Facts of the Case

Based on secret information, officers of CGST Delhi West conducted a search under Section 67(2) of the CGST Act, 2017 on 01.01.2021 at an unregistered gutka manufacturing unit at Rohini, Delhi. Fourteen gutka pouch-making machines were found operational with around 75 labourers engaged in production. Large quantities of gutka branded as “Suhana Pasand” and “SHK” were seized along with incriminating documents and mobile phones.

During investigation, statements of labourers, supervisors and other persons were recorded. The respondent, Vishal Goyal, in his statement dated 15.02.2021, admitted involvement in manufacture and supply of gutka, knowing fully well that gutka manufacturing was banned, and disclosed investment of illegal proceeds into other ventures. The Department alleged that Vishal Goyal, along with associates, clandestinely manufactured and supplied gutka for several months, resulting in alleged GST evasion of approximately ₹831.72 crore calculated on best judgment basis.

The respondent was arrested on 16.02.2021 under Section 132 of the CGST Act and remanded to judicial custody. The learned Chief Metropolitan Magistrate granted bail to the respondent vide order dated 17.03.2021 after considering the period of custody, nature of evidence and stage of investigation. Aggrieved, the Department filed a petition under Section 482 Cr.P.C. before the Delhi High Court seeking recall of the bail order.

Issues Involved

Whether the bail granted to the respondent could be recalled on the ground of seriousness of economic offence and alleged huge GST evasion, whether the bail order suffered from illegality, perversity or arbitrariness, and whether mere gravity of allegations justified recall of bail in the absence of misuse of liberty.

Petitioner’s Arguments

The Department contended that the offence involved clandestine manufacture and sale of banned gutka with massive GST evasion of over ₹831 crore, making it a grave economic offence affecting society at large. It was argued that the respondent played a central role in the illegal activity, laundered proceeds of crime, and had earlier absconded. Reliance was placed on judicial precedents emphasizing strict approach in economic offences. It was further contended that the learned CMM failed to appreciate the gravity and societal impact of the offence and granted bail prematurely while investigation was still at an initial stage, warranting recall of the bail order.

Respondent’s Arguments

The respondent submitted that the bail order was well-reasoned and passed after due consideration of all relevant factors including period of custody, nature of evidence and role attributed to him. It was contended that the alleged GST evasion figure was imaginary and based on assumptions without concrete documentary evidence. The respondent argued that the entire case rested on statements recorded during investigation, the evidentiary value of which would be tested during trial. It was further submitted that there was no allegation of misuse of bail conditions, tampering with evidence or influencing witnesses after grant of bail, and therefore recall of bail was not permissible in law.

Court Order / Findings

The Delhi High Court examined the settled distinction between recall of bail and cancellation of bail, holding that recall of bail can be ordered only if the bail order is found to be illegal, perverse, arbitrary or based on irrelevant considerations, whereas cancellation is warranted only upon supervening circumstances or misuse of liberty. Relying on authoritative precedents including Mahipal vs. Rajesh Kumar, Neeru Yadav vs. State of U.P., and recent Supreme Court decisions, the Court held that an order granting bail must be tested only on the correctness of exercise of discretion at the time of grant.

On facts, the Court found that the learned CMM had duly considered the nature of allegations, role attributed to the respondent, period of custody, documentary nature of evidence and stage of investigation. The Court observed that the evidence was largely documentary and already in possession of the Department, and there was no material to show likelihood of tampering or influencing witnesses. The Court further noted that there was no allegation of misuse of bail since its grant. The High Court held that gravity of offence alone, without perversity or illegality in the bail order, could not justify recall of bail.

Important Clarification

The High Court clarified that economic offences, though serious, do not warrant automatic recall of bail once granted. Bail orders can be interfered with only if they suffer from perversity, illegality or arbitrariness, and not merely on the basis of seriousness of allegations or magnitude of alleged tax evasion.

Final Outcome

The petition filed by CGST Delhi West seeking recall of the bail order dated 17.03.2021 was dismissed. The bail granted to the respondent, Vishal Goyal, was upheld, and no ground was found to interfere with the discretionary order passed by the learned Chief Metropolitan Magistrate.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/NBK12012026CRLMM12422021_173641.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.