Rajasthan HC Denies Bail in ₹21 Cr Fake ITC Case, Cites S.132 CGST Act & Economic Offence Gravity - 2025-04-04

Rajasthan High Court Rejects Bail in ₹21 Crore Fake GST Credit Case, Emphasizes Gravity of Economic Offences

Jaipur: The Rajasthan High Court, Jaipur Bench, has denied bail to Muchkund Mani Ojha , accused of orchestrating a fraudulent Input Tax Credit (ITC) scheme amounting to approximately ₹21.21 crore under the Central Goods and Services Tax (CGST) Act, 2017. Justice Shubha Mehta , presiding over the S.B. Criminal Miscellaneous Bail Application No. 11693/2024, dismissed the plea, highlighting the seriousness of economic offenses and their detrimental impact on the national economy.

Case Background

The Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit, initiated an investigation based on intelligence concerning fraudulent ITC activities. The probe identified Muchkund Mani Ojha , the proprietor of M/s Om Tirupati Metal based in Delhi, as a key figure.

The prosecution alleged that Ojha , through his firm (found to be non-existent upon physical verification), engaged in issuing fake invoices without the actual supply of goods or services. It was alleged that he availed fraudulent ITC of around ₹21.21 crore based on fake invoices from fictitious supplier firms and subsequently passed on ineligible ITC exceeding ₹20 crore to various beneficiary firms, including M/s Kanak CCR Limited and M/s Sukhalal Shivnarayan Rewari . The investigation indicated Ojha received a 1% commission in cash for these transactions. He was arrested on May 30, 2024, and booked under Sections 132(1)(b), (c), (f), (l), and 132(1)(i) read with sub-section (5) of the CGST Act, 2017.

Petitioner's Arguments for Bail

Counsel for the petitioner, Mr. S.S. Hora, argued: * Ojha was merely an intermediary ("pass on") and not the ultimate beneficiary of the allegedly fraudulent ITC. * The ITC amount allegedly retained by Ojha (approx. ₹94.70 lakh) was below the ₹5 crore threshold, making the offense potentially bailable under Section 132(1)(i). * His actions, if any, should fall under Section 122(1A) (penalty) based on a CBIC circular (06.07.2022), not Section 132 (criminal offense). * The petitioner was illegally detained for two days (May 28-30, 2024) before formal arrest, and the grounds for arrest were not properly documented. * The case relied heavily on his retracted confession under Section 70 of the CGST Act, which he claimed was inadmissible. * He had already spent nearly 10 months in custody, and the maximum punishment is 5 years. * The alleged mastermind, Manoj Kumar (who allegedly operated Ojha 's firm), was not arrested in this instance, and bail had been granted in similar cases by higher courts.

Respondent's Opposition to Bail

Mr. Ajatshatru Mina, representing the Union of India (DGGI), countered: * Ojha both availed and passed on fraudulent ITC, violating Section 16(2)(b) of the CGST Act. * The total amount of tax evasion involved (₹21.21 crore) determines the applicability of Section 132, not just the retained amount. * The CBIC circular cited by the petitioner explicitly allows invoking Section 132 in cases of fraudulent availment/utilization or issuance of fake invoices. * The petitioner's firm and supplier firms were found to be fake/non-operational. * Voluntariness of the confession is a trial matter; retraction doesn't nullify it, and corroborating evidence (mobile phone data, verification reports) exists. * Proper procedure involving summons was followed before the arrest, and the arrest memo contained adequate grounds. * Economic offenses involving large sums require a stricter approach to bail, citing Supreme Court precedents.

Court's Findings and Reasoning

Justice Shubha Mehta , after considering the arguments and materials on record, observed prima facie: * The petitioner created a fake firm (M/s Om Tirupati Metal) to issue fake invoices without actual supply, availing and passing on substantial fraudulent ITC (approx. ₹21 crore). * The supplying firms and the petitioner's firm were found non-existent. * The petitioner's statements, corroborated by seized mobile phone data and verification reports, pointed towards his involvement. * Arguments regarding illegal detention and defective arrest memo were not found convincing at this stage, as records indicated summons were issued and procedures followed. * The court dismissed the argument that only Section 122 applied, noting the CBIC circular allowed invocation of Section 132 based on case facts. * The retraction of the confession was deemed insufficient grounds for bail at this juncture, its admissibility being a trial issue.

The Court emphasized the distinct nature of economic offenses, quoting the Supreme Court in Y.S. Jagan Mohan Reddy vs CBI (2013) 7 SCC 439 : > "Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole..."

Further citing State of Gujarat v. Mohanlal Jitamalji Porwal (AIR 1987 SC 1321) and Ram Narain Poply vs CBI (AIR 2003 SCW 3257) , the court reiterated that economic offenses are committed with "cool calculation and deliberate design" and harm the community, warranting careful consideration during bail applications.

Decision

Finding sufficient prima facie evidence of the petitioner's involvement in a large-scale, deliberate economic offense impacting public revenue, the court concluded that granting bail would not be appropriate.

The bail application under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (corresponding to Section 439 CrPC) was accordingly dismissed .