2025 (5) TMI 2160 - HC - GST

Seeking grant of bail - evasion of GST - petitioner is ready and willing to deposit a sum of Rs. 2, 50, 00, 000/- to the credit of the crime number within a period of 10 days from the date of his release - HELD THAT - It is required to grant bail to the petitioner subject to certain conditions. Considering the voluntary submission made by the learned counsel for the petitioner the petitioner is directed to make a deposit of Rs. 50, 00, 000/- to the credit of R.R. No. 15 of 2025 before the learned Additional Chief Metropolitan Magistrate (E.O.II) Court Egmore Chennai and the remaining sum of Rs. 2, 00, 00, 000/- within a period of 10 days from the date of his release without prejudice to the right of the defence before the Trial Court. On such deposit and production of proof of Rs. 50, 00, 000/- the petitioner is ordered to be released on bail on his executing a bond for a sum of Rs. 10, 000/- with two sureties each for a like sum to the satisfaction of the learned Additional Chief Metropolitan Magistrate (E.O.II) Court Egmore Chennai and on further fulfilment of conditions imposed. Bail application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the petitioner, accused of evading Goods and Services Tax (GST) amounting to Rs. 13,73,00,000/-, is entitled to bail despite the serious nature of the offence under Sections 132(1)(a), 132(1)(1)(i), and 132(5) of the CGST Act, 2017;

(b) Whether the petitioner's submission regarding partial payment of the alleged tax liability and willingness to deposit a further sum can be treated as sufficient grounds for granting bail;

(c) What conditions should be imposed on the petitioner if bail is granted, considering the gravity of the offence and the possibility of absconding or tampering with evidence;

(d) The legal effect and enforceability of the petitioner's undertaking not to seek extension of time for payment of the deposit amount;

(e) The procedural safeguards and mechanisms to ensure compliance with bail conditions and to address any breach thereof.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Entitlement to Bail in Serious GST Evasion Cases

Relevant legal framework and precedents: The offences under Sections 132(1)(a), 132(1)(1)(i), and 132(5) of the CGST Act, 2017, relate to tax evasion, which is a non-bailable offence involving significant financial fraud. The Court must balance the presumption of innocence and the right to liberty under Article 21 against the need to ensure effective investigation and trial. The Supreme Court's principles in P.K. Shaji vs. State of Kerala emphasize that bail conditions must be stringent in serious offences to prevent abuse.

Court's interpretation and reasoning: The Court recognized the serious nature of the offence, involving evasion of GST to the tune of Rs. 13.73 crores. However, it also noted the petitioner's custodial period since 27.03.2025 and the partial payment made by the petitioner. The Court weighed these factors and found that bail could be granted subject to stringent conditions to safeguard the investigation and trial process.

Key evidence and findings: The prosecution alleged a tax evasion of Rs. 13,73,00,000/-. The petitioner initially claimed to have paid Rs. 2,86,00,000/-, but the prosecution clarified this amount was adjusted against outstanding balances, leaving the full liability intact. The petitioner's willingness to deposit Rs. 2.5 crores voluntarily was a significant factor.

Application of law to facts: The Court applied the principle that bail is not to be denied merely because the offence is serious if adequate safeguards are imposed. The petitioner's voluntary undertaking to deposit a substantial sum and the conditions to prevent absconding and tampering were considered sufficient to mitigate risks.

Treatment of competing arguments: The prosecution opposed bail on the ground that the petitioner had not discharged the entire liability and that the offence was grave. The petitioner argued custodial hardship and readiness to comply with conditions. The Court balanced these competing interests.

Conclusions: Bail was granted with stringent conditions, recognizing the petitioner's partial compliance and undertaking, while safeguarding the interests of justice.

Issue (b): Effect of Partial Payment and Undertaking to Deposit Further Amount

Relevant legal framework and precedents: The CGST Act does not bar bail merely because the accused has not paid the entire tax liability. Courts have discretion to consider deposits as a factor in bail decisions. The undertaking by the accused not to seek extension of time has been treated as a binding condition to ensure compliance.

Court's interpretation and reasoning: The Court accepted the petitioner's voluntary submission to deposit Rs. 2.5 crores within 10 days of release, with Rs. 50 lakhs to be deposited before release. The Court emphasized that this undertaking was given "without prejudice to the right of the defence," preserving the petitioner's legal rights while ensuring financial assurance.

Key evidence and findings: The petitioner's counsel's submission to deposit Rs. 2.5 crores and the undertaking that no extension would be sought were pivotal. The prosecution's contention that the prior payment was an adjustment, not discharge, was noted but did not preclude bail.

Application of law to facts: The Court treated the deposit as a condition precedent to bail and a measure to secure the State's interest in recovery. The undertaking not to seek extension was made a strict condition, with the Court warning that any breach would lead to dismissal of extension applications.

Treatment of competing arguments: The prosecution's argument that the liability remained was acknowledged, but the Court found the deposit condition adequate to protect the revenue interest.

Conclusions: The deposit and undertaking were accepted as sufficient financial and procedural safeguards to justify bail.

Issue (c): Conditions Imposed on Bail to Prevent Absconding and Tampering

Relevant legal framework and precedents: The Supreme Court in P.K. Shaji vs. State of Kerala laid down that bail conditions must be strictly enforced to prevent absconding and tampering with evidence. Conditions such as reporting to police, sureties with identity verification, and prohibition on tampering are standard safeguards.

Court's interpretation and reasoning: The Court imposed multiple conditions: execution of bond with two sureties, sureties' identity verification through photographs, thumb impressions, Aadhaar or bank passbook copies; daily police reporting for one month; prohibition on absconding and tampering with evidence; and explicit consequences on breach.

Key evidence and findings: The Court relied on the seriousness of the offence and the potential risk of interference with investigation to justify these conditions.

Application of law to facts: The Court applied the principles from precedent to impose conditions tailored to the facts, ensuring enforceability and monitoring of the petitioner's conduct.

Treatment of competing arguments: The petitioner did not oppose such conditions; the prosecution supported stringent safeguards.

Conclusions: The conditions were deemed necessary and appropriate to balance liberty and investigation integrity.

Issue (d): Legal Effect of Undertaking Not to Seek Extension of Payment Time