Punjab &Haryana High Court Grants Bail To Ludhiana Trader Accused Of ₹9.66 Crore Fake GST ITC Fraud

The Punjab & Haryana High Court has granted regular bail to a Ludhiana-based businessman accused of fraudulently availing Input Tax Credit (ITC) of nearly ₹9.66 crore under the GST regime.

It observed that continued incarceration was not justified when the prosecution case was based primarily on documentary evidence.

Justice Surya Partap Singh, while deciding the bail plea of Rohit Kumar Gupta, proprietor of Maa Steel, Ludhiana, noted that the petitioner had remained in custody for more than three-and-a-half months. It also observed that the alleged offence carries a maximum punishment of up to seven years' imprisonment under Section 132 of the CGST Act.

The petitioner was arrested on February 12, 2026, after the GST Department alleged that scrutiny of returns and e-way bill data for the period between April 1, 2024, and January 27, 2026, revealed invoices had been issued and received without actual supply of goods. According to the department, this resulted in wrongful availment of ITC and caused a loss of approximately ₹9.66 crore to the State exchequer.

The petitioner argued that he had fully cooperated with the investigation and supplied all relevant GST invoices, e-way bills, and other business records. He contended that the transactions represented genuine business activity and that there was no illegal claim of ITC.

He further submitted that the entire case rested on documentary evidence that had already been collected by the Department. Therefore, he argued, further custodial detention was unnecessary.

Opposing the bail plea, the state alleged that the petitioner had illegally availed ITC through invoices issued without actual movement of goods, causing substantial loss to the state exchequer. It also submitted that the investigation was still underway and involved examination of a large volume of documents.

While granting bail, the High Court, relying on Supreme Court precedents, observed that the seriousness of an economic offence alone cannot justify continued pre-trial incarceration.

Referring to the Supreme Court's decision in Ratnambar Kaushik v. Union of India, the Court noted that GST prosecutions are largely founded on documentary and electronic evidence, leaving little apprehension of witness tampering.

The court further noted that the petitioner had already remained in custody for more than three-and-a-half months.

Referring to the Supreme Court's decision in Radhika Aggarwal v. Union of India & Ors., 2025 the court reiterated that arrests under the GST law must be based on "reasons to believe" supported by material and not on mere suspicion.

Holding that continued detention was not likely to serve any useful purpose, the High Court granted the petitioner regular bail subject to the usual conditions.

For Petitioner: Advocate Gurkiran Singh

For Respondent: I.P.S. Sabharwal, DAG Punjab