Bail cancellation in GST fake-invoice fraud upheld where compounding basis was premature and investigation remained ongoing.

Bail granted in a serious GST fake-invoice and input tax credit fraud matter may be cancelled where the original order rests on a premature and unsustainable basis. The earlier bail relied materially on the applicant's willingness to compound and deposit part of the amount, but compounding under the statutory scheme depends on payment of tax, interest and penalty as determined by the competent authority. With investigation still in progress and the alleged evasion substantial, the factual foundation for bail was treated as vulnerable. The cancellation of bail and remand of the application for fresh consideration were upheld.

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Issues: Whether the Sessions Judge was justified in cancelling the bail granted to the applicant and remitting the bail application for fresh consideration.

Analysis: The alleged conduct involved circular trading and issuance of fake invoices for fraudulent availment of input tax credit under the Central Goods and Services Tax Act, 2017, with investigation still in progress and the alleged tax evasion running into a very large amount. The earlier bail order had substantially proceeded on the applicant's willingness to compound the offence and to deposit part of the amount, but compounding under the statutory scheme requires payment of tax, interest and penalty in accordance with the competent authority's determination. In these circumstances, the foundational basis of the grant of bail was found to be vulnerable, and cancellation of bail was not treated as an impermissible interference with liberty on the facts of the case.

Conclusion: The cancellation of bail and remand of the application for reconsideration were upheld.

Final Conclusion: The challenge to the impugned order failed, and the applicant was required to surrender, with the trial court directed to decide the bail application afresh on its own merits.

Ratio Decidendi: Where bail is granted on a premature or unsustainable basis connected to compounding in a serious fiscal offence under active investigation, the appellate court may validly cancel the bail if the original order is found to be unjustified on the facts.

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