Custodial Interrogation Is Not Mandatory In GST Offences: Karnataka HC Grants Anticipatory Bail in Rs. 31 Crore Fake ITC Case

The Karnataka High Court has granted anticipatory bail of person accused of fraudulently availing over Rs. 31.62 crore in input tax credit (ITC) through fake invoices, without any actual supply of goods or services and held that custodial interrogation is not a sine qua non in GST offences. The Justice Shivashankar Amarannavar, while allowing the criminal petition, held that custodial interrogation is not a sine qua non in GST offences, particularly when the maximum punishment prescribed under the Central Goods and Services Tax Act, 2017 is five years’ imprisonment, and the offences are compoundable in nature. The case arose from an investigation conducted by the Directorate General of GST Intelligence (DGGI), Bengaluru Zonal Unit, based on intelligence inputs alleging a large-scale fake invoicing syndicate. According to the department, Akram Pasha had availed fraudulent ITC amounting to ₹31.62 crore, primarily from 36 entities that were either non-existent or whose GST registrations had been cancelled suo-moto, along with a “namesake” firm allegedly created solely to pass on fake ITC. A coordinated search under Section 67(2) of the CGST Act was conducted on September 10, 2025, covering 13 locations, including the petitioner’s business and residential premises. The investigation revealed that no genuine business activity was being carried out from the declared place of business, strengthening the department’s case of fake invoicing The DGGI issued multiple summons to the petitioner under Section 70 of the CGST Act between September and November 2025, requiring him to appear for investigation. The petitioner failed to comply, prompting apprehension of arrest under Section 69, which empowers GST authorities to arrest persons accused of serious GST offences. Following the rejection of his anticipatory bail plea by a sessions court in Bengaluru, Akram Pasha approached the High Court under Section 482 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, seeking protection from arrest. The petitioner argued that the maximum punishment under Section 132(1)(b) and (c) of the CGST Act is five years, and the offence does not fall within the category of heinous crimes. The GST law does not bar the grant of anticipatory bail, and the object of the statute is tax recovery, not incarceration. The alleged offences are compoundable under Section 138, subject to payment of tax, interest, and penalty. State GST authorities had already completed adjudication for earlier periods, and the petitioner had paid the assessed tax dues. Similarly placed accused had already been granted anticipatory bail, entitling the petitioner to parity. The DGGI contended that the offence was cognizable and non-bailable, involving massive tax evasion affecting the national economy. The petitioner was part of a syndicate involved in issuing fake invoices worth transactions exceeding ₹100 crore. He repeatedly evaded summons and was uncooperative, necessitating custodial interrogation. Statements recorded under Section 70 are admissible evidence, and arrest was required to unearth the entire conspiracy. After an exhaustive examination of the CGST Act, constitutional principles, and judicial precedents, the High Court observed that economic offences are serious, but seriousness alone does not justify denial of bail. Under GST law, even serious offences carry a maximum punishment of five years, unlike statutes such as the PMLA. Section 138 of the CGST Act explicitly permits compounding of offences, diluting their criminal severity. Arrest under GST must be exercised sparingly and with safeguards, as personal liberty under Article 21 of the Constitution remains paramount. Anticipatory bail jurisprudence consistently upholds the principle of “bail, not jail”, unless custody is indispensable for investigation. The Court relied on landmark Supreme Court judgments including Gurubaksh Singh Sibbia, Siddharam Satlingappa Mhetre, P. Chidambaram v. ED, and Arnab Goswami v. State of Maharashtra, along with High Court rulings on GST arrests, to conclude that custodial interrogation was neither mandatory nor justified in the present case Allowing the petition, the Karnataka High Court directed that in the event of arrest, the petitioner shall be released on bail upon furnishing a personal bond of ₹5 lakh with two solvent sureties, cooperating with the investigation and appearing when summoned, surrendering his passport and not leaving India without prior permission, and sharing live location details and refraining from influencing witnesses. The Court also granted liberty to the department to seek cancellation of bail in case of violation of any conditions. Case Details Case Title: Sri Akram Pasha Versus Senior Intelligence Officer Case No.: Criminal Petition No.15066/2025 Date: 19/12/2025 Counsel For Petitioner: Hashmath Pasha, Senior Counsel Counsel For Respondent: Madhu N Rao, Senior Standing Counsel Click Here To Read Order Read More: GST Transition Uncertainty No Shield Against Interest on Delayed VAT: Bombay HC On ENA Taxability

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