Applicant to be released on bail when investigation has reached an advance level and offence was punishable with up to 5 years of jail

Case Title: Mohit Kumar v. Union of India

Court: High Court of Allahabad

Petition Number: Criminal Misc. Bail Application No. 4859 of 2024

Relevant Sections: Section 132(1)(b), Sections 62, 69, 70, 73, 74, 79 of the CGST Act, 2017

Category of Dispute: Input Tax Credit – Bail in GST Offence Case

Date of Judgement: 15 May 2024

Relevant CGST Provisions: Sections 62, 69, 70, 132 of the CGST Act, 2017; Rule 8 and 9 of CGST Rules, 2017

Facts of the Case

1. The applicant, Mohit Kumar, was arrested in connection with alleged involvement in creating fake GST firms to facilitate fraudulent input tax credit (ITC) claims by co-accused Deepanshu Srivastava. The arrest was made without formal complaint or FIR filed, under Section 132(1)(b) of CGST Act, 2017.
2. He was working as Manager (Operations) in M/s Emblica Bio Private Limited, where a search yielded incriminating material. However, the applicant contended that no such material was found in his possession and his signatures were obtained under duress during the search.
3. It was alleged that he helped register 97 shelf companies using third-party KYC documents and sold them to Deepanshu Srivastava for Rs. 35,000–50,000 each for a commission of Rs. 2,000–3,000, which were later used to generate fake invoices for ITC.
4. The applicant argued that he cooperated with the investigation, appeared before authorities on multiple occasions, and was arrested arbitrarily without grounds shown in the arrest memo, violating Supreme Court precedents

Questions in Consideration

1. Whether arrest of the applicant without assessing tax liability and without showing grounds in the arrest memo was valid under the CGST Act.
2. Whether the applicant, whose role was allegedly limited to creating and selling shelf firms, should be granted bail considering the main accused had already been granted bail.
3. Whether the Department’s reliance on retracted confessions and economic offence seriousness justified continued detention.

Observations of the Court

1. The Court observed that although the applicant confessed to creating and selling shelf firms to the main accused, the actual fraudulent availment of ITC was done by Deepanshu Srivastava. Thus, Mohit Kumar’s role was lesser in comparison
2. It was noted that no request for custodial interrogation was made at the time of remand, and the investigation was substantially completed, indicating no requirement for continued detention
3. The Court relied on the principle that in economic offences, bail can be considered if conditions are imposed to ensure cooperation with investigation and no tampering with evidence
4. Supreme Court rulings in Arnesh Kumar v. State of Bihar, Satender Kumar Antil v. CBI, and Radheyshyam Kejriwal v. State of West Bengal were considered, but the Court balanced this with the individual role of the accused

Judgement of the Court

1. The Court allowed the bail application of Mohit Kumar with stringent conditions, including surrender of passport, non-sale of assets, cooperation in investigation, and prohibition on influencing witnesses or committing any further offence.
2. Observations were made only for the purpose of bail and not to be construed as a reflection on the merits of the case

Between Fine Lines (Plain English Summary)

• The High Court granted bail to Mohit Kumar, accused of aiding a GST scam by selling fake firms.
• The main accused, who claimed the fake ITC, was already granted bail earlier.
• The Court found that the applicant’s role, while questionable, was lesser and did not require continued custody.
• No formal FIR or need for further custodial interrogation was shown.
• Bail was allowed with strong conditions to ensure compliance and prevent misuse.

Summary of Referred Cases