Gauhati HC Grants Anticipatory Bail in ₹199 Cr Fake ITC Scam, Cites Cooperation with Probe

GUWAHATI: The Gauhati High Court has granted anticipatory bail to a man implicated in a colossal fake Input Tax Credit (ITC) scam, which allegedly defrauded the exchequer of ₹199.31 crores. The intricate scheme involved the creation of a fictitious firm and the generation of fabricated invoices amounting to ₹658.88 crores, impacting 58 firms across 11 states.

In a significant order, the single-judge bench of Justice Kardak Ete underscored the principle that custodial interrogation is not a necessity when an accused is actively cooperating with the investigation and has already been examined. The court's decision in Faiz Ahmed v. The State of AP [AB/103/2025] provides crucial insights into the judicial approach towards pre-arrest bail in complex white-collar crime cases.

The Anatomy of a Multi-State Fraud

The case revolves around a sophisticated financial fraud orchestrated by a group allegedly led by the main accused, Ashutosh Kumar Jha. According to the prosecution, Jha and his associates established a fictitious entity, M/s Siddhi Vinayak Trade Merchants, to serve as the vehicle for the scam.

The operation was built on a foundation of forged documents, including a counterfeit seal of the JMFC Changlang, along with fabricated Aadhaar cards, PAN cards, and electricity bills. Through this shell company, the accused allegedly passed on fraudulent Input Tax Credits worth ₹199.31 crores to 58 different firms spread across eleven states.

This was achieved by issuing a massive volume of fabricated invoices that totalled ₹658.88 crores, creating a complex paper trail designed to obscure the illicit flow of funds and credits.

Applicant's Plea: A Story of Debt and Coercion

The applicant for anticipatory bail, Faiz Ahmed, presented a narrative that distanced him from the core fraudulent activities. Represented by Md. Apzal Ansari, Ahmed submitted that his connection to the affair was indirect and a result of unfortunate circumstances.

According to his plea, in 2021, he engaged a Chartered Accountant, the late Asis Kumar Jha, for assistance with income tax and GST filings. During this period, he also obtained a personal loan of ₹30,00,000 from the said CA. Following Asis Kumar Jha's untimely death in a road accident, Ahmed continued to repay the loan in instalments to his widow.

The situation allegedly took a turn when Ashutosh Kumar Jha, a former employee of the deceased CA, took over the professional work. Ahmed claimed that Ashutosh Kumar Jha began pressuring him for the repayment of the outstanding loan, despite his ongoing payments to the late CA's wife.

Ahmed vehemently denied any involvement with or knowledge of the business operations of M/s Siddhi Vinayak Trade Merchants, which he alleged was entirely run by Ashutosh Kumar Jha. He asserted that upon learning about the investigation, he promptly joined the proceedings to clear his name and has been fully cooperating with the authorities.

The High Court's Reasoning: Weighing Necessity of Custody

The High Court's decision hinged on a careful evaluation of several key factors, primarily the applicant's conduct and the status of the main accused.

Justice Ete noted a critical development in the case: the main accused, Ashutosh Kumar Jha, had already been arrested but was subsequently released on default bail. This was granted on the grounds that the police had failed to file a charge-sheet within the statutory 90-day period stipulated under Section 167(2) of the Code of Criminal Procedure. This fact significantly altered the landscape for considering the present applicant's plea, as the alleged mastermind was no longer in custody.

The bench placed considerable weight on the applicant's cooperation with the Investigating Officer. The order highlighted that the applicant appeared before the authorities on October 20, 2025, and his statement was recorded. The court observed:

"The accused/applicant has appeared before the Investigating Officer on 20.10.2025, and he is cooperating with the investigation and his statement has been recorded, which indicates that the same corroborates with the bank statement and WhatsApp conversation with the main accused- Shri Ashutosh Kumar Jha."

This corroboration between his statement, bank records, and digital communications appeared to satisfy the court that the applicant was being forthright.

The pivotal finding of the bench was that in light of this cooperation and the recorded statement, the need for custodial interrogation—a primary reason for denying pre-arrest bail—was obviated.

"The bench noted that on being examined and recording of statement, custodial interrogation of the accused/applicant appears not to be required. Thus, the accused/applicant is entitled to be admitted to the privilege of pre-arrest bail," the order stated.

Based on this reasoning, the High Court allowed the anticipatory bail application, directing that in the event of arrest, the applicant be released on bail subject to furnishing a bail bond and any conditions deemed fit by the court.

Legal Implications and Conclusion

This judgment reinforces a well-established but often contested principle in bail jurisprudence, particularly in cases of economic offenses: arrest and custodial interrogation are not automatic consequences of an accusation. The court must be satisfied that custody is essential for a fair and effective investigation, such as preventing the accused from tampering with evidence, influencing witnesses, or absconding.

For legal practitioners, the order serves as a reminder of the importance of advising clients to cooperate fully with investigating agencies. The applicant's decision to join the investigation and provide a statement that could be corroborated with objective evidence was instrumental in securing pre-arrest bail.

Furthermore, the status of co-accused individuals remains a vital consideration. The release of the main accused on default bail created a strong argument on grounds of parity and questioned the prosecutorial need to hold a peripheral accused in custody.

While the allegations of the massive GST fraud will proceed to trial, the Gauhati High Court's order ensures that the applicant, Faiz Ahmed, will not face pre-trial incarceration, balancing the interests of the state's investigation with the individual's right to liberty.