2023 (5) TMI 1183 - HC - GST

Businessman Secures Bail in Rs. 122.28 Crore Tax Evasion Case After Prolonged Detention and Considering Co-Accused Precedent

The HC granted bail in a tax evasion case involving allegations of creating fake firms and evading Rs. 122.28 Crores in taxes. Despite state objections, ... Seeking grant of regular bail - evasion of GST - Forming of a network of fake firms and defrauding the state exchequer. - availment of fraudulent Input Tax Credit - HELD THAT:- Since the grant or refusal of bail lies in the discretion of the Court the discretion is to be exercised with regard to the facts and circumstances of each case. However, bail is not to be denied to satisfy the collective sentiments of a community or as a punitive measure. Therefore, broadly speaking (subject to any statutory restrictions contained in Special Acts), in economic offences involving the IPC or Special Acts or cases triable by Magistrates once the investigation is complete, final report/complaint filed and the triple test is satisfied then denial of bail must be the exception rather than the rule. However, this would not prevent the Court from granting bail even prior to the completion of investigation if the facts so warrant - Given the fact that the petitioner was arrested on 13.03.2021 and is in custody ever since in a case where the maximum sentence that could be awarded was 05 years, the further incarceration of the petitioner is not required, more so when his co-accused have been granted the concession of regular bail vide order dated 31.08.2022. The further incarceration of the petitioner would be wholly unnecessary. Thus without commenting on the merits of the case, the aforementioned petitions are allowed and the petitioner-Amrinder Singh son of Gurnam Singh is ordered to be released on bail subject to the satisfaction of the Trial Court, concerned which is at liberty to impose any stringent conditions that it deems appropriate - Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the petitioner is entitled to regular bail under Section 439 Cr.P.C. in offences under Section 132(1)(a), (b) & (c) of the Central Goods & Services Tax Act, 2017 and corresponding State Act, given the nature and magnitude of alleged tax evasion and prolonged custody. 2. What principles and tests govern the exercise of judicial discretion in granting or refusing bail in economic offences triable by Magistrates, particularly after investigation is complete and complaint/final report is filed. 3. Whether parity (grant of bail to similarly situated co-accused) and the period of pre-trial detention are relevant considerations in the exercise of discretion to grant bail. 4. What conditions, if any, are appropriate to attach to bail in cases involving alleged large-scale GST fraud, including surrender of passport and restrictions against witness tampering. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to regular bail under Section 439 Cr.P.C. in GST offences. Legal framework: Section 439 Cr.P.C. empowers High Court to grant bail in non-bailable offences; offences under Section 132(1) of the CGST Act attract penal consequences for evasion of tax. The Court must exercise discretion in view of facts and circumstances. Precedent Treatment: The Court refers generally to established principle that bail denial should be exceptional once investigation is complete and the triple test is satisfied in economic offences; no specific cases named or overruled. Interpretation and reasoning: The Court noted (i) the investigation was complete and complaint filed, (ii) the petitioner had been in custody since 13.03.2021, (iii) maximum sentence for the offence was five years, and (iv) similarly situated co-accused have been granted regular bail. Considering these facts, continued incarceration was held unnecessary. The Court reiterated that discretion must be fact-sensitive and not used as punitive or communal appeasement. Ratio vs. Obiter: Ratio - where investigation is complete and material circumstances (lengthy custody, sentence ceiling, parity with co-accused) point against continued detention, grant of regular bail is appropriate; denial should be the exception. Obiter - general admonition that bail is not to satisfy collective community sentiments. Conclusion: The petitioner was entitled to regular bail; release ordered subject to trial court satisfaction and conditions. Issue 2 - Governing principles for judicial discretion in economic offences triable by Magistrates. Legal framework: Discretion under criminal procedure must consider facts and circumstances; where statutory restrictions are absent, economic offences are to be governed by the same general bail principles. The Court articulated a broad guideline: once investigation is complete and the triple test is satisfied, denial of bail must be exceptional rather than routine. Precedent Treatment: The Court treated this principle as applicable generally to IPC and Special Acts economic offences triable by Magistrates; no specific precedents were followed or distinguished, but the approach aligns with established jurisprudence favoring liberty absent countervailing factors. Interpretation and reasoning: The Court explained that the 'triple test' (implicitly seriousness of offence, prima facie involvement, and possibility of witness tampering/obstruction) when satisfied may justify denial; however, after completion of investigation and filing of final report, continued custody requires stronger justification. The Court left open that bail can be granted even prior to completion of investigation if facts warrant. Ratio vs. Obiter: Ratio - in economic offences once investigation is complete and the triple test is not shown to bar bail, custody should not be continued as the norm; Obiter - the Court's broad statement that courts may grant bail prior to completion of investigation in appropriate cases. Conclusion: The Court set out and applied the guiding principle that bail should ordinarily be granted post-investigation unless exceptional grounds exist; this guided the decision to grant bail. Issue 3 - Relevance of parity and duration of pre-trial detention. Legal framework: Principles of equality and parity among co-accused and the fundamental protection against excessive pre-trial detention inform exercise of bail discretion. Precedent Treatment: The Court relied on parity as an influential factor where similarly situated co-accused have been released; no contrary authority was invoked. Interpretation and reasoning: The Court observed that several similarly placed co-accused had already received regular bail. Combined with the petitioner's prolonged custody (over two years at time of hearing) and the statutory maximum sentence, these facts weighed in favour of bail. The Court held that further incarceration would be unnecessary and disproportionate. Ratio vs. Obiter: Ratio - parity in treatment of accused and prolonged pre-trial detention are material considerations and may justify grant of bail; Obiter - the degree to which parity alone is decisive depends on case specifics. Conclusion: Parity and long pre-trial detention supported the exercise of discretion to grant bail to the petitioner. Issue 4 - Appropriate conditions to attach to bail in large-scale GST fraud allegations. Legal framework: Bail may be made subject to conditions reasonably designed to secure attendance at trial and prevent interference with the investigation or witnesses; courts routinely impose conditions like surrendering passport and prohibiting contact with witnesses. Precedent Treatment: The Court imposed standard protective conditions; no departure from established practice. Interpretation and reasoning: To mitigate risks posed by granting bail in a case alleging extensive fraud, the Court required surrender of passport or affidavit of non-possession and permitted cancellation of bail on proof of any attempt by the petitioner or associates to contact, threaten or intimidate witnesses. The trial court retained discretion to impose additional stringent conditions. Ratio vs. Obiter: Ratio - bail granted subject to surrender of passport/affidavit and prohibition on witness interference, with liberty to move for cancellation on breach; Obiter - the trial court's latitude to impose any further stringent conditions. Conclusion: Bail was conditioned on passport surrender/affidavit and prohibition of witness contact, with the State entitled to seek cancellation on any attempt to intimidate witnesses; trial court empowered to impose additional conditions.