Gujarat High Court Grants Regular Bail to Businessman Accused in Input Tax Credit Fraud - 2025-08-07

Gujarat High Court Grants Regular Bail to Businessman Accused in Input Tax Credit Fraud

The High Court of Gujarat at Ahmedabad has granted regular bail to Sunil Hiralal Mandowara, who was in judicial custody in connection with alleged Input Tax Credit (ITC) fraud. Presided over by Justice M. R. Mengdey, the court’s decision follows a review of the evidentiary status and the duration of the applicant’s incarceration.

Case Background

The proceedings arose from an offence registered with the Directorate General of GST Intelligence (DGGI), Ahmedabad. The prosecution alleged that the applicant had systematically created fictitious firms using forged identification documents—such as Aadhar and PAN cards—to claim illegal ITC benefits exceeding ₹10 crores. The applicant was arrested on December 17, 2024, and the investigation into the matter has since concluded, with a formal charge-sheet already filed.

Arguments Presented

The defense counsel, Mr. Apurva Mehta, argued that the applicant had been in custody for approximately eight months and that the investigation was complete. He contended that the accused had genuinely purchased goods, and the subsequent cancellation of GST registrations for the involved firms was a result of lapses by those firms, for which the applicant should not be held liable.

Conversely, the counsel for the GST authorities, Mr. Utkarsh Sharma, vehemently opposed the bail plea. He emphasized that the applicant had orchestrated the creation of fraudulent firms specifically to fabricate transactions and siphon off tax credits, suggesting that his release could impede the upcoming trial.

Legal Analysis

Justice M. R. Mengdey evaluated the bail application based on established legal precedents, specifically citing the principles laid down by the Supreme Court of India in Sanjay Chandra v. C.B.I. (2012). The court focused on the "triple test" for bail: determining if there is a prima facie case, assessing the risk of the accused fleeing from justice, and ensuring the accused does not tamper with evidence. Given that the investigation is complete and the charge-sheet is filed, the court found that the continued incarceration of the applicant for an indefinite period served no further purpose.

Key Observations

In its assessment, the court noted: * "In the present offence, investigation is over and charge-sheet has been filed." * "As per catena of decisions of Hon’ble Supreme Court, there are mainly 3 factors which are required to be considered... prima-facie case, availability of Applicant accused at the time of trial and tampering and hampering with the witnesses." * "The applicant has already undergone incarceration for a period of almost 8 months."

Court's Decision

The Gujarat High Court allowed the bail application, ordering the release of Sunil Hiralal Mandowara upon the execution of a personal bond of ₹10,000 and one surety of the same amount. The release is subject to stringent conditions, including mandatory monthly attendance at the local police station for six months, an affidavit detailing his immovable properties, and a prohibition on leaving India without judicial permission. The trial court is instructed to proceed with the trial independent of the observations made during this bail proceeding.