The Telangana High Court has granted anticipatory bail to the partners of M/s Vijay Industrial Needs LLP in a GST fraud case involving allegations of fraudulent availment of Input Tax Credit (ITC) worth approximately ₹94.96 crore, holding that the power of arrest under the CGST Act cannot be exercised mechanically and must be based on the necessity for custodial interrogation.
Justice N. Tukaramji observed that while economic offences are undoubtedly serious, the gravity of the allegations alone cannot justify deprivation of personal liberty. The Court reiterated that arrest is an investigative measure, not a punitive one, and must be resorted to only where it is necessary to prevent absconding, tampering with evidence, influencing witnesses, or otherwise ensuring an effective investigation.
The GST Department alleged that the petitioners fraudulently availed ITC on the basis of invoices issued by fake or non-existent suppliers, causing substantial loss to the exchequer. It argued that custodial interrogation was required to trace the money trail, identify beneficiaries and uncover the larger conspiracy.
The petitioners, however, contended that the case rested entirely on documentary and electronic evidence already seized by the authorities, that they had cooperated with the investigation, and that they were willing to continue doing so. They also submitted that the tax demand had already been adjudicated and was subject to the statutory appellate mechanism.
Accepting the plea, the High Court noted that substantial documentary, financial and electronic records were already in the Department’s custody, there was no material indicating that the petitioners were likely to abscond or tamper with evidence, and they had undertaken to cooperate with the investigation. In these circumstances, the Court held that custodial interrogation had not been shown to be indispensable at this stage.
The Court directed the petitioners to surrender before the investigating authority on or before 30 July 2026, following which they shall be released on anticipatory bail upon furnishing personal bonds of ₹5 lakh each with two sureties, subject to conditions including cooperation with the investigation, appearance as and when summoned, restriction on leaving India without permission, and non-interference with witnesses or evidence.
