Facts of the Case

The petitioner, Directorate General of GST Intelligence (DGGI), challenged two orders passed by the learned Additional Sessions Judge (ASJ), Patiala House Courts:

  • Order dated 02.02.2023 granting anticipatory bail to the respondent.
  • Order dated 24.04.2023 rejecting the application for cancellation of anticipatory bail.

The case arose from interception of 21 containers of smoking mixtures at Mundra Port, which were found to be spurious and unfit for human consumption after laboratory testing.

Investigations revealed:

  • The respondent, proprietor of M/s Harsha International, allegedly exported such products.
  • No genuine business activity was found at registered premises.
  • Transactions involved GST refund of approximately ₹198 crores, largely transferred to another entity (M/s Radiant Traders).
  • Co-accused was arrested under Section 132(1)(b) and (c) of the CGST Act, 2017.

Despite summons, the respondent initially did not comply, leading to allegations of GST fraud and wrongful Input Tax Credit (ITC) claims. 

Issues Involved

  1. Whether anticipatory bail under Section 438 CrPC is maintainable in offences under the CGST Act, 2017.
  2. Whether the anticipatory bail granted to the respondent should be cancelled due to:
    • Alleged non-cooperation,
    • Violation of bail conditions,
    • Serious economic offence involving GST evasion.
  3. Applicability and retrospective effect of Supreme Court ruling in
    State of Gujarat v. Choodamani Parmeshwaran Iyer.

Petitioner’s Arguments (DGGI)

  • Anticipatory bail is not maintainable in CGST offences as per Supreme Court ruling.
  • The respondent is involved in a serious GST fraud of ₹218 crores.
  • Fraudulent method used:
    • Claiming ITC using high-value cigarettes as raw material (economically unviable).
  • Seized goods were spurious and unsafe for consumption.
  • Large GST refunds were fraudulently obtained and transferred.
  • Respondent violated bail conditions, justifying cancellation.

Respondent’s Arguments

  • Supreme Court judgment relied upon is distinguishable and not retrospective.
  • Co-accused had already been arrested, creating a genuine apprehension of arrest.
  • Laboratory report was inconclusive, not definitively proving fraud.
  • GST on purchases was duly paid; no fake invoices alleged.
  • Entire case based on assumptions from one consignment.
  • ITC amount of over ₹18 crores was reversed voluntarily.
  • Respondent cooperated with investigation and complied with conditions.

Court’s Findings

The Hon’ble Delhi High Court held:

  • Supreme Court ruling in Choodamani Parmeshwaran Iyer is not applicable retrospectively.
  • Anticipatory bail can still be granted, especially where genuine apprehension of arrest exists.
  • High Court can exercise powers under Article 226 for pre-arrest protection.
  • The respondent:
    • Was not the main accused,
    • Had clean antecedents,
    • Cooperated with investigation.

Regarding cancellation of bail:

  • No substantial violation of bail conditions was proved.
  • Allegations of non-cooperation were factually incorrect.
  • Passport condition was irrelevant as passport had expired long ago.
  • ITC reversal was verified and acknowledged. 

Court Order / Final Decision

  • The petitions filed by DGGI were dismissed.
  • Anticipatory bail granted to the respondent was upheld.
  • Respondent directed to strictly comply with bail conditions.
  • Liberty granted to DGGI to seek cancellation if future non-compliance occurs.
  • Court clarified that observations are limited to bail adjudication and not merits.

Important Clarifications

  • Anticipatory bail under Section 438 CrPC is not absolutely barred in GST cases.
  • Supreme Court rulings on procedural aspects cannot operate retrospectively unless explicitly stated.
  • Economic offences, though serious, require individual role assessment before denying bail.
  • Bail cancellation requires clear violation of conditions, not mere allegations.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/ABL19012024CRLMM45282023_155147.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.