Anticipatory Bail in Large-Value GST ITC Investigations: Analysis of Telangana High Court’s Order in Saroj Kumar Pandey Vs State of Telangana

1. Background of the Case

The Telangana High Court in Saroj Kumar Pandey Vs State of Telangana (Telangana High Court) decided Criminal Petition No. 13710 of 2026 on 17/09/2026, dealing with a plea for anticipatory bail in a GST investigation involving alleged wrongful availment and utilisation of Input Tax Credit (ITC) of about Rs.98.47 Crores.

The proceedings were initiated by the Commercial Taxes Department, Telangana State, in connection with Ref. No. CCT’s Enft/JE1/05/2026, alleging offences under:

  • Section 132(1)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act), and
  • Section 132(1)(i) of the Telangana Goods and Services Tax Act, 2017 (TGST Act).

The Criminal Petition was filed under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), invoking the High Court’s inherent powers to secure anticipatory bail, i.e., protection against arrest in anticipation of custodial action.

The petitioner, Sri Saroj Kumar Pandey, was arrayed as Accused No. 2, a Director of M/s. Shah Batteries Private Limited, which was under investigation for allegedly availing ITC on the basis of invoices said to have been issued by 17 non-genuine suppliers.

The High Court was called upon to balance:

  • the seriousness and scale of the alleged economic offence,
  • the statutory framework under the CGST/TGST Acts and BNSS, and
  • the fundamental right to personal liberty, particularly the necessity and justification for pre-arrest custody.

Ultimately, the Court granted anticipatory bail, while expressly preserving the power of the authorities to act under Section 69 and Section 132 of the CGST/TGST Acts if future material justifies arrest.

2. Factual Matrix and Investigation Status

2.1 Role of the Petitioner and Company

  • The petitioner is a Director of M/s. Shah Batteries Private Limited, engaged in business from Hyderabad.
  • The Commercial Taxes Department alleged that the Company wrongfully availed and utilised ITC of approximately Rs.98.47 Crores.
  • The ITC was claimed on invoices said to have been issued by 17 non-genuine suppliers, allegedly without any real movement or supply of goods.
  • The alleged conduct falls within Section 132(1)(c) and attracts higher punishment under Section 132(1)(i) when the amount crosses specified thresholds.

2.2 Searches and Seizure

  • Search operations were carried out at the Company’s premises on 30.04.2026, during which documents and electronic devices were seized.
  • A further search was undertaken on 05.06.2026.
  • Another Director, Accused No.1 (Managing Director), was arrested on 16.06.2026 and later granted bail by the trial Court on 23.07.2026 in Crl.M.P. No.295 of 2026.

2.3 Payments and Cooperation

  • The Company deposited Rs.1.50 Crores via DRC-03, under protest.

  • The petitioner asserted:

    • consistent appearance in response to summons,
    • production of documents and replies, and
    • ongoing cooperation with the investigation.

  • The Department, however, alleged incomplete cooperation and insisted on the necessity of custodial interrogation to:

    • trace the financial trail,
    • identify ultimate beneficiaries, and
    • examine alleged hawala links and related persons/entities.

3. Petitioner’s Contentions

3.1 Documentary Nature of Evidence and Seizure

The petitioner’s counsel emphasised that:

  • The case revolves primarily around documentary, financial, and electronic records.
  • Substantial material has already been seized and is in the Department’s custody.
  • In such circumstances, custodial interrogation is not indispensable and can be substituted by:
    • further summons,
    • production of additional records, and
    • interrogation without arrest.

3.2 Genuineness of Business and Transactions

The petitioner claimed that:

  • The Company is a genuine, registered entity with regular business turnover and GST compliance.
  • Transactions in issue were supported by:
    • tax invoices,
    • e-way bills,
    • photographs,
    • banking channels, and
    • duly maintained Books of Accounts.
  • The suppliers in question held valid GST registrations during the relevant period, and any later cancellation or action against them cannot automatically fasten criminal liability upon the petitioner.

3.3 Conduct, Cooperation, and Bail Parity

  • The petitioner argued that his conduct, including appearance on summons and the DRC-03 payment under protest, evidences bona fide cooperation.
  • Reference was made to the fact that Accused No. 1, similarly placed and allegedly involved in the same set of transactions, has already been granted bail.
  • The petitioner invoked the principle of parity, contending that in the absence of a materially different role or conduct, he should also receive pre-arrest protection.

3.4 Reliance on Judicial Precedent

The petitioner relied, in particular, on:

  • Sandeep Kumar Goel and another v. Union of India, 2026 SCC OnLine TS 7232 (Telangana High Court)

This decision was cited for the proposition that where:

  • evidence is largely documentary,
  • material is already with the Investigating Agency, and
  • the accused are cooperating,

then the mere seriousness of an economic offence does not, by itself, justify custodial interrogation.

On this foundation, the petitioner requested that anticipatory bail be granted subject to reasonable conditions on appearance and cooperation.

4. Department’s Submissions

4.1 Alleged Fraudulent ITC Network

The respondent-Department opposed the plea, asserting: