciously there were cash transactions of around 800 crores.

While making further searches under Section 67 (2) of the CGST Act, 2017, it was found that one of such non-existent firm, namely M/S Suraj trading company was also actively involved in such fake and sham transactions. While tracing the address of search firm, it was formed that address of one premises belonging to Shri Vivek Garg was given in the record. When statements of Shri Vivek Garg were recorded by DGGI, he informed that he had been working for Shri Rajesh Goyal and Ankit Bansal (petitioner in the instant case). On getting relevant information, on 03.05.2024, DGGI also conducted search at the premises of the accused petitioner at Sonipat, Haryana, where so many incriminating documents were found. Even statement of wife of the accused petitioner were recorded, who also admitted that her husband was instrumental in creating fake GST firms.

During further searches conducted on 31.05.2024, huge uncounted cash amount to the tune of Rs. 2,41,86,000/- was found and seized by DGGI and statements of Shri Rahul Tayal, Pankaj Dayal, Ankit Rao Joshi, Gagan Tayal, Gaurav Jain and Deepak Agarwal were recorded. Cumulative analysis of all such statements was that the accused-petitioner along with one other person was the kingpin of the Gang, who had created and operated various fake firms for the sole purpose of availing and passing on fraudulent ITC to their various clients and involved in rotation of cash through the monetary transactions, ultimately in order to avail fake Input Tax Credit (hereinafter to be referred as ITC).

Further investigation in the matter revealed that the accused petitioner along with Shri Rajesh Goyal was involved in creation of at least 353 fake/non-existent firms with an intent to pass on fraudulent ITC and in such process, they issued fake invoices/bills without there being any actual supply of goods/ services. It has been pointed out that during such process fake ITC of hundreds of crores was passed on to various beneficiaries. DGGI also succeeded in unearthing that the accused-petitioner was instrumental in creating and managing fake firms by using identity proof/pan cards belonging to some other persons, who had no knowledge with regard to creation of such Firms.

While showing different misdeeds and fake transactions, the DGGI levelled allegation of commission of offences relating to GST evasion against the accused petitioner amounting to around Rs. 704 crores, which is an offence under section 132(1)(b)(c)(j) and (l) of Central goods and services tax Act, 2017.

The accused-petitioner has come out with a case in the instant bail application that on 31.05.2024, when he was in a meeting with some other persons at Haldiram, New Delhi, at around 3:30 PM, various officers of DGGI with the help of local police officers raided at Haldiram, where the petitioners and other persons were sitting and abruptly arrested the petitioner. Even the reason of arrest was not disclosed to the petitioner. Thereafter, they created summons under CGST Act, on providing PAN card by the petitioner, requiring the petitioner to appear in the office of DGGI Jaipur unit on 01.06.2024 at 11 AM and the petitioner was directed to sign the same. However, copy of the summons was not given to him, nor was he allowed to inform to his family/ friends. Then they took the petitioner as well as Shri Rajesh Goyal along with them from Delhi to DGGI office, Jaipur, through one vehicle Innova.

Shri S.S. Hora, learned Counsel for the accused-petitioner would submit that although the accused-petitioner was illegally arrested on 31st May 2024, yet he was not produced before the concerning Magistrate within 24 hours of his arrest and in order to validate such unconstitutional act, on papers his arrest has been shown on 3rd June 2024. On 3rd June 2024 itself, the accused petitioner was produced before the Magistrate alongwith an application for seeking remand of the accused-petitioner, which was allowed by the concerned Court ignoring the defence put forward by the Petitioner.

However in this case alleged the GST Department argued that economic offence is of a grave magnitude involving evasion of Rs. 704 Crores, striking at the very core of India’s tax administration. The Department also emphasized that the fraud was not an isolated event but part of a well-engineered conspiracy to defraud the Government exchequer, thereby undermining the integrity of the indirect tax regime. The accused-petitioner is a pivotal figure in a nexus of interlinked entities created solely to facilitate this large-scale tax evasion.

High Court Denies bail:

46. It is no longer res-integra that it is necessary to assess the accused’s propensity to abscond, at the time of consideration of the bail application. In view of the facts of the instant case, where the petitioner has attempted to abscond, he is not entitled to bail.

47. Needless to mention that where the amount involved runs into hundreds of crores and has serious implications over the economic fabric of the country, it cannot be said to be a routine matter; and hence, quantum is directly relevant in assessing the seriousness of the offence and the necessity of custody. Therefore, when determining bail in economic offences, the magnitude of the siphoned amount is not merely incidental but rather an integral indicator of the severity of the offence, potential influence over witnesses or the system, and the possible adverse impact on public confidence in financial integrity and the rule of law.

48. Accordingly, the bail application filed by the accused petitioner hereby stands dismissed.