Madras High Court

Mukesh Kumar vs The Additional Assistant Director on 10 October, 2025

                                                                                        Crl.O.P.No.27608 of 2025


                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     DATED : 10.10.2025

                                                              CORAM

                                  THE HONOURABLE Mr. JUSTICE K. RAJASEKAR

                                                   Crl.O.P.No.27608 of 2025

                   Mukesh Kumar                                                         ... Petitioner
                                                                   Vs.
                   The Additional Assistant Director,
                   Directorate General of GST Intelligence,
                   Coimbatore Zonal Unit,
                   Coimbatore.                                                          ... Respondent

                   PRAYER : Criminal Original Petition filed under Section 483 of Bharatiya
                   Nagarik Suraksha Sanhita, 2023, to enlarge the petitioner on bail in
                   F.No.DGGI/INV/GST/1819/2025-Gr J on the file of the respondent, pending
                   investigation.

                                  For Petitioner       : Mr.B.Kumar, Senior Advocate
                                                         For Mr.B.Sathish Sundar
                                  For Respondent       : Mr.P.Vishnu,
                                                         Special Public Prosecutor

                                                              ORDER

The petitioner, who was arrested and remanded to judicial custody on

14.08.2025 for the alleged offence under Section 132(1)(b), 132(1)(c), and

132(5) of the CGST Act, 2017 in F.No.DGGI/INV/GST/1819/2025-Gr J on the

file of the respondent, seeks bail.

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2. The case of the prosecution is that based on intelligence, an

investigation was initiated against M/s.Naklank Enterprises and during

investigation it revealed that it's suppliers were non-existent in entities,

generated and passed on fake Input Tax Credit (ITC) to 25 other units (Level-2

units) without any actual supply of goods. Further, it revealed that some of these

Level-2 units passed on ineligible ITC to three firms (Level-3 units), namely

M/s.Parth Steel Alloys, M/s.Jay Enterprises, and M/s.Dhanlaxmi Trading. It was

discovered that the petitioner herein was managing and handling these three

firms for the purpose of availing and passing on ITC and it is also revealed that

major outward supply from these three firms converged to a fourth entity,

M/s.Shri Ram Alloys (Level-4 Unit), where the petitioner worked as the Manager

and a search operation was conducted on 11.08.2025 at the premises of all four

units. Based on search, it was found that the petitioner managed three dummy

firms (M/s.Parth Steel Alloys, M/s.Jay Enterprises, and M/s.Dhanlaxmi Trading)

from the premises of M/s.Shri Ram Alloys. The proprietors of these three firms-

Shri Narendra Kumar, Shri Ashok Kumar, and Shri Subhash Ram were found to

be labourers, staff and cooks working at M/s.Shri Ram Alloys. Further, voluntary

statements were also recorded and revealed that the petitioner controlled all

business operations, including the generation of invoices and e-way bills and all

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banking transactions, used the mobile app “Gimbooks” to generate fake invoices.

Based on the statements recorded from the petitioner dated 11.08.2025 and

13.08.2025, it revealed that the petitioner had fraudulently availed ineligible ITC

amounting to Rs.10.41 Crores and has passed on ineligible ITC of Rs.9.35

Crores and totally quantified as Rs.19.76 Crores. Hence, the present complaint

has been registered.

3. The learned Senior Counsel for the petitioner submitted that the reason

to believe for commission of offence by the petitioner herein recorded by the

Arresting Officer before arrest is not in accordance with the mandatory

procedures prescribed and the satisfaction recorded is also misconceived. He

further submitted that there is also a fabrication of record for getting the

authorization for arrest from his Superior Officers of the Arresting Officer. For

supporting his argument, the learned Senior Counsel produced the copy of the

Arrest Memo as well as the Grounds of Arrest and Reason to Believe recorded

by the Arresting Officer. He further submitted that the authorization itself was

obtained from the Superior Officers only on 14.08.2025 around 10.39 a.m., but

the petitioner was arrested at about 10.30 a.m., on 14.08.2025. According to him,

without authorization, the petitioner has been arrested and subsequently records

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were fabricated for authorization to arrest the petitioner. He further submitted

that the petitioner is in custody from 14.08.2025 and considering the

incarceration suffered by the petitioner, he prayed for grant of bail to the

petitioner.

