Bail Rejected Under Section 132 of CGST Act, 2017: Principal Sessions Court, Chennai Upholds Arrest on Prima Facie Material
Case Overview
Dr. Obed Ulla A Vs Senior Intelligence Officer
Principal Sessions Court, Chennai
The Principal Sessions Court, Chennai, recently dismissed a bail application filed by a Director of a gold jewellery trading company who was arrested in connection with alleged GST evasion exceeding Rs. 100 crore. The Court, after carefully evaluating submissions from both sides, concluded that sufficient prima facie material existed to support the arrest, the investigation remained at a preliminary stage, and the conduct of the accused demonstrated that custodial interrogation was indispensable for the purposes of investigation.
Background and Factual Matrix
The Company and Its Business Operations
M/s. Attica Gold Private Limited, a company incorporated under the Companies Act, was engaged in purchasing used gold jewellery from walk-in customers and reselling the same through an extensive network of over 200 branches spread across India, employing upward of 1,500 individuals. The business operated under the margin scheme as prescribed under Rule 32(5) of the CGST Rules, 2017, whereby GST is charged only on the margin earned from such resale rather than on the entire transaction value.
The petitioner was inducted as a Director of the company in the year 2024.
The Alleged Scheme of Evasion
According to the investigation agency, the Directorate General of GST Intelligence (DGGI), the company misused the margin scheme in the following manner:
- Old gold jewellery purchased at various branches, particularly from Bangalore, was not resold to end customers as reflected in the GST returns
- Instead, the gold was transported, melted and converted into Gatti gold, which is a raw gold product
- The Gatti gold was then sold to other jewellery manufacturers, attracting a flat GST rate of 3%
- The company's GST returns, however, depicted the transactions as resales under the margin scheme, thereby suppressing taxable turnover considerably
- The alleged wilful GST evasion was computed to exceed Rs. 100 crore, spanning the period from 2020–2021 to 2025–2026
Search Operations and Arrest
The investigation agency carried out searches at the corporate office and multiple branches on 29.05.2026, 30.05.2026, 01.06.2026 and 02.06.2026. A separate search was conducted at the petitioner's residential premises on 12.06.2026. The following materials were seized during the searches:
- Hard disks and electronic devices
- Tally data
- Transport and logistics records
- Melting records and melting room CCTV footage
- Voluntary statements recorded from employees and recipients
Notably, no incriminating material was recovered from the petitioner's residential premises.
Following the approval granted by the Additional Director General under Section 69(1) of the CGST Act, 2017, the petitioner was arrested on 12.06.2026 at his Bangalore residence in the presence of family members, with due intimation. He was subsequently produced before the concerned authority on 13.06.2026 and remanded to judicial custody.
Arguments Advanced by the Petitioner
The petitioner's Senior Counsel raised several significant legal contentions:
1. Unsupported Allegation of Rs. 100 Crore Evasion
It was argued that the claim of GST evasion to the tune of Rs. 100 crore was a bald, unsubstantiated allegation unsupported by any concrete material or evidence. Reliance was placed on the Hon'ble Supreme Court's ruling in Radhika Agarwal Vs. Union of India, 2025 6 SCC 545, where it was held that arrest under the GST law could be made only if the offence is non-bailable and cognizable and the conditions under Section 132(1)(a) to (d) of the CGST Act, 2017 are duly satisfied.
2. Petitioner's Limited Association with the Company
Since the petitioner joined the company only in 2024, it was contended that he could not be saddled with criminal liability for alleged evasion spanning the period from 2020–2021 onwards, which predated his directorial appointment.