2025 (12) TMI 1553 - HC - Service Tax

Alleged large-scale service tax evasion by company managers over taxable services and missing returns leads to bail denial

Regular bail was sought in a prosecution alleging large-scale service tax evasion by the accused, who, as key managerial functionaries, were alleged to ... Seeking grant of regular bail - serious economic offences have been committed by the petitioners and their statutory liability runs in crores of rupees and involves public revenue and the petitioners had evaded process till long - HED THAT:- The petitioners who are admittedly Managing Director and Chairman-cum-Managing Director of the company respectively were found receiving huge amounts of money for taxable services provided. However, they are alleged to have failed to properly self-assess their actual service tax liability and to obtain service tax returns during the relevant period thereby contravening the legal provisions. Obviously they were the master minds and beneficiaries of entire scheme of duty evasion. Their liabilities have already been assessed and adjudicated to be of a sum of about Rs. 55 crores. The offences alleged against them are grave in nature. The petitioners are involved in as many as 49 FIRs which have been registered against them in different parts of the country for allegedly defrauding public persons. On perusal of material placed on record, it is apparent that they did not furnish the requisite record with the respondent despite receipt of show cause notices thereby compelling the adjudicating authority to adjudicate the matter. Liability to pay huge amount of service tax has been fastened upon them which they evaded. In Satender Kumar Antil’s case [2021 (10) TMI 1296 - SUPREME COURT], the Hon’ble Apex Court had agreed with a caveat put by the respondent where the accused did not cooperate in investigation by not appearing before the investigating officer and not answering to the summons. In the instant case also, the petitioners have avoided joining the investigation proceedings. The act of evasion of tax about Rs. 55 crores amounts to commission of a serious economic offence constituting fraud on the economy of the country itself. These offences are to be considered as a class apart. This Court is of the considered opinion that the petitioners do not deserve to be extended benefit of bail - Accordingly, the petition is dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, considering the gravity and nature of the alleged tax-evasion/offences involving substantial public revenue, the petitioners were entitled to regular bail. (ii) Whether the petitioners' asserted grounds-documentary nature of evidence, completion of investigation/adjudication, lack of need for custodial interrogation, and claimed applicability of the bail approach in Satender Kumar Antil-warranted grant of bail, in light of the Court's findings on non-cooperation and risk factors. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Entitlement to regular bail in alleged serious economic offences involving large-scale tax evasion Legal framework (as discussed by the Court): The Court applied the principle that economic offences constitute a class apart and require a different approach in bail matters, keeping in view factors such as the nature of accusation, nature of evidence, severity of punishment, character and circumstances of the accused, likelihood of securing presence at trial, and the larger public/state interest. Interpretation and reasoning: The Court treated the allegations as grave: the petitioners, being in control of the company's affairs, were found to have received large amounts for taxable services and were alleged to have contravened legal requirements by failing to properly self-assess liability and comply with return/registration obligations. The Court emphasised that their tax liability had already been assessed/adjudicated at about Rs. 55 crores, and concluded that they were the 'master minds and beneficiaries' of the alleged duty-evasion scheme. The Court further considered their involvement in numerous other criminal cases as a factor bearing on the bail decision, and viewed the alleged evasion as a serious economic offence affecting public revenue and the economy. Conclusion: On the Court's assessment of gravity, magnitude of liability, and attendant circumstances, the petitioners were held not entitled to regular bail. Issue (ii): Whether documentary nature of case, absence of custodial interrogation, and reliance on Satender Kumar Antil justified bail despite the Court's findings Legal framework (as discussed by the Court): The Court considered the reliance placed on Satender Kumar Antil but noted that even there, a caveat existed where an accused does not cooperate with investigation by not appearing or not responding to summons. The Court treated non-cooperation as material to bail discretion in the context of economic offences. Interpretation and reasoning: The petitioners contended that the matter was complaint-based and documentary, that they were not required for custodial interrogation, and that the maximum punishment being up to seven years supported bail. The Court, however, found from the material that they did not furnish requisite record despite notices and avoided joining proceedings/investigation over a prolonged period. The Court treated this conduct-along with the scale of alleged evasion and their involvement in multiple other cases-as outweighing the argument that custodial interrogation was unnecessary. It also accepted the seriousness of the allegations as a relevant counterweight to the plea for bail. Conclusion: The Court held that, in view of the petitioners' non-cooperation/delay, the magnitude and seriousness of the alleged economic offence, and other adverse factors, the reliance on Satender Kumar Antil did not warrant bail; the bail request was therefore rejected.