the essay of 4 March 2026 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">MARCH 04, 2026 </font></strong></font></font></p> <p align="center"><font color="#FF6633" face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong> Liberty with leash - GST bail</strong></font></p> <p align="center"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><u>By Vijay Kumar</u></strong></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the ongoing saga of GST enforcement, two taxpayers found themselves in the unenviable position of being guests of the state since September 2025. They were arrested by officials of the GST Department on 17.09.2025. Complaint/chargesheet for commission of offences under GST has been filed against them. They moved applications for grant of bail, which have been dismissed by the Court of Chief Judicial Magistrate, Ludhiana on 29.10.2025 and then by the Court of Additional Sessions Judge, Ludhiana on 22.12.2025 and 06.01.2026, respectively </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">After a series of unsuccessful auditions for liberty, they eventually brought their plea to the High Court - <a href="https://taxindiaonline.com/gst/details?id=191827&view=news&type=caselaw" target="_blank"><strong>2026-TIOL-369-HC-P&H-GST</strong></a> with the submissions that:</font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. They have been falsely implicated in this case without considering the true facts.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. Their business activities are lawful and have been carried on in the ordinary course of commercial operations.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">3. Mere holding of the position of Director, in the absence of any specific role or overt act attributed to the petitioners, does not attract criminal liability.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">4. They were not involved in the day-to-day affairs or operational management giving rise to the alleged transactions and no material has been placed on record to show their direct participation, <em>mens rea </em> or conscious involvement in the commission of any alleged offence.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">5. No nexus has been established between the alleged acts and the petitioners.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">6. The allegations, even if taken at face value, do not disclose the essential ingredients of the offences alleged.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">7. The procedural safeguards under Section 41(1) of the Code of Criminal Procedure were not complied with and as such, the arrest is in violation of Articles 14 and 21 of the Constitution of India.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">8. There was no circumstance appearing on record justifying the necessity of their arrest.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">9. The provisions of Section 73 and 74 of the CGST Act had not been followed.</font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">10. No reasonable satisfaction had been recorded. The prosecution case rests on vague and omnibus allegations without specific attribution of criminal conduct, rendering the continuation of proceedings against the petitioners an abuse of the process of law. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">11. They are in custody since long. The maximum punishment to be awarded to them in case of conviction is 05 years. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">They, therefore, urged that they deserve to be released on bail. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">These are the typical grounds taken by anybody who is arrested under GST. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The counsel for the Department argued that: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. The petitioners are key persons connected with the firms, who have played an active role in orchestrating a large-scale tax evasion racket by fraudulently availing Input Tax Credit on the basis of fake and non- genuine invoices. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. The complaint has already been filed after completion of investigation and the seriousness of allegations, magnitude of the offence and role attributed to the petitioners disentitle them to the discretionary relief of bail. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">3. Sections 73 and 74 operate in the realm of civil adjudication dealing with assessment, determination, and recovery of tax, interest, and penalty. In the present case, the fraudulent availment and utilization of ITC amounting to Rs. 71.86 crores, based on bogus invoices valuing Rs. 471.15 crores, has been established during investigation through documentary records, financial trail, GST returns, e-way bill analysis, and digital evidence, which is overwhelming in nature and sufficient to attract the provisions of Section 132 of the CGST Act and consequently to justify arrest under Section 69 of CGST Act, without awaiting completion of adjudication under Sections 73 or 74 of CGST Act. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">4. The arrest of the petitioners was effected after collecting evidence and conducting thorough inquiry as well as after obtaining requisite sanction from the Principal Commissioner under Section 69(1) of the CGST Act. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">5. The grounds of arrest were duly communicated to them. All the constitutional and legal safeguards were complied with and, there was compliance of all the mandatory provisions and the plea that the arrest was liable to be vitiated for want of proper adjudication is not tenable. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">6. There are chances of the petitioners fleeing or tampering with the record, if extended benefit of bail. There is no illegality or infirmity in the orders passed by the Courts of Chief Judicial Magistrate, Ludhiana and Additional Sessions Judge, Ludhiana declining the prayer of the petitioners for grant of bail. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">7. The petitioners are not entitled to get indulgence of bail by this Court and the petitions are liable to be dismissed. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">These are the typical grounds taken by Revenue in all arrest cases – like a script that never changes. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The High Court noted that <em>bare perusal of Section 132 (Punishment for certain offences) leaves no room to doubt that the offences alleged carry minimum punishment of 06 months and a maximum punishment of 05 years of imprisonment. Further, Section 138 of the CGST Act is relevant, as per which, the offences under Section 132 of the Act are compoundable </em>. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The law regarding grant of bail has been discussed in several pronouncements of the Supreme Court. </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. <em>Dataram Singh vs. State of U .P, (2018)3 SCC 22</em>, wherein Supreme Court had reiterated the law of bail as : </font></font></p><blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. Yet another important facet of our criminal jurisprudence is that the grant of bail is the general rule and putting a person in jail or in a prison or in a correction home (whichever expression one may wish to use) is an exception. Unfortunately, some of these basic principles appear to have been lost sight of with the result that more and more persons are being incarcerated and for longer periods. This does not do any good to our criminal jurisprudence or to our society. