2025 (10) TMI 169 - HC - GST

Regular bail granted to accused in alleged bogus firm invoice fraud for fraudulent ITC; prolonged custody despite no witnesses examined

HC granted regular bail to the petitioners accused of orchestrating clandestine sale of goods, issuing no invoices and fraudulently availing/utilizing ITC ... Seeking grant of regular bail - petitioners were the key persons for the Clandestine Sale of goods - various sale of goods without actual issuance of invoices - fraudulent availment and utilization of ITC without physical receipt of goods from non-existence firm - HELD THAT:- The veracity of the prosecution case against the petitioners shall be adjudicated upon during the course of the Trial. They are stated to be in custody since 02.05.2025 but none of the 25 prosecution witnesses has been examined so far. Therefore, the Trial of the present case is not likely to be concluded anytime soon. In this situation, the further incarceration of the petitioners is not required. Thus, without commenting on the merits of the case, the present petitions are allowed and the petitioners, namely, Sovit Bansal (in CRM-M- 38861-2025), Karan Bansal (in CRM-M-42749-2025) and Shri Sanjeev Kumar Bansal (in CRM-M-44075-2025) are ordered to be released on bail subject to their furnishing bail bonds and surety bonds each to the satisfaction of learned CJM/Duty Magistrate, concerned. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the petitioners are entitled to regular bail under Section 483 of the BNSS, 2023 in respect of complaint alleging offences under Sections 132(1)(a) and 132(1)(c) r/w Section 132(1) of the CGST Act, 2017 r/w Section 20 of the IGST Act, 2017 and the Punjab GST Act, 2017. 2. Whether alleged non-compliance with statutory pre-arrest provisions under Sections 73 and 74 of the CGST Act, 2017 (as contended) affects the entitlement to bail. 3. The relevance of (a) the gravity/amount of alleged GST evasion, (b) the period of pre-trial incarceration, and (c) delay or pace of trial/prosecution (no prosecution witnesses examined despite custodial period) in determining bail. 4. Appropriate bail conditions, including surety, periodic reporting, and deposit of fixed deposit receipt (FDR), to ensure attendance and prevent abscondence pending trial. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to regular bail under Section 483 BNSS, 2023 for offences under the CGST/IGST/Punjab GST framework Legal framework: The determination of regular bail requires assessment of the prosecution case, gravity of offence, statutory maximum sentence, likelihood of trial conclusion, and custodial period. Section 483 BNSS, 2023 is the statutory provision under which regular bail was sought; the substantive offences are under the CGST/IGST/Punjab GST schema (Sections 132(1)(a) & (c) r/w Section 132(1) CGST Act, and Section 20 IGST Act). Precedent Treatment: The Court did not invoke or discuss any specific precedents. No earlier decisions were followed, distinguished, or overruled in the order; the decision rests on facts, statutory framework and established bail principles. Interpretation and reasoning: The Court observed that the merits of the prosecution case are to be decided at trial and declined to make definitive findings on guilt. Given that the complaint had already been filed and the petitioners were in custody since a specified earlier date, the Court balanced the seriousness of the allegations against the realities of trial progress. The Court found that continued incarceration was not necessary in the circumstances where trial progression was slow (no prosecution witnesses examined despite custody) and where the maximum sentence would be five years, thereby weighing in favour of bail. Ratio vs. Obiter: Ratio - A court may grant regular bail under Section 483 BNSS, 2023 in a commercial tax prosecution alleging large-scale evasion when continued custody is not required, particularly where trial is not progressing and maximum sentence is limited; merits are to be decided at trial. Obiter - Observations on the prosecution's allegation of large fraud and quantum of alleged evasion without adjudication on merits. Conclusion: Petitioners were entitled to regular bail subject to conditions. The Court granted bail without expressing any conclusive view on the prosecution case. Issue 2 - Effect of alleged non-compliance with Sections 73 and 74 CGST Act on bail entitlement Legal framework: Sections 73 and 74 CGST Act pertain to determination of tax liability and adjudication mechanisms; alleged mandatory