GST tax evasion bail and deposit test under Section 132/138: deposit accepted but bail cancellation dismissed.

Section 132's threshold distinguishes non cognizable, bailable offences (tax evasion up to Rs.5 crore) from cognizable, non bailable offences (above Rs.5 crore); section 138 makes evasion up to Rs.5 crore compoundable while larger amounts are not. A deposit of Rs.5 crore against alleged evasion of Rs.9.39 crore does not change classification or render the offence compoundable, so the trial court's analogy was flawed. The respondent's offer to deposit 50% and actual deposit of Rs.5 crore with departmental consent, lack of prior misuse of bail, limited risk of witness interference, and comparative grants to co accused led the court to dismiss the bail cancellation application.

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Issues: Whether the petition for cancellation of bail granted to the respondent should be allowed and bail revoked.

Analysis: The Court examined whether the trial court's reliance on analogy between Sections 132 and 138 of the Central Goods and Services Tax Act, 2017 to treat the offence as compoundable/bailable was legally sustainable, having regard to the statutory scheme that distinguishes cognizability, bailability and compoundability based on the amount of tax evaded. The Court noted that deposit of a portion of the alleged evaded tax does not change the statutory classification of the offence under Section 132, nor does it render compoundable an offence which statute excludes from compounding under Section 138. The Court also considered other relevant factors for bail: the maximum statutory sentence, period of custody already undergone, absence of prior criminal record or misuse of bail, likelihood of witness tampering (low because witnesses are officials), consent of the Special Public Prosecutor before the trial court, and precedents where bail was granted in comparable circumstances.

Conclusion: The application to cancel bail is dismissed; the bail granted to the respondent stands.

Final Conclusion: The challenge to the trial court's grant of bail is rejected and the respondent's release on bail is upheld, notwithstanding the trial court's imperfect statutory analogy; the matter proceeds to trial subject to the existing bail conditions.

Ratio Decidendi: Deposit of a portion of the alleged evaded tax does not alter the statutory classification of offences under Section 132 or the limits of compounding under Section 138 of the Central Goods and Services Tax Act, 2017, but bail may nevertheless be retained after holistic consideration of statutory classification, custody, severity of punishment and other relevant factors.

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