Juristway Blog

Tag: tax litigation

  • Punjab and Haryana High Court Grants Bail to Ludhiana Steel Trader in ₹9.67 Cr GST Fraud Case; Cites Documentary Nature of Evidence and Supreme Court Precedents on Liberty

    Punjab and Haryana High Court Grants Bail to Ludhiana Steel Trader in ₹9.67 Cr GST Fraud Case; Cites Documentary Nature of Evidence and Supreme Court Precedents on Liberty

    Court holds that a three-and-a-half month custody period, combined with the wholly documentary character of the evidence and the absence of any flight or tampering risk, tilts the scales firmly in favour of bail, irrespective of the gravity of the alleged offence.

    Punjab and Haryana High Court, Chandigarh | CHANDIGARH, June 2, 2026

    The Punjab and Haryana High Court has granted bail to Rohit Kumar Gupta, proprietor of M/s Maa Steel, Ludhiana, who was arrested on 12 February 2026 in connection with alleged irregularities in Input Tax Credit (ITC) claims totalling approximately ₹9.67 crore under the Central Goods and Services Tax Act, 2017.

    Hon’ble Mr. Justice Surya Partap Singh allowed the first bail petition, CRM-M-19525-2026, filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, holding that the cumulative effect of settled legal principles and the facts of the case overwhelmingly favoured the petitioner’s release on bail.

    Background and Allegations

    The petitioner is engaged in the business of trading iron and steel goods through his proprietorship concern, M/s Maa Steel, based in Ludhiana.

    According to the State Tax Department, scrutiny of E-Way Bill data for the period from 1 April 2024 to 27 January 2026 revealed systematic issuance and utilisation of invoices without actual movement or supply of goods. The authorities alleged that through these transactions, the petitioner fraudulently availed ineligible Input Tax Credit, causing a loss of approximately ₹9,66,64,194 to the State exchequer.

    Based on these allegations, the petitioner was arrested on 12 February 2026 and remained in judicial custody thereafter.

    The prosecution invoked Section 132 of the Punjab Goods and Services Tax Act/CGST Act, 2017, read with Section 69 of the CGST Act and Section 187 of the BNSS, 2023. The offences alleged against the petitioner carry a maximum punishment of seven years’ imprisonment.

    Petitioner’s Case

    Appearing for the petitioner, Mr. Gurkiran Singh contended that the allegations were baseless and unsupported by credible evidence.

    It was argued that M/s Maa Steel is a duly registered and functioning business concern and that all relevant documents, including GST invoices, E-Way Bills and purchase records, had already been supplied to the investigating authorities.

    The petitioner further pointed out that the department itself had previously sanctioned and processed refund claims after conducting due verification of records. According to the petitioner, this prior departmental verification contradicted the subsequent allegation that the transactions were fictitious.

    Counsel emphasised that the petitioner had fully cooperated with the investigation from the very beginning and that all material evidence was documentary in nature and already in the possession of the authorities.

    It was submitted that continued incarceration would serve no investigative purpose because:

    • All documents had been seized or examined;
    • No custodial interrogation was required;
    • The petitioner had cooperated throughout the investigation;
    • The trial was unlikely to conclude in the near future; and
    • The petitioner had already undergone more than three-and-a-half months of incarceration.

    The petitioner accordingly sought regular bail.

    State’s Opposition

    The State, represented by Deputy Advocate General Mr. I.P.S. Sabharwal, opposed the bail application.

    The prosecution argued that the allegations involved a serious economic offence resulting in substantial loss to the public exchequer and were supported by substantial documentary material.

    It was further submitted that although the petitioner had spent more than three-and-a-half months in custody, the investigation remained ongoing as a large volume of records still required scanning and processing.

    The State relied upon the Supreme Court’s decision in CBI v. V. Vijay Sai Reddy (2013) 7 SCC 452, which lays down the factors relevant to the grant of bail, including:

    • Nature and gravity of the accusation;
    • Severity of punishment upon conviction;
    • Likelihood of tampering with evidence;
    • Possibility of influencing witnesses; and
    • Larger public interest.

    Court’s Analysis

    Justice Surya Partap Singh undertook a detailed review of Supreme Court jurisprudence governing bail in economic offences before applying those principles to the facts of the present case.

