Facts of the Case

The case arose from allegations of large-scale GST evasion involving the respondent, Manish Goyal, proprietor of M/s Radiant Traders. The Directorate General of GST Intelligence (DGGI) alleged that the firm was engaged in fraudulent transactions involving smoking mixtures.

A consignment exported through M/s Harsha International was intercepted at Mundra Port, and laboratory testing revealed that the product was spurious and not fit for human consumption. Investigation further indicated that no actual manufacturing activity was conducted at the registered premises of M/s Radiant Traders, and the firm was allegedly non-existent at its declared locations.

The respondent was arrested on 25 November 2022 under Section 132 of the CGST Act. His bail application was initially rejected but later granted by the Sessions Court on 21 December 2022. Subsequently, the bail was cancelled on 15 September 2023 due to alleged non-cooperation with the investigation, which led to the present petitions before the Delhi High Court. 

Issues Involved

  1. Whether cancellation of bail was justified on grounds of non-appearance during investigation.
  2. Whether the respondent’s role justified continued custody in a GST evasion case.
  3. Whether statements recorded under Section 70 of the CGST Act can be relied upon at the stage of bail.

Petitioner’s Arguments (DGGI)

  • The respondent was involved in a serious economic offence involving GST evasion of approximately ₹218 crores.
  • The transactions were economically and technically unviable, indicating fraudulent intent.
  • The seized goods were found to be spurious and unfit for consumption.
  • Statements under Section 70 are admissible as evidence under Section 136 of the CGST Act.
  • The respondent failed to comply with bail conditions by not appearing on multiple occasions, justifying cancellation of bail. 

Respondent’s Arguments (Manish Goyal)

  • The CRCL report was inconclusive and could not establish that the goods were not manufactured using declared inputs.
  • A single defective consignment cannot imply that all transactions were fraudulent.
  • The respondent had substantially complied with investigation requirements, and absence on one occasion was due to ill health.
  • No criminal complaint had yet been filed, making it a pre-charge sheet stage.
  • Cancellation of bail on minor procedural lapses was unjustified. 

Court’s Findings

The Delhi High Court observed that:

  • Statements on record suggested that the main accused was another individual (Chirag Goel), and the respondent may have acted under his directions.
  • Prima facie, the respondent did not appear to be in control of the day-to-day operations of the firm.
  • The respondent had already spent time in custody, and further custodial interrogation was not required.
  • Non-appearance on one or two occasions cannot be a valid ground for cancellation of bail when overall cooperation is evident.

The Court held that the Sessions Court’s order cancelling bail was harsh and unsustainable.

Court Order / Final Decision

  • Petition filed by DGGI: Dismissed
  • Petition filed by Manish Goyal: Allowed
  • Bail granted earlier was restored and confirmed
  • Condition imposed: strict compliance with summons, failing which bail may be cancelled

Important Clarifications by the Court

  • Bail cannot be cancelled mechanically for minor non-compliance.
  • Economic offences, though serious, do not automatically justify continued custody without necessity.
  • Observations in the judgment are limited to bail and shall not affect trial merits.
  • Authorities must provide at least 48 hours’ notice for appearance pursuant to summons.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/ABL19012024CRLMM8812023_160622.pdf

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