Facts of the Case

The petitioners, Saurabh Jindal and Yashik Jindal, sought regular bail under Section 439 Cr.P.C. after being arrested in connection with a GST investigation conducted by the Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit. They were accused of offences under Section 132 of the CGST Act involving wrongful availment of Input Tax Credit (ITC) amounting to approximately ₹11.30 crore.

According to the prosecution, the petitioners, being associated with Krishna Metallurgical Pvt. Ltd. and M/s Grand Design, New Delhi, were responsible for tax evasion through fraudulent ITC transactions. The complaint had already been filed, and the petitioners had remained in judicial custody since 14.09.2022.

 

Issues Involved

  1. Whether the petitioners were entitled to regular bail under Section 439 Cr.P.C. in a prosecution under Section 132 of the CGST Act.
  2. Whether the gravity of the alleged GST fraud involving wrongful ITC of ₹11.30 crore justified continued judicial custody.
  3. Whether bail could be granted subject to financial conditions safeguarding the revenue interests of the Department.

 

Petitioners' Arguments

The petitioners contended that:

  • They had been falsely implicated.
  • They had been in custody since 14 September 2022.
  • The complaint had already been filed, and therefore custodial interrogation was no longer necessary.
  • They had not created fake firms.
  • The principal accused, Dipanshu Gupta, had already been granted bail by the Coordinate Bench.
  • The alleged offences are triable by a Magistrate.
  • The offences are compoundable with a maximum punishment of five years.
  • The trial would take considerable time to conclude.
  • No show cause notice had been issued to them.
  • Several judicial precedents supported the grant of bail in similar GST cases.

 

Respondent's Arguments

The Directorate General of GST Intelligence opposed the bail applications by submitting that:

  • The petitioners were Director and Proprietor of the concerned business entities.
  • They were directly responsible for wrongful availment of ITC amounting to ₹11.30 crore.
  • Their role was significantly different from that of Dipanshu Gupta, who merely received commission.
  • Reliance was placed on the Supreme Court's order in Vinay Kant Ameta, wherein substantial monetary deposit was directed while granting bail.
  • The Department submitted that if the petitioners deposited the alleged tax loss, it would not object to grant of bail; otherwise, the applications deserved dismissal.
  • Various judgments relating to economic offences and bail were relied upon to oppose the applications.

 

Court Order / Findings

After considering the submissions of both sides, the Rajasthan High Court observed that:

  • It was an admitted position that the petitioners had allegedly availed wrongful Input Tax Credit amounting to ₹11.30 crore.
  • The Supreme Court had previously imposed monetary conditions while granting bail in similar GST matters.
  • Without expressing any opinion on the merits of the case, the Court found it appropriate to grant bail considering the overall facts and circumstances.

Accordingly, the Court ordered that:

  • Both petitioners be released on bail.
  • Each petitioner shall deposit ₹2 crore before the respondent Department under protest.
  • Each petitioner shall furnish a personal bond of ₹50,000 along with two sureties of ₹25,000 each.
  • The Trial Court shall verify the receipts evidencing deposit of ₹2 crore each before accepting the bail bonds.

 

Important Clarification

  • Bail in serious GST fraud matters may be granted even in cases involving substantial alleged tax evasion where investigation has progressed and the complaint has already been filed.
  • Courts may impose substantial monetary conditions while granting bail in appropriate cases without deciding the merits of the prosecution.
  • The deposit directed by the Court was specifically ordered under protest, ensuring that the petitioners' legal rights regarding liability remained unaffected.
  • The order does not determine guilt and is confined only to the question of grant of bail.

 

Sections Involved

  • Section 132(1)(c), 132(1)(f), 132(1)(h) & Section 132(1)(i), Central Goods and Services Tax Act, 2017
  • Section 439 of the Code of Criminal Procedure, 1973 (Cr.P.C.)

 

Link to download the order -

https://mytaxexpert.co.in/uploads/1782968526_168compressed.pdf

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