    The Court identified seven factors favouring grant of bail.

    1. Length of Custody

    The petitioner had already undergone more than three-and-a-half months of incarceration.

    2. Maximum Punishment

    Even if the prosecution case were accepted in its entirety, the offences carry a maximum punishment of seven years.

    The Court observed that the Supreme Court has repeatedly granted bail in comparable GST-related prosecutions at relatively early stages of custody.

    3. Documentary Nature of Evidence

    The Court considered this to be the most significant factor.

    All evidence relied upon by the prosecution consisted of documentary and electronic records already collected and available with the department.

    Consequently, continued detention was unnecessary for the purposes of investigation.

    4. Delay in Trial

    The Court found no realistic possibility of the trial concluding in the immediate future.

    5. No Investigative Purpose Served

    Since the evidence had already been secured, continued incarceration would not advance the investigation.

    6. No Risk of Tampering

    Nothing on record suggested that the petitioner would tamper with evidence or influence witnesses if released on bail.

    7. No Flight Risk

    The Court also found no material indicating any possibility that the petitioner would abscond or evade trial.

    Reliance on Supreme Court Precedents

    The Court extensively relied upon recent Supreme Court decisions emphasising the primacy of personal liberty and the limited role of pre-trial detention.

    Referring to Dataram Singh v. State of Uttar Pradesh (2018), the Court reiterated:

    “The grant of bail is the general rule and putting a person in jail is an exception. A fundamental postulate of criminal jurisprudence is the presumption of innocence.”

    The Court also relied on Vineet Jain v. Union of India (2025 SCC OnLine SC 2331), where the Supreme Court expressed surprise that bail had been denied in a GST prosecution carrying a maximum sentence of five years despite the evidence being entirely documentary. Bail was ultimately granted after seven months of custody.

    Similarly, in Ratnambar Kaushik v. Union of India (2023) 2 SCC 621, the Supreme Court granted bail in a CGST evasion case after approximately four months of custody, observing that documentary and electronic evidence generally minimises the possibility of tampering.

    The Court further referred to Radhika Aggarwal v. Union of India (2025) 6 SCC 545, where the Supreme Court emphasised that arrest powers under the CGST Act must be exercised strictly in accordance with statutory safeguards and cannot be employed as a coercive mechanism for tax recovery.

    Particular reliance was also placed on Ashutosh Garg v. Union of India (SLP (Crl.) No. 8740 of 2024, decided on 26 July 2024), wherein the Supreme Court granted bail in a case involving alleged fake ITC transactions exceeding ₹1,032 crore through 294 firms after approximately nine months of custody.

    The High Court observed that if bail could be granted in a case involving allegations of such magnitude, the quantum involved in the present case could not, by itself, justify prolonged pre-trial detention.

    The Court also cited the landmark decision in Sanjay Chandra v. CBI (2012), observing:

    “Even if the offence is serious in terms of huge loss to the State exchequer, that, by itself, should not deter the Court from enlarging the appellant on bail, when there is no serious contention that the accused will interfere with the trial or tamper with evidence.”

    Reliance on Coordinate Bench Decisions

    Justice Surya Partap Singh also noted that several coordinate benches of the Punjab and Haryana High Court had recently granted bail in similar prosecutions under Section 132 of the GST laws.

    Among the decisions referred to were:

    • Atul Aggarwal v. State of Punjab (CRM-M-21915-2026);
    • Bhanuj Jindal v. DGGI (CRM-M-881-2026); and
    • Arvind Kumar v. DGGI (2025 NC PHHC 65125).

    In each of these cases, bail had been granted despite allegations of GST evasion after custody periods of approximately three months or less.

    Order

    Allowing the petition, the Court directed that the petitioner be released on regular bail upon furnishing appropriate personal bonds and surety bonds to the satisfaction of the Trial Court or Duty Magistrate concerned.

    The release was made subject to the following conditions:

    1. The petitioner shall not directly or indirectly induce, threaten or promise any person acquainted with the facts of the case to withhold information from the Court or investigating authorities;
    2. The petitioner shall furnish his residential address to the Court and promptly notify any subsequent change of address; and
    3. The petitioner shall not leave India without obtaining prior permission from the Trial Court.