(a) The learned Senior Counsel for the petitioner further relied on the

Judgment of the Apex Court in Radhika Agarwa l vs. Union of India reported in

(2025) 27 Centax 425 (S.C) and submitted that “the power to arrest under

Section 69 of the CGST Act, requires that reason to believe must be formed by

the Commissioner on the basis of concrete material and evidence and further

reason to believe must be based on facts and materials and not mere suspicion.

Hence the reason to believe must be properly recorded and if the same is not

properly recorded, it would result in failing the legal test for valid arrest”.

4. The learned Special Public Prosecutor appearing for the respondent

reiterated the prosecution case and reported that value of the ITC wrongly

availed exceeds the threshold of Rs.5 Crores as stipulated in Section 132 (1) (i)

of the CGST Act, 2017 and therefore, the offences committed falls under Section

132 (1)(b) and 132 (1) (c) of the CGST Act, 2017 which are cognizable and non-

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bailable under Section 132 (5) of the said Act. He further submitted that

voluntary statements were recorded from other firms revealed that this petitioner

alone is handling all the operations including the generation of invoices and e-

way bills, without any actual movement of goods. He further submitted that the

main accused in this racket namely one Shri Ishwar Lal, who is the brother-in-

law of the petitioner is also absconding and investigation in this case is pending.

He further submitted that the petitioner is a native of Rajasthan and does not

have any residence in Coimbatore and if he is released on bail, there is a

possibility of tampering the witness. He further submitted that in the Arrest

Memo, there is a clerical error in mentioning the sections and wrong quoting of

sections alone is not sufficient to enable the accused to seek bail and since the

petitioner is arrested he shall seek bail only on merits. Hence, he opposed to

grant bail to the petitioner.

5. I have considered the submissions made on both sides and also perused

the materials available on record.

6. Admittedly, the petitioner has been arrested and incarceration from

14.08.2025 after serving Arrest Memo and Grounds of Arrest. The Arrest Memo

which reads that the petitioner was arrested at about 10.30 a.m., on 14.08.2025

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and the Arresting Officer has obtained authorization to arrest from his Superior

Officer on 14.08.2025 at about 10.04 a.m., however, the authorization letter

seems to be generated from the office at about 10.39 a.m., on 14.08.2025. It is

the contention of the respondent that the time of authorization has clearly

mentioned in the document as 10.04 a.m., and after confirming that, Arrest

Memo was issued at 10.30 a.m., and the petitioner was arrested. The computer

generated copy was printed out by the Arresting Officer at about 10.39 a.m., and

the same is not a ground to contend that this authorization was given after 10.30

a.m., and the same is a fabricated document. I am fully agree with the

submissions made on behalf of the respondent that the authorization submitted

by the Officer in the letter reads that at about 10.04 a.m., he has been authorized.

It does not mean that this authorization was in the form of soft copies would

have been generated only at 10.39 a.m. This generation only refers to converting

soft copy into hard copy and this was immediately served on the petitioner

immediately after serving Arrest Memo. I find that this action could not be

considered as any fabrication of records since the time gap between the

authorization, arrest and generation of computerised copy is within the short

peiod.

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7. The other contention raised by the learned Senior Counsel for the

petitioner is that in the reasons to believe, the Additional Director General has

not apply his mind properly and there is no proper grounds of arrest was given to

the petitioner. In the reason to believe for commission of offence, Additional

Director General states that, offences specified under Clause (b) and Clause (c)

of Section 132 (1) of the CGST Act, 2017, which is punishable by imprisonment

for a term that may extended to five years, along with a fine has been committed

by the petitioner. Whereas, in the Arrest Memo, it has been mentioned that the

petitioner was committed offence as satisfied in Clause (a) or Clause (b) or

Clause (c) or Clause (d) of Sub Section (1) of Section 132 of the Central Goods

and Service Tax, 2017, which is punishable under Clause (i) or (ii) of Sub

Section (1) or Sub Section (2) of the said Section. Similarly, in the reason to

believe, the Additional Director General has recorded in Para-2, his satisfaction

that the petitioner herein has committed offence under Clause (a) of Sub Section

(1) of Section 132 of the CGST Act, 2017 and the same is covered in Clause (i)

of Sub Section (1) of Section 132 of the CGST Act, 2017.

