Grant of bail appropriate where documentary/electronic evidence predominates and there is no threat of tampering or absconding.

The Hon’ble Punjab & Haryana High Court in Gaurav Babu Jain v. State of Haryana, [2025 (11) TMI 825 - PUNJAB AND HARYANA HIGH COURT] granted bail to the petitioner who was arrested under section 132(1) of the Central Goods and Services Tax Act, 2017(“the CGST Act”) citing prolonged custody is unjustified in presence of only documentary or electronic evidence. The Hon’ble High Court followed the rationale of the Hon’ble Supreme Court of India in Vineet Jain v. Union of India [2025 (5) TMI 925 - SC Order],Ashutosh Garg vs. Union of India [2024 (8) TMI 189 - SC Order], and Ratnambar Kaushik v. Union of India [2022 (12) TMI 263 - Supreme Court]in reaching its decision.

Facts:

Mr. Gaurav Babu Jain (“the Petitioner”) was arrested and has been in custody since then on account of allegations of being the mastermind behind a network of 11 bogus firms created solely to generate fake invoices and pass fraudulent Input Tax Credit (“ITC”). On the basis of the incriminating documents collected by the Department, a search was conducted at the residential premises of the petitioner, and his statement was also recorded, in which he admitted his role in operating those firms. Thereafter, he was arrested under section 132(1) of the CGST Act.

The Petitioner made two bail applications before both the learned Additional Chief Judicial Magistrate and the Learned Additional Sessions Judge, which were rejected. Aggrieved, the present petition was filed by the Petitioner under Section 483 of the Bharatiya Nagarika Surakhsa Sanhita, 2023(“the BNSS”).

The petitioner submitted that he was coerced into making incriminating statements under threat. He further contended that no grounds of arrest or reasons to believe were supplied to him, even though the investigation was complete and the chargesheet had already been filed. He further argued that considering his clean antecedents, as also the fact that the trial is likely to take a long time and that the alleged offences, being triable by a Magistrate, carry a maximum punishment of five years, so, lenient view deserves to be taken in his favour by allowing the present petition.

Whereas, the respondent submitted that the entire search was conducted lawfully in the presence of two independent witnesses, leaving no scope for any threat or coercion. The investigation further showed that the main suppliers to these bogus firms were non-existent, and all evidence and witness statements collected during the investigation have been detailed in the reply.

Issue:

Whether the grant of bail is appropriate where documentary/electronic evidence predominates and there is no threat of tampering or absconding?

Held:

The Hon’ble Punjab & Haryana High Court in 2025 (11) TMI 825 - PUNJAB AND HARYANA HIGH COURTheld as under:

• Relied on, Vineet Jain’s case (supra), where the Hon’ble Supreme Court granted bail to an accused charged under Clauses (c), (f), and (h) of section 132(1) of the CGST Act. In that case, the charge sheet had already been filed, and the accused had remained in custody for nearly 7 months. The Hon’ble Apex Court observed that the maximum punishment prescribed is 5 years and the case was triable by a Court of a Judicial Magistrate, and in any case, the entire prosecution rested on documentary evidence with no antecedents, hence these are the cases where in normal course, the accused should get bail unless there are some extra ordinary circumstances.
• Noted that, in the case of Sanjay Chandra v. CBI, 2011 (11) TMI 537 - Supreme Court, the Sessions Court and the High Court had declined the bail applications of the accused, who had been alleged of committing forgery and cheating, on the ground that the offences are serious, involved deep rooted planning and huge loss had been caused to the Exchequer, as also that if allowed the relief of bail the possibility of accused tampering with the evidence could not be ruled out.
• Relied on, the judgment in Ashutosh Garg’s case (supra), wherein the Hon’ble Supreme Court granted bail even though the accused was alleged to have defrauded the State exchequer of INR 1,032 crore as Input Tax Credit by creating 294 fake firms, citing long custody period of 9 months and the fact that the maximum imprisonment under Section 132 of the CGST Act is only 5 years.
• Relied on the decision in Ratnambar Kaushik’s case (supra), where the Hon’ble Supreme Court granted bail to an accused charged under section 132(1) of the CGST Act after noting that he had already undergone about 4 months of custody. The Court also observed that the available evidence was mainly documentary and electronic in nature, reducing any possibility of tampering, intimidation, or influencing.
• Emphasized that, even in cases involving economic offences, the Court has to go through the gravity of the offence, the object of the Act, the attending circumstances, etc. Thus, economic offences cannot be categorized in one group and the Court should not proceed on the presumption that “Denial of Bail is the Rule and grant being the exception”.
• Noted that, the allegations against the petitioner are still to be proven, and further detention is not justified since the evidence involved before the adjudicating authority is largely documentary and electronic.
• Held that, further incarceration would be violative of his rights under Article 21 of the Constitution of India, including right to speedy trial and would, thus, also be against the principle of “Bail is a general rule and incarceration is an exception” as held by Hon’ble Supreme Court in Dataram v. State of Uttar Pradesh and another, - 2018 (2) TMI 410 - Supreme Court. Accordingly, the Hon’ble High Court granted bail with certain conditions.

Our Comments:

Section 132 of the CGST Act:

(1) Whoever commits any of the following offences, namely:—

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c) avails input tax credit using such invoice or bill referred to in clause

 shall be punishable—

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five year and with fine.

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(iii) in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine; '

The Hon’ble Punjab and Haryana High Court in Manoj Gupta v. Union of India [2025 (7) TMI 991 - PUNJAB AND HARYANA HIGH COURT] released the accused on bail, holding that accused was in custody for about 6 months and 24 days for alleged ITC fraud. The Hon’ble High Court held that where documentary/electronic evidence predominates and custodial interrogation is not necessary, apprehension of tampering must be balanced against available non-custodial safeguards; such factors can justify release on bail despite large alleged evasion.

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