    The Court clarified that the observations contained in the order were confined solely to adjudication of the bail application and would not influence the merits of the trial.

    Significance

    The judgment reinforces the increasingly consistent judicial approach that pre-trial incarceration in GST fraud prosecutions should remain an exception rather than the norm, particularly where the evidence is entirely documentary and already secured by the investigating authorities.

    The decision is especially noteworthy for its detailed reliance on the Supreme Court’s recent rulings in Vineet Jain and Radhika Aggarwal, which have significantly strengthened the protection of personal liberty in GST prosecutions and emphasised that the financial magnitude of an alleged tax fraud cannot, by itself, justify denial of bail.

    For taxpayers, professionals and enforcement agencies alike, the ruling serves as a reminder that economic offences, however serious, remain subject to the constitutional principles of presumption of innocence and personal liberty, and that continued custody must be justified by genuine investigative necessity rather than the mere size of the alleged tax demand.

    Case: Rohit Kumar Gupta v. State of Punjab through State Tax Officer
    Court: Punjab and Haryana High Court
    Case No.: CRM-M-19525-2026 (O&M)
    Decision Date: 2 June 2026
    Judge: Hon’ble Mr. Justice Surya Partap Singh

  • Meghalaya High Court Dismisses Jorabat-Shillong Expressway Company’s Writ Against ₹112 Cr GST Demand; Directs Petitioner to Exhaust Statutory Appeal

    Meghalaya High Court Dismisses Jorabat-Shillong Expressway Company’s Writ Against ₹112 Cr GST Demand; Directs Petitioner to Exhaust Statutory Appeal

    Division Bench holds that classification of BOT annuity receipts—whether taxable construction services or exempt road-access services—raises mixed questions of law and fact unsuitable for writ adjudication, and finds no patent jurisdictional defect or violation of natural justice that would warrant bypassing the appellate remedy under Section 107 of the CGST Act.

    Gauhati High Court, Shillong Bench (Meghalaya) | SHILLONG, June 2, 2026

    The Meghalaya Bench of the Gauhati High Court has dismissed a writ petition filed by M/s Jorabat Shillong Expressway Limited (JSEL) challenging a GST demand of ₹112,39,64,394 (comprising CGST and SGST) raised on annuity receipts of ₹864,12,69,958 received from the National Highways Authority of India (NHAI) for the period July 2017 to December 2022.

    The Division Bench of Hon’ble Mr. Justice H.S. Thangkhiew and Hon’ble Mr. Justice B. Bhattacharjee declined to exercise writ jurisdiction under Article 226 of the Constitution, holding that the petitioner had an efficacious alternate remedy by way of a statutory appeal before the appellate authority under Section 107 of the CGST Act, 2017.

    The Court, however, granted liberty to the petitioner to file the appeal within four weeks and directed the appellate authority to consider the same on its own merits, uninfluenced by any observations made in the judgment.

    Background: The BOT Annuity Project

    JSEL was incorporated as a Special Purpose Vehicle (SPV) by a consortium of IL&FS Transportation Networks Limited and Ramky Infrastructure pursuant to a Letter of Acceptance issued by NHAI on 20 May 2010.

    The company entered into a Concession Agreement dated 16 July 2010 for a BOT (Annuity) project covering approximately 61.98 kilometres of the Jorabat–Shillong Section of National Highway No. 40 spanning the States of Assam and Meghalaya.

    Under the BOT (Annuity) model—a Public Private Partnership structure widely used in highway development—the concessionaire finances and constructs the highway, operates and maintains it for a specified concession period, and eventually transfers it back to the government.

    Importantly, the right to collect toll remains with NHAI and not with the concessionaire. Instead, the concessionaire recovers its investment through half-yearly annuity payments made by NHAI after commencement of commercial operations. Under JSEL’s concession agreement, the concession period extends until 2031.

    The Demand and Its Basis

    The dispute originated when GST Intelligence authorities issued a Show Cause Notice dated 30 September 2023 alleging that JSEL had failed to discharge GST on annuity payments received for road construction activities.

    The Department classified the services under SAC 9954 (works contract services taxable at 12% to 18%) rather than SAC 9967 (services by way of access to a road or bridge exempt under Entry 23A of the relevant exemption notification).

