Punjab & Haryana HC Grants Bail To Two Accused In ₹197 Cr. GST Fraud Case, Holds Allegations Need Trial

The Punjab and Haryana High Court on 29 July granted regular bail to two accused in a Goods and Services Tax (GST) fraud case involving an alleged loss of around Rs. 197.39 crore to the government exchequer, holding that the allegations would have to be tested at trial where the case was largely based on documentary and electronic evidence and the prosecution witnesses were government officials.

Justice Shalini Singh Nagpal passed the order in petitions arising from a complaint filed by the Directorate General of Goods and Services Tax Intelligence (DGGI), Ludhiana, under Section 132(1)(b) and Section 132(1)(c) of the Central Goods and Services Tax Act, 2017, concerning the fraudulent issuance of invoices and wrongful availment and passing on of input tax credit (ITC). She held:

"...Petitioners, who were operating and controlling three firms, in their names or in the names of their family members, allegedly availed and utilized ITC by creating 26 fake firms and defrauded the government exchequer to the tune of ₹197.39 crores..."

The DGGI alleged that the accused created and operated 26 fake firms using the identities of other persons. According to the department, these firms issued fake GST invoices worth around Rs. 1,161.10 crore, through which fraudulent ITC of approximately Rs. 176.24 crore was allegedly passed on to various beneficiary firms.

The department further alleged that the accused retained commissions of around 4% to 5% from these transactions. It also alleged that one of the accused fraudulently availed and utilised ITC of around Rs. 21.15 crore through three firms operated in his name and those of his family members.

The accused had remained in custody since December 2025. Their counsel submitted that the case was primarily based on documentary and electronic evidence, most of which had already been collected by the department. Counsel also argued that the alleged ITC liability was only an investigative estimate and had not been finally adjudicated.

The DGGI opposed the bail pleas, alleging that the accused were the masterminds behind the network of fake firms and had availed and passed on ITC without any actual supply of goods or services.

The Court noted that the prosecution case was largely based on documentary and electronic evidence and that the witnesses were government officials. It also took note of the fact that the accused had no criminal antecedents and had spent more than seven months in custody.

Referring to earlier decisions of the Supreme Court and High Courts concerning bail in GST offences, the Bench held that the allegations would have to be tested during trial. It further found that the possibility of the accused tampering with evidence or influencing witnesses was negligible. It held:

"...Considering the nature of evidence sought to be led during trial and the status of the witnesses to be examined, chances of tampering with the evidence or influencing the witnesses are negligible. Allegations levelled against the petitioners are to be tested at the time of trial. Both petitioners have no criminal antecedents and have roots in the society...."

Accordingly, the High Court granted regular bail to both accused, subject to conditions including surrender of their passports, appearance before the trial court and refraining from tampering with evidence or influencing prosecution witnesses.

For Petitioner: P.S. Ahluwalia, Senior Advocate with Bhavi Kapur and Anish Kansal, Advocates

For Respondent: Sourabh Goel, Special Public Prosecutor DGGI with Anju Bansal, Advocate