2025 (11) TMI 825 - HC - GST

Bail granted to accused in alleged ?16 crore bogus taxpayer input tax credit fraud; custody since 18.04.2025

Gaurav Babu Jain Versus State Of Haryana And Another

HC granted bail to the petitioner accused of orchestrating bogus taxpayers and wrongfully availing/passing input tax credit allegedly causing a ?16 crore ... Seeking grant of bail - economis offences - availing and passing of Fraudulent Input Tax Credit - petitioner is the mastermind, operating 11 bogus firms - economic offences - HELD THAT:- A bare perusal of Section 132 leaves no doubt that the offences alleged to have been committed by the petitioner are punishable with imprisonment for a term which may extend to 05 years and fine, meaning thereby that the maximum terms of imprisonment is 05 years. Economic offences by their very nature pose threat to the State’s financial stability and deserve to be dealt with sternly. Question that arises is as to what criteria/factors/circumstances need to be kept in mind while dealing with the petition for grant of bail in such economic offences. At this stage, it would be most appropriate to refer to recent judgment of Hon’ble Supreme Court in Vineet Jain Vs. Union of India [2025 (5) TMI 925 - SC ORDER], wherein while discussing the current state of affairs with regard to grant of bail arising out of CGST cases, it was held 'We are surprised to note that in a case like this, the appellant has been denied the benefit of bail at all levels, including the High Court and ultimately, he was forced to approach this Court. These are the cases where in normal course, before the Trial Courts, the accused should get bail unless there are some extra ordinary circumstances.' Appropriate here would also be to refer to judgment of Hon’ble Supreme Court in Sanjay Chandra Vs. CBI, [2011 (11) TMI 537 - SUPREME COURT] wherein the Sessions Court and the High Court had declined the bail applications of the accused, who had been alleged of committing forgery and cheating, on the ground that the offences are serious, involved deep rooted planning and huge loss had been caused to the Exchequer, as also that if allowed the relief of bail the possibility of accused tampering with the evidence could not be ruled out. In the case in hand, the allegations against petitioner are that he is key-person in creating/operating of 11 taxpayer firms and wrongfully availed/passed input tax credit amounting to Rs.16 crore, thus, causing loss to the State Exchequer. These claims are yet to be proved. The fact that he has been in custody since 18.04.2025, has been admitted by the respondent department. His (petitioner’s) further detention is not justified as the evidence to be rendered by complainant-department is primarily documentary and electronic. The same (further incarceration) would be violative of his rights under Article 21 of the Constitution of India, including right to speedy trial and would, thus, also be against the principle of “Bail is a general rule and incarceration is an exception” as held by Hon’ble Supreme Court in Dataram vs. State of Uttar Pradesh and another, [2018 (2) TMI 410 - SUPREME COURT]. Resultantly, petitioner is granted the concession of bail subject to his furnishing bail/surety bonds to the satisfaction of learned trial Court/Duty Magistrate concerned and fulfilment of conditions imposed. The petiiton is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the accused charged under Clauses (b), (c) and (l) of Section 132(1) of the CGST Act, 2017 is entitled to bail pending trial. 2. What factors and legal principles govern grant of bail in economic offences under Section 132 CGST Act, particularly where the alleged wrongful availment/passing of Input Tax Credit is documentary/electronic in nature and the maximum prescribed imprisonment is five years. 3. The relevance of completion of investigation/filing of charge-sheet, period of pre-trial custody, and likelihood of tampering with evidence or fleeing from justice in deciding bail applications in CGST matters. 4. What conditions are appropriate to impose when bail is granted in such economic offence cases to protect the interests of the State and ensure the accused's presence at trial. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to Bail under Section 132 CGST Act Legal framework: Section 132(1) CGST Act prescribes punishments for offences including issuance of invoices without supply and wrongful availment/utilisation of input tax credit; where the amount involved exceeds Rs. 5 crore, imprisonment may extend to five years and fine. Precedent treatment: The Court relied on recent Supreme Court decisions emphasizing that where the maximum sentence is limited and evidence is largely documentary/electronic, accused ordinarily should be considered for bail unless extraordinary circumstances exist (citing Vineet Jain, Ratnambar Kaushik, and Ashutosh Garg principles as applied to CGST matters). Sanjay Chandra principles were also noted for consideration of seriousness, trial delay and risks of tampering/fleeing. Interpretation and reasoning: The Court held that offences under Section 132 can be serious, but their punishability (maximum five years) and documentary/electronic character of evidence reduce the justificatory force for continued pre-trial incarceration. The Court emphasized that economic offences are not to be treated by a blanket presumption of 'denial of bail is the rule'; rather, each case requires assessment of gravity, evidence type, investigation status and custodial period. Ratio vs. Obiter: Ratio - where investigation is complete, charge-sheet filed, accused has undergone significant pre-trial custody, and evidence is primarily documentary/electronic with no convincing material that accused will tamper or abscond, bail may be granted even in