Bail conditions cannot become a recovery tool in GST cases; onerous payment and surety terms were scaled back.

Bail conditions in a GST prosecution must remain fair and reasonable and cannot be used as a disguised recovery mechanism. The Punjab and Haryana High Court held that a condition requiring payment of the disputed GST liability with interest, while granting bail, could infringe personal liberty under Article 21 and was therefore set aside; it also found the surety requirement unduly onerous and reduced the bail bond from Rs. 50 lakhs with one surety in the like amount to Rs. 25 lakhs secured by immovable property. The remaining bail conditions were left undisturbed.

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Issues: Whether the bail conditions requiring payment of the entire outstanding GST liability with interest and furnishing of bail bonds of Rs. 50 lakhs with one surety in the like amount were liable to be set aside or modified as being unreasonable and onerous.

Analysis: The petition under Section 482 of the Code of Criminal Procedure, 1973 challenged the conditions imposed while granting regular bail in a prosecution arising out of alleged wrongful input tax credit under the GST regime. The Court followed its earlier view that bail conditions cannot operate as a disguised recovery mechanism and must conform to the requirement of fairness and reasonableness. It held that where the accused is granted bail, a condition demanding payment of the disputed tax liability along with interest, or imposing disproportionately harsh surety requirements, may infringe personal liberty and fail the test of judicial scrutiny under Article 21 of the Constitution of India.

Conclusion: The impugned condition requiring payment of Rs. 2,24,46,239/- along with interest was set aside, and the bail bonds were reduced from Rs. 50 lakhs with one surety in the like amount to Rs. 25 lakhs, to be furnished in the form of immovable property; the remaining bail conditions were left undisturbed.

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