'Concerning Deviation From Procedure': P&H High Court Flags Abrupt Arrests Under CGST Act, Lack Of Urgency By Dept In Pursuing Trial

The Punjab and Haryana High Court has expressed concern over the sluggish pace of trials and the lack of convictions in Goods and Services Tax (GST) evasion cases and flagged abrupt arrests of accused by the authorities, "driven by some inexplicable urgency rather than necessity."

The Court granted bail in an alleged case involving defrauding the state exchequer of Rs. 107 crore, as input tax credit by generating fake invoices from fake firms.

Referring to data presented in pursuance of its order, the Court pointed out that since the commencement of the GST regime in 2017, involving defrauding the state exchequer of 107 crore claimed as input tax credit by generating fake invoices from fake firms.

"The pattern displayed by the respondent officials shows a concerning deviation from the procedure established by law. The CGST Act is clear in its mandate and does not leave scope for ambiguity for the respondent to justify the conduct of its officials. In practice, the respondent is seen carrying out abrupt arrests, driven by some inexplicable urgency rather than necessity. However, as the data suggests, the respondent does not pursue the trial with the same urgency," Justice Harpreet Singh Brar observed.

"Perhaps, the respondent ought to deliberate upon the fact that the goal of initiating criminal prosecution is not achieved by securing only an arrest and modify their approach to serve the larger purpose," the Court added.

Notice Not Served Prior To Arrests 

The Court noted that the empirical data suggest that notices under Sections 73 and 74 of the CGST Act are served in a very few cases. "It can be safely inferred that where notice is served, arrests are not being made however, where arrests are in fact made, no prior notice is served."

Further, the Court said that, authorities seem to be "habitual of initiating proceedings" but not seeing them through, a trend appropriately showcased by the data provided by all 08 DGGI jurisdictions in the States of Punjab, Haryana and Chandigarh.

State Authorities Focusing On Arrest Not On Concluding Trial

The Court said that, while it is understandable that economic offences require sophisticated investigation, the same cannot go on indefinitely.

"Much to the concern of this Court, the empirical data makes it abundantly clear that securing a conviction and concluding the trial is not a matter of priority for the respondent as all its energy is devoted towards curtailing liberty of the prospective accused," it added.

It clarified that the Court is not oblivious to the gravity of economic offences and its impact, of late, "it has been observed that the involvement of the criminal justice system in cases pertaining to the CGST Act seemingly begins at the stage of arrest and ends when a bail is secured."

"Allowing such tendencies to go unchecked would raise serious doubts about the efficacy of investigation, which naturally weakens the faith of the public in the justice dispensation mechanism," the bench added.

Slow Paced Trial- A Symptomatic Of Systematic Problem

The Court opined that the slow-paced trials stemming from complaints under Section 132 of the CGST Act and the departure from the established procedure qua Section 73 and 74 of the CGST Act, throughout the States of Punjab, Haryana as well as Union Territory of Chandigarh is symptomatic of a systemic problem.

"As such, it would be against the interest of justice to shield the prosecuting agencies from accountability with regard to timely conclusion of trials," the Court said.

Adding that "it is trite law that no person can be deprived of his liberty except through a procedure that is reasonable, fair and just as such deprivation would amount to a direct violation of the fundamental right as enshrined in Article 21 of the Constitution of India," the Court said, "curtailment of personal liberty to some extent, during the judicial process, cannot be avoided."

In the present case, the Court noted that the petitioners have been in custody for 9 months 18 days while no substantial progress has been made in the trial. The final report under Section 173 Cr.P.C. (now Section 193 BNSS) stands presented qua the petitioners.

Stating that an accused in a complaint under Section 132 of the CGT Act cannot be denied the concession of bail, solely on the ground that investigation remains pending qua a co-accused, the Court allowed the relief.

Also read: Accused Cannot Be Denied Bail U/S 132 GST Act In Tax Fraud Case Because Investigation Is Pending Against Co-Accused: P&H High Court

Mr. Vinod Ghai, Senior Advocate with Ms. Kashish Sahnia, Advocate and Mr. Arnav Ghai, Advocate for the petitioner in CRM-M-8675-2025.

Ms. Muskaan Gupta, Advocate and Ms. Muskan Chauhan, Advocate for the petitioner in CRM-M-14956-2025.

Ms. Sharmila Sharma, Senior Panel Counsel, DGGI in CRM-M-14956-2025.

Mr. Sunish Bindlish, Senior Standing counsel for the respondent- DGGI

Ms. Pridhi Sandhu, Senior Standing Counsel, CGST for Chief Commissioner, Panchkula, CGST.

Mr. Manish Bansal, Public Prosecutor, U.T. Chandigarh and Mr. Alankrit Bharadwaj, Addl. P.P., U.T. Excise and Tax Department.

Title: Manish Kumar v. Directorate General, Goods & Service Tax Intelligence, Zonal Unit, Ludhiana

Citation: 2025 LiveLaw (PH) 313

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