2025 (6) TMI 253 - HC - GST

Bail Denied in Major Tax Fraud Case: Ongoing Investigation Prevents Release of Accused Amid Significant Evidence Risks

HC denied bail in GST evasion case involving alleged 60 crore tax fraud. Despite applicant's claims of cooperation and retraction of statement, the court ... Seeking grant of bail - large scale evasion of GST - HELD THAT:- It is apparent that the case involves documentary evidence only, however, it is also apparent that the other co-accused persons are evading the notices, and in such circumstances, it would be premature to allow the present application, as the possibility of the applicant tampering with the evidence cannot be ruled out. Application dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the applicant is entitled to bail under Section 483 of the BNSS, 2023 and Section 439 of the Criminal Procedure Code, 1973, in a case involving alleged large-scale evasion of GST under Sections 132(1)(B) & (C) read with Section 69(1) of the GST Act, 2017.- Whether the applicant's custodial detention is justified considering the stage of investigation and the nature of allegations.- Whether the applicant's claim of arrest being retaliatory, due to his complaint to the Human Rights Commission alleging ill-treatment by investigating officers, affects the bail consideration.- Whether the applicant's cooperation with investigation and retraction of statement given under alleged coercion impacts the bail decision.- The relevance of the compoundable nature of the offence under Section 132 of the GST Act, 2017, in the grant of bail.- The risk of the applicant tampering with evidence or interfering with the investigation if released on bail.2. ISSUE-WISE DETAILED ANALYSISEntitlement to Bail under Relevant Provisions and Nature of OffenceThe legal framework involves Section 483 of BNSS, 2023 and Section 439 of the Criminal Procedure Code, 1973, which govern bail in cases involving serious offences. The offence charged relates to Sections 132(1)(B) & (C) read with Section 69(1) of the GST Act, 2017, concerning evasion of GST through fabrication of documents and invoices. The Court noted the gravity of allegations involving evasion of GST amounting to over 60 crores, indicating a significant economic offence.The Court recognized that the offence is compoundable under the GST Act, implying that the accused may settle the matter outside trial, which generally favors bail. However, compoundability does not automatically entitle the accused to bail, especially at an early stage of investigation.Applicant's Cooperation and Retraction of StatementThe applicant contended that he had cooperated with the investigation, given his statement, and was in judicial custody post-remand, with no further recovery or discovery to be made from him. He also submitted that his initial statement was retracted on the ground of coercion by investigating officers, supported by an affidavit. The applicant further alleged that his arrest was retaliatory, triggered by his complaint to the Human Rights Commission alleging ill-treatment by the Directorate General of GST Intelligence officers.The Court considered these submissions but found them insufficient to override the concerns about the ongoing investigation. While cooperation and retraction of statements are relevant, the Court emphasized that such factors must be weighed against the overall investigation progress and risk factors.Risk of Interference with Investigation and Evidence TamperingThe respondent's counsel argued that the applicant had not cooperated fully, with other co-accused persons evading notices, and that the applicant's release could jeopardize the investigation by enabling tampering with evidence. The Court acknowledged that the case primarily involved documentary evidence and that other accused persons were yet to be arrested or examined.Given these factors, the Court highlighted the possibility of the applicant interfering with the investigation or influencing witnesses and evidence, which is a recognized ground for denying bail in serious economic offences.Stage of Investigation and Judicial CustodyThe Court noted that the applicant had been in custody since 09/05/2025, and that this was the first bail application. However, the investigation was still incomplete, with other accused persons evading arrest and statements pending. The Court found it premature to grant bail at this stage, as the investigation was ongoing and the risk of interference remained.Competing Arguments and Court's ReasoningThe applicant's argument for bail was grounded on cooperation, retraction of statement under alleged coercion, the compoundable nature of the offence, and the claim of retaliatory arrest. The respondent's counter-arguments emphasized non-cooperation, ongoing investigation, evasion by co-accused, and the risk of interference with evidence.The Court weighed these competing contentions and concluded that the nature of the offence and the ongoing incomplete investigation outweighed the applicant's submissions. The Court underscored the importance of safeguarding the integrity of the investigation over the applicant's premature release.3. SIGNIFICANT HOLDINGS'Having considered the rival submissions and on perusal of the case diary, it is apparent that the case involves documentary evidence only, however, it is also apparent that the other co-accused persons are evading the notices, and in such circumstances, it would be premature to allow the present application, as the possibility of the applicant tampering with the evidence cannot be ruled out.'The Court held that despite the compoundable nature of the offence and the applicant's custodial period, bail was not justified at the current stage due to the ongoing investigation and risk of interference.The Court granted liberty to renew the bail application after the charge sheet is filed or after the other accused persons are arrested, indicating that the stage of investigation is a critical factor in bail considerations for economic offences involving complex documentary evidence.