    An initial demand of approximately ₹130.57 crore, along with interest and penalty, was proposed.

    JSEL initially challenged the Show Cause Notice before the High Court on the ground that the proceedings were premature. That writ petition was dismissed. Thereafter, a Special Leave Petition filed before the Supreme Court was disposed of on 5 February 2024 with directions requiring the authorities to properly consider the petitioner’s submissions.

    Following a personal hearing held on 19 March 2024, the Additional Commissioner, CGST, Shillong passed an Order-in-Original dated 18 April 2024 confirming a reduced demand of ₹112.39 crore together with applicable interest and penalty.

    The present writ petition challenged both the Show Cause Notice and the Order-in-Original.

    Petitioner’s Grounds of Challenge

    Senior Advocate Mr. S. Ghosh advanced multiple grounds of challenge on behalf of JSEL.

    The central contention was that the entire consideration, including annuity receipts received under the BOT arrangement, was exempt under Entry 23A of the exemption notification dated 28 June 2017, as amended on 13 October 2017, which exempts:

    “Service by way of access to a road or a bridge on payment of annuity.”

    According to the petitioner, the Department had artificially bifurcated an integrated BOT service into separate construction and access components when, in substance, the concessionaire was providing a composite and indivisible service.

    The petitioner also mounted a constitutional challenge to CBIC Circular No. 150/06/2021-GST dated 17 June 2021, which clarified that Entry 23A does not exempt GST on annuity paid for construction of roads.

    It was argued that the Circular effectively overrides a statutory exemption notification, contrary to Section 11(3) of the CGST Act.

    Reliance was placed upon the decision of the Karnataka High Court in M/s DPJ Bidar-Chincholi (Annuity) Road Project Pvt. Ltd. v. Union of India, reported in (2024) 122 GSTR 48, wherein the same Circular was struck down and annuity receipts were held exempt.

    Jurisdictional objections were also raised against:

    • The Additional Director, DGGI, who issued the Show Cause Notice; and
    • The Additional Commissioner, CGST, Shillong, who passed the adjudication order.

    The petitioner contended that neither officer qualified as a “Proper Officer” under Section 2(91) of the CGST Act for initiating and adjudicating proceedings under Section 74.

    Further, it was argued that Section 74, which applies to cases involving fraud, suppression, or wilful misstatement, was inapplicable because the dispute involved only interpretation of law and not any attempt to evade tax.

    Additional grounds included:

    • Taxability of services rendered under pre-GST contracts;
    • Incorrect inclusion of certain exempt receipts;
    • Alleged computational errors in the demand; and
    • Inclusion of interest earned on term deposits, which was claimed to be exempt.

    The petitioner submitted:

    “The case hinges on a pure question of law—whether annuity receipts under BOT road projects are exempt—supported by statutory notifications, judicial precedent, and settled principles on interpretation of exemptions.”

    Revenue’s Defence

    The Union respondents, represented by learned DSGI Dr. N. Mozika, defended both the Show Cause Notice and the Order-in-Original.

    According to the Revenue, JSEL was engaged in a composite supply consisting of:

    • Design;
    • Financing;
    • Construction;
    • Operation; and
    • Maintenance.

    The principal supply, according to the Department, was construction of roads, which is taxable as a works contract service.

    Since the right to collect toll never vested in JSEL, the concessionaire could not claim that it was providing road-access services falling under Entry 23A.

    On jurisdiction, the Revenue relied on Notification No. 14/2017-Central Tax dated 1 July 2017, which conferred powers upon DGGI officers as Central Tax officers.

    The Revenue also relied upon Notification No. 2/2022-Central Tax dated 11 March 2022, which inserted Paragraph 3A and vested Additional Commissioners with adjudication powers in respect of Show Cause Notices issued by DGGI.

    On the issue of pre-GST contracts, reliance was placed on Section 142(10) of the CGST Act and Section 13 dealing with time of supply of continuous services.

    The Revenue further contended that the Karnataka High Court’s decision in DPJ Bidar-Chincholi had not attained finality as appeals were pending.

    The State of Meghalaya, represented by learned Government Advocate Mr. N. Syngkon, argued that Entry 23A was intended to apply only where a concessionaire provides access to a road in lieu of toll collection and receives annuity as compensation.

