Can I lie in an interview that has an offer standing from another firm?

What’s your objective though? Saying you have another offer won’t change their decision point on whether they wanna offer you or not. On the contrary it might play against you and they might think you are a risk. If it is to increase pay, it’s a debatable approach. Companies coming for on campus hiring have fixed ctc based on college tier, they won’t change that for one candidate.
Off campus, if you feel you are almost selected but being low balled on salary, then you can think of doing this. But.. Only do that if you u feel you have strong leverage in the interview. Generally freshers don’t have that much leverage as companies can always hire other freshers.

This can fireback if you don't know their budget.
Suggest if you do add fake offer, do not keep a huge difference. Like if company is paying you 10LPA, do not have offer at 20LPA. They will wish you luck and move out.

Yes. Once you get the offer they ask for the competing offer proof. You must refuse saying that it is confidential, they will push you saying it's the policy etc etc, come to a mutual agreement and share only the salary breakup page. At this step, Photoshop is your friend. Remember smart lying is the trick and use this to get 20-30% more than what they will be prepared to offer you otherwise and not 100% (more risky).

Do not ever disclose company name and do not deviate from the competing offer amount you have disclosed. Don't worry, Big 4 doesn't care enough. Once you get in remember never ever disclose this to anyone in the company and always stick to your story if someone asks at least until you leave and join your next company.

Never do that. As an employer, I would have serious doubts on integrity as well as stability and one might get rejected