Facts of the Case

  • The respondent, the Senior Intelligence Officer of the Director General of GST Intelligence (DGGI), Hyderabad Zonal Unit, initiated an investigation based on an intelligence report/complaint.
  • The allegations state that the petitioner, Faisal Malik, acting as the managing partner of M/s. F.K. Metals Traders, was actively engaged in the fraudulent availment and passing of Input Tax Credit (ITC).
  • The quantum of the alleged tax evasion and illicit ITC routing is approximately ₹30 Crores, conducted through various shell entities and end-beneficiaries.
  • The fraudulent transactions were purportedly executed on the pretext of receiving and procuring metal scrap, supported solely by fake invoices without actual physical movement of goods.
  • Consequent to the intelligence gathered, a case was registered under F.No.DGGI/INV/GST.363/2026-Gr-L for offences punishable under Sections 132(1)(b)(c)(l) and 132(5) of the CGST Act, 2017.
  • The petitioner was arrested by the authorities and placed in judicial custody on April 10, 2026, where he remained incarcerated throughout the bail proceedings.

Issues Involved

  • Whether the petitioner is entitled to the grant of regular bail under Sections 480 and 483 of the BNSS, 2023, considering he had completed 60 days of incarceration in judicial custody as of the date of the hearing.
  • Whether the continued detention of the accused is justified given that the statutory period of 60 days elapsed without the investigation agency filing a formal complaint or charge sheet before the competent court.
  • Balancing the severity of the financial economic offence involving an alleged ₹30 Crores against the fundamental right to personal liberty and the statutory timelines governing detention.

Petitioner’s Arguments

  • The learned counsel for the petitioner strongly asserted that the petitioner has been falsely and illegally arrayed as an accused in the matter and maintains complete innocence against all allegations.
  • It was argued that the petitioner has not engaged in any unlawful or clandestine activity concerning the wrongful generation or availment of Input Tax Credit.
  • The petitioner's counsel emphasized that despite clear business statements and records clarifying the legitimate commercial activities carried out by the firm, the authorities falsely implicated him without any structural fault or culpability on his part.
  • A pivotal ground raised was the duration of custody; the petitioner had been continuously detained in jail since April 10, 2026. Having spent a substantial period (over 60 days) in judicial custody without a formal complaint being lodged, it was prayed that the regular bail petition be allowed.

Respondent’s Arguments

  • The learned Public Prosecutor fiercely opposed the grant of regular bail, designating the petitioner as the primary mastermind and kingpin behind the entire fraudulent network.
  • The respondent pointed out that although Accused No.2 had already been enlarged on bail, the role and magnitude of the allegations specific to the petitioner are far more severe and deeply entrenched.
  • It was contended that the petitioner orchestrated the issuance of multiple fake invoices to pass on unearned ITC, leading to a massive exchequer loss of approximately ₹30 Crores.
  • Furthermore, the prosecution highlighted that the investigation into the complex web of shell entities was still ongoing and incomplete. Enlarging the petitioner at this critical juncture could prejudice the probe, and therefore, the petition deserved outright dismissal.

Court Order / Findings

  • The High Court, presided over by Hon’ble Smt. Justice K. Sujana, carefully evaluated the rival submissions and scrutinized the case records.
  • The Court noted that the petitioner had been in continuous incarceration since April 10, 2026, effectively completing the 60-day statutory threshold.
  • It was explicitly observed by the Court that the alleged offences carry a maximum statutory punishment of up to five years of imprisonment.
  • Crucially, the Court highlighted that despite the passage of 60 days and the continuous detention of the petitioner, no formal complaint or charge sheet had been filed by the DGGI before the court as of the date of the order.
  • Taking into account the nature of the allegations, the statutory maximum punishment, and the prolonged period of incarceration, the Court deemed it fit to exercise its discretion in favor of liberty and allowed the regular bail petition subject to strict conditions:
    1. The petitioner must execute a personal bond of ₹1,00,000/- (Rupees One Lakh only) along with two sureties of the like sum to the satisfaction of the Special Judge for Economic Offences, Nampally, Hyderabad.
    2. The petitioner is ordered to mark his attendance and appear before the respondent DGGI authorities between 09:00 a.m. and 05:00 p.m. every Monday and Friday for a duration of one month, and as and when reasonably required thereafter.
    3. The petitioner is strictly directed not to influence, tamper with, or coerce any witness connected to the case.
    4. The petitioner must strictly adhere to all statutory conditions provided under Section 483(2) of the BNSS, 2023.

Important Clarification

  • This ruling reaffirms that even in severe economic offenses involving significant amounts (such as ₹30 Crores under the CGST Act), the accused cannot be detained indefinitely if the investigating agency fails to file a formal complaint within the stipulated statutory period while the accused is in custody. Personal liberty must be balanced against prosecution timelines when maximum imprisonment is capped at five years.

Section Involved

  • Sections 480 & 483 of the Bharatiya Nagarik Surakhsha Sanhita, 2023 (BNSS): Provisions governing the grant of regular bail and the imposition of conditions thereon.
  • Sections 132(1)(b), 132(1)(c), 132(1)(l), and 132(5) of the Central Goods and Services Tax Act, 2017 (CGST Act): Statutory provisions relating to the offences of passing/availing fraudulent Input Tax Credit (ITC) without underlying supply, and the classification of certain cognizable and non-bailable offences punishable with imprisonment up to five years.

Link to download the order - https://mytaxexpert.co.in/uploads/1783058906_312compressed.pdf

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