    Since JSEL never possessed toll collection rights, the principal supply remained construction, making the entire composite supply taxable under Section 8 of the CGST Act.

    Court’s Analysis

    The Division Bench first noted that the legal position concerning GST liability on BOT annuity receipts remains unsettled and is presently the subject of divergent judicial views and pending appeals.

    Against that background, the Court examined the maintainability of the writ petition.

    Challenge to Jurisdiction Rejected

    The Court rejected the petitioner’s challenge regarding the competence of the officers involved.

    It held that the Additional Director, DGGI was a valid Proper Officer by virtue of Notification No. 14/2017, which conferred powers on DGGI officers corresponding to their rank.

    Similarly, the Additional Commissioner, CGST, Shillong possessed adjudicatory authority under Notification No. 2/2022.

    The Court observed:

    “Mere disagreement regarding the interpretation of the scope of powers conferred under statutory notifications cannot by itself convert an issue into a jurisdictional defect warranting interference under Article 226.”

    The Court relied upon the decision of the Allahabad High Court in RC Infra Digital Solution v. Union of India as well as the Supreme Court’s decision in Union of India v. Azadi Bachao Andolan (2004) 10 SCC 1.

    Mixed Questions of Law and Fact

    The Court further held that the controversy involved several intertwined issues requiring detailed factual examination, including:

    • Classification under SAC 9954 or SAC 9967;
    • Applicability of Entry 23A;
    • Characterisation of BOT annuity payments;
    • Interpretation of concession agreements; and
    • Determination of principal supply under the composite supply provisions.

    These issues, according to the Court, constituted mixed questions of law and fact and were therefore unsuitable for adjudication in writ jurisdiction at the first instance.

    Alternate Remedy Cannot Be Bypassed

    The petitioner argued that the appellate remedy under Section 107 would be illusory because appellate authorities are bound by CBIC Circulars issued under Section 168 of the CGST Act.

    The Court rejected this contention.

    It held that while circulars may bind departmental officers, they do not constitute law and do not bind courts.

    The Court observed that acceptance of the petitioner’s argument would effectively permit taxpayers to bypass the statutory appellate framework whenever a departmental circular is involved.

    Approving the principle laid down by the Allahabad High Court, the Bench noted:

    “Though orders or instructions issued by the Board may be binding upon departmental authorities, they do not bind courts and it is needless to cite cases on the point.”

    The Court also noted that the petitioner had fully participated in the adjudication proceedings pursuant to the directions of the Supreme Court, filed detailed replies, attended personal hearings, and presented extensive submissions.

    Whether the conclusions reached by the adjudicating authority were correct or incorrect was a matter appropriately falling within the domain of the appellate authority.

    Outcome

    Finding no exceptional circumstance warranting interference under Article 226, the Court dismissed the writ petition.

    The Court held that none of the recognised exceptions to the rule of alternate remedy were attracted, namely:

    • Lack of jurisdiction;
    • Violation of principles of natural justice; or
    • Infringement of fundamental rights incapable of redress through the statutory mechanism.

    However, the Court granted JSEL liberty to file an appeal under Section 107 of the CGST Act within four weeks from the date of the judgment.

    The appellate authority was directed to decide the appeal independently and strictly on its own merits, without being influenced by any observations made in the writ proceedings.

    Significance

    The judgment reinforces the well-established principle that writ jurisdiction should not ordinarily be invoked where an effective statutory appellate remedy exists.

    The ruling is particularly significant for infrastructure concessionaires operating under BOT (Annuity) models because it indicates that disputes concerning the GST treatment of annuity receipts should generally be pursued through the appellate hierarchy rather than through direct writ proceedings.

    The decision also highlights that the controversy surrounding taxation of BOT annuity receipts remains unresolved. Although the Karnataka High Court in DPJ Bidar-Chincholi held such annuity receipts to be exempt, the Meghalaya Bench noted that the issue remains subject to pending appellate proceedings and cannot yet be regarded as conclusively settled.

    Case: M/s Jorabat Shillong Expressway Limited v. Union of India & Others
    Court: Meghalaya Bench of the Gauhati High Court
    Case No.: WP(C) No. 245 of 2024
    Decision Date: 2 June 2026