2025 (6) TMI 995 - HC - GST

Bail Upheld: Respondent's Cooperation and Financial Deposits Demonstrate No Impediment to Ongoing CGST Investigations

Directorate General of GST Intelligence Versus Sanjay Jaglan

The HC upheld bail granted to the respondent under CGST Act, finding no grounds for cancellation. Despite multiple ongoing investigations, the court ... Grant of bail at the initial stage of investigation - involvement of the respondent in other pending investigations and proposals for prosecution by different Commissionerates of Central Tax impacts the bail order or not - HELD THAT:- Undisputedly, no complaint has been filed against the respondent. Despite the fact that the investigation was taken up by the Department way back in the year 2019, no criminal complaint has been filed till date. Thus, even otherwise, had the respondent been in custody, he would have been entitled for default bail on the department not completing the investigation. It is not alleged anywhere that the respondent, pursuant to being admitted to bail, had misused the liberty. It is the petitioner department’s own position that the respondent has deposited with the department a sum of Rs. 1 crore in cash on 11.12.2019 Rs. 2.5 crore in cash on 23.12.2019, and Rs. 0.50 crore in cash on 24.12.2019. That being said, the respondent has already deposited a sum of Rs. 4 crores with the department pursuant to the order granting bail, which is more than 10% of the disputed liability. The same has been recorded in the order passed by this Court on 18.12.2024. This Court finds no reason to cancel the bail granted to the respondent - Petition dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the bail granted to the respondent under Section 132 of the Central Goods and Services Tax Act, 2017, by the learned Chief Metropolitan Magistrate at the initial stage of investigation, was erroneous and liable to be cancelled.- Whether the involvement of the respondent in other pending investigations and proposals for prosecution by different Commissionerates of Central Tax impacts the bail order.- Whether the respondent's deposition of amounts with the department and non-filing of prosecution complaint justify continuation of bail.- Whether any supervening circumstances have arisen post-grant of bail warranting its cancellation.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Bail Granted at Initial Stage of InvestigationThe legal framework governing bail in economic offences under the CGST Act, particularly Section 132, is supplemented by the general principles under Section 482 CrPC, which allows the High Court to exercise inherent powers to prevent abuse of process or to secure the ends of justice. The Court considered precedents including the Apex Court's decision in Pradeep v. CCE (GST), wherein bail relief was granted upon deposit of 10% of the disputed liability.The Court noted that the learned CMM had granted bail after considering the totality of facts, including the respondent's bona fide conduct demonstrated by depositing Rs. 1 crore initially and agreeing to deposit an additional Rs. 3 crores. The bail order included conditions to safeguard investigation integrity.Key evidence included the respondent's financial deposits totaling Rs. 4 crores, verified property attachments worth Rs. 40.76 crores, and the absence of any complaint filed despite the investigation commencing in 2019. The Court applied the principle that in the absence of a complaint and with a protracted investigation, default bail would be the respondent's entitlement if in custody.Competing arguments included the petitioner's contention that bail was premature and that the respondent's involvement in other investigations should preclude bail. The Court rejected these, noting no objection was raised at the time of bail and no misuse of liberty post-bail was alleged.The conclusion was that the bail granted was not erroneous and did not warrant cancellation.Issue 2: Impact of Other Investigations and Prosecution ProposalsThe petitioner contended that the respondent's involvement in other cases, including a matter booked by the Ghaziabad Commissionerate and a prosecution proposal by the Gurugram Commissionerate, should influence bail status.The Court observed that the impugned bail order did not record any such objections from the petitioner's counsel at the time. Further, no prosecution complaints had been filed in these matters, and no supervening circumstances were demonstrated to have arisen after bail was granted.The Court held that mere existence of other investigations or proposals without formal prosecution or material adverse developments does not justify revocation of bail.Issue 3: Adequacy of Deposits and Undertakings by RespondentThe respondent had deposited Rs. 4 crores with the department, exceeding the 10% threshold of disputed liability as per the precedent. The Court found this significant in demonstrating bona fides and willingness to cooperate.The respondent's undertaking to join investigation, cooperate fully, and abstain from tampering with evidence or intimidating witnesses was accepted as a binding condition.The Court applied the principle that such undertakings and financial deposits serve as adequate safeguards for the investigation process and public interest.Issue 4: Presence or Absence of Supervening CircumstancesThe petitioner failed to demonstrate any new facts or circumstances arising after the bail order that would warrant cancellation. The Court emphasized that bail is not to be cancelled lightly without cogent reasons.The absence of any complaint filing, no misuse of liberty by the respondent, and compliance with bail conditions weighed against cancellation.3. SIGNIFICANT HOLDINGS'Undisputedly, no complaint has been filed against the respondent. Despite the fact that the investigation was taken up by the Department way back in the year 2019, no criminal complaint has been filed till date. Thus, even otherwise, had the respondent been in custody, he would have been entitled for default bail on the department not completing the investigation.''The respondent has already deposited a sum of Rs. 4 crores with the department pursuant to the order granting bail, which is more than 10% of the disputed liability.''No reason to cancel the bail granted to the respondent. Other conditions imposed in the impugned order shall remain applicable on the respondent.'Core principles established include that bail in economic offences under the CGST Act can be granted at the initial stage of investigation where the accused demonstrates bona fide conduct, including substantial deposits towards disputed liability, and in the absence of formal prosecution complaints. The Court reaffirmed that mere pendency of other investigations or prosecution proposals without formal complaint or adverse developments does not justify bail cancellation. Undertakings by the accused to cooperate and not interfere with investigation are critical safeguards.Final determinations were that the bail order dated 17.12.2019 was validly passed, no supervening circumstances existed to warrant cancellation, and the petition challenging bail was dismissed with all conditions of bail continuing to apply.