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. The historical background of the provision for bail has been elaborately and lucidly explained in <em>Nikesh Tarachand Shah v. Union of India </em><a href="https://taxindiaonline.com/searchcaselaw/details?id=132156&type=caselaw&keyword=null" target="_blank"><strong><em>2017-TIOL-433-SC-PMLA </em></strong></a> going back to the days of the Magna Carta. It was held way back in <em>Nagendra v. King-Emperor </em> [AIR 1924 Cal 476] that bail is not to be withheld as a punishment. Reference was also made to <em>Emperor v. Hutchinson </em> [AIR 1931 All 356] wherein it was observed that grant of bail is the rule and refusal is the exception. The provision for bail is therefore age-old and the liberal interpretation to the provision for bail is almost a century old, going back to colonial days. </font></font></p></blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. In <em>Sanjay Chandra vs. CBI , (2012) 1 SCC 40</em>, Sessions Court and the High Court had refused the requests of the persons accused of committing offences of cheating and forgery and use of forged documents, for grant of bail on the grounds that offences alleged against them were serious involving deep rooted planning, causing huge loss to the State exchequer and that there was possibility of the accused persons tampering with the evidence. The Supreme Court observed: </font></font></p><blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The grant or refusal to grant bail lies within the discretion of the court. The grant or denial is regulated, to a large extent, by the facts and circumstances of each particular case. But at the same time, right to bail is not to be denied merely because of the sentiments of the community against the accused. The primary purposes of bail in a criminal case are to relieve the accused of imprisonment, to relieve the State of the burden of keeping him, pending the trial, and at the same time, to keep the accused constructively in the custody of the court, whether before or after conviction, to assure that he will submit to the jurisdiction of the court and be in attendance thereon whenever his presence is required. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">X XXX XXX </font></font></p></blockquote></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The High Court noted: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The position of law regarding grant of bail is that the basic jurisprudence relating to bail in economic offences remains the same in as much as the grant of bail is the rule and its refusal is the exception, so as to ensure that an accused has the opportunity to get fair trial. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The broad parameters to be considered while deciding prayer of an accused for grant of bail can be enumerated as: </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(i) Whether there is any prima facie or reasonable ground to believe that the accused had committed the offence; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(ii) Nature and gravity of the charge; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(iii) Severity of the punishment in the event of conviction; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(iv) Danger of accused absconding or fleeing if released on bail; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(v) Character, behaviour, means, position and standing of the accused; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(vi) Likelihood of the offence being repeated; </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(vii) Reasonable apprehension of the witnesses being tampered with; and </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">(viii) Danger, of course, of justice being thwarted by grant of bail. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">On consideration of the facts and circumstances and also considering that the alleged offences are punishable with maximum punishment up to 05 years and also keeping in view that in such circumstances, the further detention of the petitioners may not at all be justified since in case of this nature, the evidence to be rendered by the respondent would essentially be documentary and electronic, which will be through official witnesses, due to which, there cannot be any apprehension of tampering, intimidating or influencing the witnesses and further as it appears justified to strike a fine balance between the need for further detention of the petitioner when no custodial interrogation has been claimed at all by the department, the Court considered that the petitioners are entitled to be released on bail but subject to certain conditions.</font></font></p> <h2 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Taxman's Lexicon: A Cheat Sheet for the "Accidental" Director</font></font></h2> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">When the Revenue department comes knocking with a Rs. 471.15 crore invoice in one hand and handcuffs in the other , it helps to have a few Latin maxims and judicial "hits" up your sleeve. Here is the essential glossary from the Ludhiana Bail Odyssey: </font></font></p> <blockquote><h3 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">1. The <em>"Default Setting"</em> (Rule vs. Exception) </font></font></h3><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In the eyes of the law, <strong>Bail is the Rule and Jail is the Exception</strong>.; the Department has to pay a very high "evidence tax" to upgrade anyone to the "Incarcerated" tier. </font></font></p><h3 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">2. The<em> "Director's Alibi" (Mens Rea)</em></font></font></h3><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Criminal liability requires <strong>mens rea </strong> - the <em>"guilty mind"</em> or conscious involvement in the crime. </font></font></p><h3 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">3. The<em> "Paper Tiger"</em> Defence (Documentary Evidence) If the case relies almost entirely on documentary and electronic evidence held by official witnesses, there is no<em> "reasonable apprehension"</em> of tampering. Since you can't exactly "intimidate" an Excel spreadsheet or <em>"bribe"</em> a digital trail, the Court sees little point in keeping you behind bars just to stare at the walls. </font></font></h3><h3 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">4. The <em>"Magna Carta"</em> Callback: The right to bail is an <em>"age-old"</em> liberty, stretching back to the days of colonial jurisprudence and the <strong>Magna Carta </strong>. A reminder to the Department that while the <strong>CGST Act </strong> is from 2017, the right to not be randomly locked up is a <em>"vintage"</em> classic from 1215.</font></font></h3><h3 style="text-align:justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">5. The <em>"Fine Balance"</em> Act: The Court must strike a <strong><em>"fine balance"</em> </strong> between the need for detention and the personal liberty of the accused.</font></font></h3></blockquote> <p align="justify"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2026/je3326.JPG" style="height:200px; width:329px"/></p> <p align="justify"><font color="#ff0000"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Until next week </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Comments/feedback welcome at <a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a> or 9848111243 (WhatsApp)</font></font></p> </body> </html>