Rajasthan High Court Refuses Bail in Large-Scale GST Evasion Prosecution

The Rajasthan High Court has declined to grant bail to two accused persons in a substantial GST evasion matter, emphasizing the seriousness of economic offences, the magnitude of the alleged fraud, and the presence of extensive electronic and documentary evidence. The applications were moved under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) in prosecutions launched under Section 132 of the Central Goods and Services Tax Act, 2017 (CGST Act).

The Court passed a common order dealing with both bail applications because the factual matrix and legal issues were closely interlinked and arose out of complaints filed by the Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit.

Background of the Prosecutions

Two separate complaints were filed by the DGGI, each alleging large-scale evasion of GST through clandestine transactions in iron scrap and related trading activities. The complaints arose from intelligence inputs suggesting that certain entities were:

  • Supplying goods without valid tax invoices
  • Moving goods without e-way bills or proper documentation
  • Issuing or utilizing fake invoices
  • Destroying or concealing incriminating records

Complaints and Statutory Provisions Involved

  1. Complaint against petitioner Gulam Fareed

    • Complaint No. DGGI/ INT/ INTL/ 183/ 2025-GR.1-0/O ADG- DGGI-ZU-Jaipur dated 19.02.2025
    • Offences alleged under Section 132(1) of the CGST Act, 2017
    • Bail application filed under Section 483 BNSS

  2. Complaint against petitioner Yash Chandani

    • Complaint No. DGGI/INV/GST/366/2025-Grl-0/O ADJ-DGGI-ZU-Jaipur dated 19.02.2025
    • Offences alleged under Section 132(1)(a)(f)(h)(l) of the CGST Act, 2017
    • Bail application also under Section 483 BNSS

The Court noted that the alleged tax evasion crossed the statutory threshold under Section 132 which renders the offences non-bailable and cognizable.

Petitioners’ Submissions in Support of Bail

Counsel appearing for both petitioners argued that the Department had wrongly roped them into the alleged evasion scheme and that they were not the primary actors originally targeted in the intelligence-based investigation.

Common Arguments by Both Petitioners

The following key submissions were advanced:

  • The initial probe, according to the petitioners, was centered on other alleged masterminds, and not on these petitioners, suggesting that their subsequent implication was an afterthought.
  • The investigation was said to be substantially complete, and complaints had already been filed; hence, there was no need for further custodial interrogation.
  • The maximum punishment prescribed for the alleged offences is five years, and the petitioners contended that in such circumstances, bail should ordinarily be granted, particularly when trial would take considerable time to conclude.
  • It was argued that many of the materials collected, especially certain electronic records and statements, were not legally admissible and should not be heavily relied upon at the bail stage.
  • The petitioners stressed that they had been in custody since 19.02.2025 and that continued detention was punitive rather than investigative.

They also contended that the offences are triable by a Judicial Magistrate First Class, and thus, prolonged incarceration before trial would be disproportionate.

Specific Contentions on Behalf of Petitioner Gulam Fareed

Counsel for petitioner Gulam Fareed submitted:

  • The core investigation was focused on three other individuals, namely Manoj, Naveen Yadav and Rajeev Yadav, alleged by the Department to be the real brains behind the GST evasion in iron scrap dealings.
  • The Department had connected the petitioner primarily due to his association with M/s Apollo Steels and M/s Aravali Steels, said to be involved in unauthorized supply of iron scrap, resulting in a claimed GST loss of ₹13,61,00,000/-.
  • It was argued that:
    • M/s Apollo Steels is owned by Mohammad Noor Makkar, and not by the petitioner.
    • M/s Aravali Steels was indeed owned by the petitioner, but lawful business dealings between the two firms had been wrongly criminalized.
  • Apart from certain WhatsApp chats and messages, there was alleged to be no substantive material tying the petitioner directly to the alleged GST evasion.
  • On this basis, it was contended that the petitioner’s implication was speculative and not supported by cogent admissible evidence.

Specific Contentions on Behalf of Petitioner Yash Chandani

With respect to petitioner Yash Chandani, it was argued: