Rajasthan High Court Rules Economic Offences Under CGST Act Require Stricter Approach in Bail Consideration

In a significant decision, the Rajasthan High Court has clarified the legal approach to bail in cases involving economic offences under the Central Goods and Services Tax Act, 2017 (CGST Act). The Court, presided over by Justice Praveer Bhatnagar, dismissed a bail application filed by an accused charged with orchestrating a large-scale GST evasion scheme, holding that such offences require a stricter judicial approach due to their serious impact on the economy.

The petitioner, arrested in connection with a Directorate General of GST Intelligence case, faced allegations of creating and operating multiple fake firms, generating bogus invoices and e-way bills, and facilitating wrongful availment and passing on of inadmissible Input Tax Credit. The alleged tax evasion exceeded Rs. 48 crore, with the investigation revealing the use of non-existent transport entities and shell companies to perpetrate the fraud.

The petitioner’s counsel argued that the case rested primarily on statements of co-accused, with no independent evidence directly implicating the petitioner. It was further submitted that the petitioner had no criminal antecedents, was a permanent resident, and had already spent a substantial period in judicial custody. The defence invoked Section 480(6) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), contending that the petitioner was entitled to bail due to the delay in trial and the maximum punishment prescribed.

The Union of India, opposing the bail, emphasized the organized and grave nature of the offence, the magnitude of the evasion, and the petitioner’s active role in the conspiracy. The prosecution argued that economic offences of this scale are cognizable and non-bailable under the CGST Act, and that the petitioner’s continued detention was justified given the risk of evidence tampering and the broader public interest.

The Court, after reviewing the material on record, found prima facie evidence of the petitioner’s involvement in a deep-rooted conspiracy to evade GST through the creation of fake companies and fraudulent documentation. The judgment highlighted that economic offences, particularly those involving significant loss to the public exchequer, must be treated as a distinct category requiring a different approach to bail, as recognized by the Supreme Court in Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439.

Addressing the applicability of Section 480(6) of BNSS (formerly Section 437(6) Cr.P.C.), the Court clarified that this provision does not confer an absolute or indefeasible right to bail if the trial is delayed. Instead, it empowers the court to exercise discretion, taking into account the nature of the offence, the conduct of the accused, and the interests of justice. The Court further noted that the right to bail is not automatic and must be balanced against the seriousness of the allegations and the potential threat to the financial health of the country.

The Court also referred to Section 479 of BNSS, which prescribes the maximum period for which an undertrial can be detained, but emphasized that even prolonged incarceration alone does not entitle an accused to bail in the absence of mitigating circumstances, especially in cases involving grave economic offences.

Ultimately, the Rajasthan High Court concluded that, given the gravity of the offence, the magnitude of the alleged evasion, and the material available on record, the petitioner was not entitled to bail. The application was accordingly dismissed, reinforcing the principle that economic offences under the CGST Act warrant a stricter approach in bail considerations to safeguard the public interest and the integrity of the financial system.