pre-arrest or procedural requirements (as argued) bear on lawfulness of arrest and may affect bail but are determinations for trial/remedies against arrest. Precedent Treatment: No authorities were cited or relied upon to resolve the contention that arrests were illegal for non-compliance with Sections 73/74. Interpretation and reasoning: The Court noted the petitioners' contention that arrests were effected illegally and grounds of arrest were not provided; however, the order does not decide the legality of arrest or address pre-arrest procedural compliance in detail. Instead, the Court proceeded to assess bail on conventional bail principles (custodial period, trial progress, gravity of offence) and granted bail with conditions, without adjudicating the asserted illegality of arrest. Ratio vs. Obiter: Obiter - The Court's decision to grant bail is not predicated on a finding of illegality of arrest; the question of compliance with Sections 73/74 remains to be adjudicated in the appropriate forum or trial stage. Conclusion: Alleged non-compliance with Sections 73/74 was noted but not determinative; bail was granted without ruling on the legality of arrest. Issue 3 - Weight of alleged financial gravity of offence, custodial duration, and trial delay in bail adjudication Legal framework: Bail consideration requires balancing the gravity of the offence (including amount allegedly evaded), likelihood of abscondence, risk to investigation, and personal liberty where trial may be delayed; sentencing maxima informs but does not solely determine bail permissibility. Precedent Treatment: The Court did not cite precedent but employed standard judicial reasoning balancing public interest and liberty when trial delay is evident. Interpretation and reasoning: The respondent emphasized the large alleged evasion (~Rs.116.53 Crores) and the grave nature of the offence as a factor against bail. The Court acknowledged the gravity but placed material weight on the custodial period (since a stated date) coupled with lack of trial progress (none of 25 prosecution witnesses examined). The Court concluded that further incarceration was not required where trial is unlikely to be concluded soon and the maximum sentence is five years. Thus, the quantum of alleged fraud did not automatically preclude bail given the other circumstances. Ratio vs. Obiter: Ratio - Where significant trial delay and prolonged pre-trial custody exist, even allegations involving substantial financial irregularity do not necessarily bar bail; necessity of continued incarceration must be demonstrated. Obiter - The Court's acceptance that gravity is a relevant factor but not conclusive. Conclusion: Despite large alleged GST evasion, the prolonged custody and lack of trial progress justified grant of bail subject to conditions designed to secure attendance and aid trial completion. Issue 4 - Appropriate terms and conditions of bail to secure trial attendance and protect investigative interests Legal framework: Bail orders can be conditioned by bond/surety, periodic reporting, and monetary security (including FDR) to ensure appearance and deter abscondence; conditions must be proportionate and directed to securing trial process. Precedent Treatment: No precedent relied upon; conditions reflect customary judicial practice to secure attendance and continuity of trial. Interpretation and reasoning: To mitigate release risks given the nature of allegations, the Court imposed conditions: furnishing bail bonds and surety bonds to the satisfaction of the trial magistrate; monthly appearance at local police station on first Monday and written confirmation of non-involvement in other crimes; deposit of FDR of specified amount liable to forfeiture for non-attendance. These conditions were tailored to balance liberty with assurance of attendance and trial integrity. Ratio vs. Obiter: Ratio - Release on bail in serious commercial tax matters may be granted subject to strict reporting and financial security conditions (including FDR) to ensure presence at trial; such conditions are appropriate where trial is prolonged. Obiter - Specific periodicity of reporting and FDR amount are case-specific and not framed as general prescriptions. Conclusion: Bail granted subject to specified conditions-bail/surety bonds, monthly police station reporting, written confirmations, and an FDR deposit-to secure the trial process and guard against abscondence. The order disposes of the petitions and leaves undetermined any pending applications and substantive guilt issues for trial adjudication.