Accused Cannot Be Denied Bail U/S 132 GST Act In Tax Fraud Case Because Investigation Is Pending Against Co-Accused: P&H High Court

In a significant ruling, the Punjab & Haryana High Court has clarified that an accused person cannot be denied bail in complaint under Section 132 Central Goods and Services Tax (CGST) Act merely because the investigation is still ongoing against a co-accused. 

Section 132 of the Act pertains punishment for committing offences including tax evasion, fraudulently availing tax credit input.

Granting bail in an alleged case involving defrauding the state exchequer of Rs. 107 crore, by generating fake invoices from fake firms under Sections 132(1)(b) of the CGST Act, the Court rejected the submission that the relief cannot be granted on the ground investigation is pending against the co-accused.

Justice Harpreet Singh Brar said, "an accused in a complaint under Section 132 of the CGT Act cannot be denied the concession of bail, solely on the ground that investigation remains pending qua a co-accused."

The Court explained that it is trite law that the matter of bail must be decided qua each accused individually, based on the specific role attributed to them. Reliance in this regard was placed on the judgment rendered by a two Judge bench of the Supreme Court in Prahlad Singh Bhati vs. NCT, Delhi and another (2001) 4 SCC 280.

In the present case, the Court noted that the final report qua the petitioners has already been presented after subjecting them to prolonged interrogation. Nowhere during the thorough investigation process did the respondent even remotely hint at any non- cooperation on part of the petitioners.

Further, it remains unclear as to why arrest process has not been initiated against the co-accused qua whom investigation is pending. If the same is for want of sufficient material to satisfy the standards for grant of authorisation under Section 69 CGST Act, the respondent must explain the delay in investigation as well efficacy thereof, the bench added.

Moreover, the Court highlighted that while the possibility of evidence tampering has been flagged, the entire case is based on documentary and electronic evidence, which are already available with the investigating agency, and all of the prosecution witnesses are officials of the respondent.

Justice Brar found that, "it against objective standards of reason and justice to deny bail to those accused against whom final report has been presented merely on the ground that the investigation is under progress qua a co-accused. Nothing has been brought to the fore to suggest that the release of the petitioners would derail the investigation; therefore, this cannot be used as a reason to keep them under custody indefinitely."

The Court clarified that no doubt the economic offences pose a threat to the State's financial stability. Acknowledging their gravity, investigating agencies are equipped with sufficient powers to enable them to unearth the modus operandi and ascertain wrongful gains.

"However, prerogative of the investigating agency cannot supersede fundamental rights of the accused," it added.

Reliance was placed on ASHUTOSH GARG VS. UNION OF INDIA, wherein the Supreme Court granted bail to Ashutosh Garg, accused in 1000 crores GST Input Fraud.

Considering that the petitioners have been in custody for 9 months 18 days while no substantial progress has been made in the trial, the Court allowed the plea.

Mr. Vinod Ghai, Senior Advocate with Ms. Kashish Sahnia, Advocate and Mr. Arnav Ghai, Advocate for the petitioner in CRM-M-8675-2025.

Ms. Muskaan Gupta, Advocate and Ms. Muskan Chauhan, Advocate for the petitioner in CRM-M-14956-2025.

Ms. Sharmila Sharma, Senior Panel Counsel, DGGI in CRM-M-14956-2025.

Mr. Sunish Bindlish, Senior Standing counsel for the respondent- DGGI

Ms. Pridhi Sandhu, Senior Standing Counsel, CGST for Chief Commissioner, Panchkula, CGST.

Mr. Manish Bansal, Public Prosecutor, U.T. Chandigarh and Mr. Alankrit Bharadwaj, Addl. P.P., U.T. Excise and Tax Department.

Title: Manish Kumar v. Directorate General, Goods & Service Tax Intelligence, Zonal Unit, Ludhiana

Citation: 2025 LiveLaw (PH) 313