Alleged fake firms and ?30+ crore input tax credit fraud u/s132 CGST-continued custody held unjustified; bail granted.

In a bail petition under the CGST Act alleging creation/operation of firms to wrongfully avail and pass on input tax credit exceeding ?30 crores, the HC held that offences under s.132 carry a maximum sentence of five years, and seriousness of economic offences alone cannot justify continued incarceration. Relying on SC guidance that bail should ordinarily be granted in CGST matters absent extraordinary circumstances, and that "bail is the rule," the HC found further detention unjustified because the prosecution evidence was primarily documentary/electronic, custody had continued since early May 2025, and prolonged pre-trial incarceration would offend Article 21 and the right to speedy trial; regular bail was granted subject to conditions.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, having regard to the nature of the alleged offence under Section 132 of the CGST Act (maximum punishment up to five years) and the stage of the case, continued judicial custody was justified or the petitioner deserved regular bail.

(ii) Whether the apprehensions asserted by the department-risk of tampering with evidence, influencing witnesses, fleeing from justice, or repeating similar conduct-were sufficient, on the Court's assessment of the record and nature of evidence, to deny bail.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Justification for continued custody vis-à-vis grant of regular bail

Legal framework (as discussed by the Court): The Court examined Section 132 of the CGST Act and noted that the offences alleged are punishable with imprisonment which may extend to five years and fine, making five years the maximum term. The Court also applied constitutional considerations of Article 21, including the right to speedy trial, and proceeded on the principle that bail is the general rule and incarceration the exception in the circumstances assessed.

Interpretation and reasoning: The Court accepted that economic offences warrant stern treatment, but held that such offences cannot be approached on a presumption that denial of bail is the rule. On the facts, the Court emphasised that (a) the allegations of wrongful availment/passing of input tax credit were yet to be proved at trial, (b) the petitioner had been in custody since 06.05.2025, and (c) the evidence expected to be led by the complainant-department was primarily documentary and electronic. In these circumstances, the Court found further incarceration unnecessary for the purposes of the case and considered prolonged custody inconsistent with Article 21 concerns, particularly when trial would take time.

Conclusions: Continued custody was held unjustified. The petitioner was granted regular bail, subject to furnishing bail bonds and two sureties as directed, along with additional safeguards imposed by the Court.

Issue (ii): Whether asserted risks (tampering, influencing, absconding, repetition) warranted denial of bail

Legal framework (as discussed by the Court): In assessing bail, the Court considered the seriousness of the allegations alongside factors relevant to fair trial-especially likelihood of interference with evidence or witnesses-and balanced these against the limited maximum punishment and the evidentiary nature of the prosecution case (documentary/electronic).

Interpretation and reasoning: Although the department alleged that the petitioner was a key person and raised apprehensions of repeated offending, absconding, and tampering, the Court considered that the prosecution case would substantially rest on documentary and electronic material, reducing the necessity of continued custody for protecting the evidentiary process. The Court addressed the department's concerns by imposing stringent conditions designed to secure presence and prevent interference, rather than treating the apprehensions as sufficient to refuse bail.

Conclusions: The Court did not find the stated apprehensions, in the context of the record and the nature of evidence, sufficient to deny bail. Bail was granted with conditions including surrender of passport, restriction on travel, non-tampering with evidence, non-intimidation of witnesses, appearance on all dates, non-commission of similar offence, non-misuse of liberty, and compliance-related directions; breach would permit seeking cancellation of bail.

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