substantial-value CGST offences where maximum punishment is five years. Obiter - general observations on how economic offences 'by their very nature' should be dealt with sternly. Conclusion: Bail granted subject to stringent conditions; further detention not justified on facts before the Court given documentary/electronic nature of evidence, completion of investigation and prolonged custody since arrest. Issue 2 - Relevance of Documentary/Electronic Evidence and Completion of Investigation Legal framework: Principles from apex and High Court precedents requiring assessment of the nature of prosecution evidence, completion of investigation and filing of charge-sheet while deciding bail applications; Article 21 considerations where prolonged pre-trial detention may be disproportionate. Precedent treatment: Court applied rulings that emphasize documentary/electronic evidence reduces risk of tampering and supports bail (Ratnambar Kaushik, Vineet Jain, Ashutosh Garg), and relied on Sanjay Chandra and related authorities for the importance of trial duration and Article 21. Interpretation and reasoning: The Court reasoned that when prosecution case is documentary/electronic and official witnesses supply ocular evidence, prospects of tampering are limited; completed investigation and filing of complaint/charge-sheet reduce the need for custodial interrogation. Extended pre-trial custody would risk Article 21 violation and may exceed the likely sentence if convicted. Ratio vs. Obiter: Ratio - documentary/electronic character of evidence and completion of investigation are material factors favoring bail; prolonged custody after completion of investigation attracts Article 21 concerns. Obiter - remarks on the general unsuitability of treating all economic offences as exceptions to bail principles. Conclusion: Documentary/electronic evidence and completed investigation weigh in favor of grant of bail with protective conditions to mitigate tampering or flight risk. Issue 3 - Seriousness of Offence, Risk of Tampering or Fleeing, and Bail Discretion Legal framework: Established tests for bail in non-bailable offences include seriousness of charge, likelihood of accused fleeing justice, and prospect of tampering with prosecution witnesses/evidence; bail remains discretionary and fact-sensitive. Precedent treatment: The Court balanced Sanjay Chandra's emphasis on seriousness and tampering risk with more recent decisions directing courts to consider sentence ceiling and documentary nature of evidence; earlier decisions that declined bail on grounds of deep-rooted planning were distinguished where there was no material showing present risk of tampering/fleeing. Interpretation and reasoning: Although allegations involve large-scale fake firms and significant tax credit fraud, those allegations remain to be proved. The prosecution's documentary/electronic material and corroborative statements were acknowledged, but the Court found no specific material demonstrating present likelihood of tampering or abscondence if bail were granted. The Court also considered the accused's custodial period and the practical delay of trial as relevant to Article 21. Ratio vs. Obiter: Ratio - absence of tangible material about risk of tampering or fleeing, coupled with documentary evidence and completed investigation, militates in favor of bail even in serious economic offences; the discretion to deny bail must be exercised on case-specific grounds. Obiter - emphasis that economic offences can still threaten State finances and should not be lightly treated. Conclusion: Grant of bail appropriate where prosecution does not demonstrate specific and contemporaneous risk of tampering or flight; courts should impose stringent conditions to allay legitimate apprehensions. Issue 4 - Conditions Appropriate on Grant of Bail Legal framework: Courts may impose conditions on bail to secure attendance, prevent tampering, and safeguard the investigation/prosecution; common conditions include surrender of passport, non-interference with witnesses and evidence, and reporting/communication obligations. Precedent treatment: Reliance on precedent directions where bail was granted subject to conditions such as deposition of passport, ensuring attendance and prohibiting interference with witnesses/evidence (as in Vineet Jain, Ratnambar Kaushik, Ashutosh Garg lines). Interpretation and reasoning: To balance the interests of liberty and investigation/justice, the Court specified detailed conditions: surrender of passport, prohibition on tampering or intimidating witnesses, mandatory appearance at trial dates, prohibition on committing similar offences, furnishing and maintaining address and mobile number, and leaving open to the trial court to add conditions. Ratio vs. Obiter: Ratio - when bail is granted in CGST economic offence matters, courts should impose specific protective conditions (passport surrender, non-tampering covenants, attendance obligations, and address/communication disclosure) to mitigate identified risks. Obiter - suggestions on additional conditions remain at trial court's discretion. Conclusion: Bail allowed subject to enumerated stringent conditions; State retains liberty to seek cancellation for breach. Overarching Conclusion The Court applied established bail jurisprudence to CGST economic offences, holding that economic gravity alone does not preclude bail where investigation is complete, evidence is largely documentary/electronic, custodial period has been substantial, and prosecution has not shown concrete risk of tampering or abscondence; accordingly bail was granted subject to specific protective conditions to secure the trial process and State interest. These observations are confined to bail proceedings and do not express any opinion on the merits of the prosecution's case.