8. The offences classified in Section 132 (i) (a), 132 (i) (b) and 132 (i) (c)

of the CGST Act, 2017 are distinctive and each section prescribe different types

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of offences. For better understanding Section 132 reads as follows:

Section 132 - Punishment for certain offences.

1)[Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences], namely:-

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

[(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;]

(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

(e) evades tax 3*** or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);

(f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;

(g) obstructs or prevents any officer in the discharge of his duties under this Act;

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(h) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;

(i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;

(j) tampers with or destroys any material evidence or documents;

(k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or

(l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, shall be punishable-

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;

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(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine;

(iv) in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

(2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.

(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months.

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(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.

(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non- bailable.

(6) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner.

Explanation.-For the purposes of this section, the term "tax" shall include the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or refund wrongly taken under the provisions of this Act, the State Goods and Services Tax Act, the Integrated Goods and Services Tax Act or the Union Territory Goods and Services Tax Act and cess levied under the Goods and Services Tax (Compensation to States) Act."

9. While recording the reasons to believe by the Additional Director

General, has stated that the petitioner has involved in under Clause (a) of Sub

Section (1) of Section 132 of the CGST Act, 2017 and the same is covered under

Clause (i) of Sub Section (1) of Section 132 of the CGST Act, 2017.

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10. Section 132 (1) states that if the amount of tax evaded or the amount of

input tax wrongly availed or utilized or amount of refund wrongly taken exceeds

Rs.500 lakhs, the person shall be punishable with imprisonment for the term

which may extend to five years. In this case, the allegation against the petitioner

is that he is involved in availing ineligible ITC amounting to Rs.10.41 Crores

and has passed on ineligible ITC of Rs.9.39 Crores totalling to Rs.19.76 Crores.

Since the value of ITC availed is more than Rs.5 Crores, the offence committed

is punishable under Section 132(i) of the CGST Act, 2017.

11. In the reasons to believe while concluding with the authorization to

arrest the petitioner herein, the Additional Director General has stated that the

petitioner committed an offence under Section 132 (1) (b) & (c) of the CGST

Act, 2017. He further stated that the offence committed by the petitioner herein is

punishable by term that may extend to five years along with fine.

12. It has been admitted by the respondent that in the concluding

paragraph while authorizing the Additional Director General to arrest, the wrong

provision has been mentioned and the same is purely a clerical error. The entire

reading of the reasons to believe for arresting the petitioner recorded by the

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Additional Director General reveals that all the facts necessity to form a basis or

form reasons to believe for arresting the accused has been clearly stated and

there is a clerical error in the conclulding paragraph while mentioning the

relevant section. However, other portions of the document is unambiguous and

no way it could be termed as non application of mind. Further, it coud not be

held that the petitioner has lost meaningful opportunity to defend himself due to

wrong mentioning of the Section in concluding paragraph of the reasons to

believe.

13. Next ground raised by the learned Senior Counsel for the petitioner

that the petitioner is in custody for the past 56 days and major part of the

investigation is concluded and prays to grant bail to the petitioner.

14. This Court is unable to agree with the contention raised by the learned

Senior Counsel for the petitioner since the respondent has countered the same

stating that one of the co-accused, who is also played a vital role along with the

petitioner herein namely Sree Ishwar Lal, who is brother-in-law of the petitioner

absconding and he has not co-operated for the investigation and failed to appear

for the summons and further, the total amount involved in the case is Rs.19.76

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Crores. Since the investigation is not concluded and the nature of allegations that

several fake ITCs were issued and also ITC claims were made by various units

including three firms handled by the petitioner and other accused, the

investigation could not be concluded within a shorter period, and also the fact

that the other accused are also absconding, I am of the view that granting bail at

this stage would further hamper the investigation and it would pave way for the

petitioner to involve in tampering with evidence. Hence, I am not inclined to

grant bail to the petitioner.

15. Accordingly, this Criminal Original Petition stands dismissed.

10.10.2025 ssi

Note :

1. Registry is directed to forthwith upload this order in the Official Website of this Court.

2. All concerned to act on this order being uploaded in Official Website of this Court without insisting on certified hard copies. To be noted, this order when uploaded in the official website of this Court will be watermarked and will also have a QR code.

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