GST Fake Firm Scam: Allahabad High Court Grants Bail to Accused
Brothers in ₹25 Crore ITC Fraud
Case Title: Ankit Rajput & Mayank
Rajput vs. Union of India
Case Nos.: Criminal
Misc. Bail Applications Nos. 46743 and 47009 of 2024
Neutral Citation No.: 2025:AHC:56407
Court: High Court of Judicature at
Allahabad, Court No. 77
Date of Order: 17 April 2025
Background
The
case involves two brothers, Ankit Rajput and Mayank Rajput,
arrested in October 2024 by the Directorate General of GST Intelligence
(DGGI), Ghaziabad Unit, for allegedly masterminding a network of 17 fake
firms to fraudulently avail and pass on Input Tax Credit (ITC) under
the CGST Act, 2017.
The
allegations are serious, involving extensive misuse of identities, forged firm
registrations, and wrongful ITC transactions amounting to ₹25 crore,
linked to firms such as M/s Shreeji Metals, M/s Shiv Wire Udyog,
and several others.
Allegations and Modus Operandi (As Per DGGI Complaint)
- The accused duo, Ankit and Mayank,
allegedly operated a cartel of fake firms, created by misusing the
identity documents of unaware individuals and workers.
- These firms, including M/s Shiv
Wire Udyog, M/s MG Wire Udyog, M/s RS Wire Company, and M/s
JSR Wire Industry, were shown as suppliers or recipients in fraudulent
transactions.
- The fake transactions were routed to generate
ineligible ITC, which was then passed on to other firms,
primarily M/s Shreeji Metals.
- Statements under Section 70 of the
CGST Act were recorded where both brothers admitted
to creating and operating fake firms, in partnership with Vikrant
Singhal, who was arrested earlier and allegedly shared 50% of the
commission.
🔹
Financial Magnitude:
- Ankit Rajput (Proprietor of M/s A.R.
Enterprises):
- Fraudulent ITC Availed: ₹9.41 Crore
- Fraudulent ITC Passed On: ₹8.21
Crore
- Mayank Rajput (Proprietor of M/s
Tirzah Industries):
- Fraudulent ITC Availed: ₹15.70 Crore
- Fraudulent ITC Passed On: ₹14.97
Crore
Contention of the Applicants
Advocate
Jai Prakash, representing the Rajput brothers, presented the following
arguments:
1. False
Implication:
o The
applicants are law-abiding businessmen who were conducting legitimate business
through M/s A.R. Enterprises and M/s Tirzah Industries.
o The
documents used to register the allegedly fake firms were misused without their
consent.
2. Parity
with Co-Accused:
o Shivam
Goyal (Proprietor of M/s Shreeji Metals) and Vikrant Singhal,
both key figures in the alleged fraud, have already been granted regular
bail by the same Court.
o Bail
is sought on parity grounds, especially since all are part of the same
transaction and face similar allegations.
3. Complete
Investigation:
o The
investigation is complete, and a charge sheet (complaint) was filed on
20.12.2024.
o No
recovery or custodial interrogation is pending, and trial is yet to commence.
4. No
Flight Risk:
o Applicants
have been in custody since 25.10.2024 (almost 6 months) and there is no
likelihood of tampering with evidence or influencing witnesses.
Response from the Union of India
Opposing
the bail, Counsel Parv Agarwal submitted:
- The applicants were the masterminds
behind a massive ITC fraud, who not only created fake firms but also controlled
banking and digital infrastructure, including GST filings and IP
addresses.
- The gravity of the offence is enormous,
involving fraud of over ₹25 crore.
- The statements recorded under
Section 70 CGST Act confirm their admissions and reveal their modus
operandi.
- Given the seriousness of the
allegations, they do not deserve leniency.
However,
it was also acknowledged by the respondent that:
- Investigation is complete,
- Charge sheet has been filed,
- Trial has not yet commenced,
and
- Proceedings under Section 74 (for tax
recovery) have not been initiated against the accused.
Court’s Observations and Findings
Justice
Manoj Bajaj, after examining submissions from both sides, observed:
1. Investigation
Complete:
o With
the filing of the charge sheet and no further custodial interrogation required,
the continued detention serves no useful purpose.
2. Trial
Yet to Begin:
o The
trial has not commenced, charges are yet to be framed, and the matter is likely
to take a long time to conclude.
3. Parity
with Co-Accused:
o The
main co-accused Vikrant Singhal and Shivam Goyal have been granted bail
in connected complaints, part of the same fraudulent transactions.
o No
distinction was shown between the roles of the co-accused and the applicants.
4. Public
Witnesses:
o All
witnesses are officials, and there is no immediate apprehension of
tampering or influence.
Final Judgment
The
Court allowed both bail applications, stating:
"Further
detention of the applicants behind the bars would not serve any useful purpose.
Hence, on the ground of parity and the fact that the offences are triable by
Magistrate and punishable with up to five years’ imprisonment, the applicants
deserve regular bail."
🔹 Order:
- Regular bail granted
to both Ankit Rajput and Mayank Rajput.
- They are to be released upon
furnishing appropriate bail and surety bonds to the satisfaction of
the trial court.
- Bail is subject to terms and
conditions to be imposed by the trial court at the time of acceptance
of bonds.
Conclusion
This
judgment highlights the Court's balanced approach between the gravity of
economic offences and individual liberty, especially when investigation is
over and trial is yet to begin.
While
the allegations involve serious GST fraud through fake firm syndicates,
the extended judicial custody of the accused without commencement of
trial tipped the balance in favor of granting bail.
Key Takeaways
- Bail on Parity:
When co-accused facing similar charges are granted bail, others may claim
the same unless a material distinction is shown.
- Trial Delay as a Factor:
Long pre-trial custody without active trial proceedings may weigh in favor
of granting bail.
- Confession under Section 70:
While confessions are relevant, their admissibility and evidentiary value
will be tested at the trial, not at the bail stage.
- Economic Offences and Liberty:
Even in financial crime, prolonged detention must be justified with cogent
reasons; blanket denial of bail is not tenable.
Disclaimer: All
the Information is based on the notification, circular and order issued by the
Govt. authority and judgement delivered by the court or the authority
information is strictly for educational purposes and on the basis of our
best understanding of laws & not binding on anyone.
Find the Attachment (Press on Click Here )
Click here
