The Rajasthan High Court at Jaipur has refused to grant regular bail to an accused facing allegations of operating an unregistered tobacco manufacturing unit and evading approximately ₹9.96 crore in Central Excise duty on the alleged production of flavoured tobacco (khaini).
The bench of Justice Chandra Prakash Shrimali observed that considering the facts and circumstances of the case, the seriousness of the alleged offence, the pending investigation and the possibility of the accused influencing the evidence, it would not be appropriate to release him on bail at this stage. The order was pronounced on August 12, 2026.
The bail application was filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) in connection with proceedings arising out of an investigation by the Directorate General of Goods and Services Tax Intelligence (DGGI), Jaipur Zonal Unit. The proceedings concerned an alleged offence under Section 9 of the Central Excise Act, 1944.
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The accused had been in custody since April 19, 2026. His counsel argued that he was not the owner of the tobacco factory and that the premises had been let out under a rent agreement. According to the defence, another person was the actual owner and operator of the manufacturing activity, while the accused was only working at the premises in an employee-related capacity.
The defence further contended that the allegations against the accused were false and that he had not committed any criminal act. It was argued that the principal accused persons were Shambhu Singh and Harisingh alias Mama and that the statements recorded during the investigation identified Shambhu Singh as the owner of the factory and the person operating the manufacturing unit.
In support of the bail plea, the accused relied upon several earlier decisions, including Lakhvir Singh and Others v. State of Punjab and Another, as well as various bail orders passed by the Rajasthan High Court and other courts in proceedings involving the Union of India and the DGGI.
The defence also relied on decisions including Vikash Gupta v. Union of India, Sher Singh Shekhawat v. Union of India, Ronak Kumar Jain v. Union of India, Shailesh Chandra v. DGGI Jaipur Zonal Unit, Praveen Jangir v. Union of India, Ratnambar Kaushik v. Union of India, Vishesh Sahal v. Union of India, Lakshya Agarwal v. DGGI Jaipur Zonal Unit, Jitendra Kumar Gupta v. Union of India, Pradeep Kumar Bansal v. Union of India and Vineet Jain v. Union of India.
The defence sought to persuade the Court that the allegations did not justify continued incarceration, particularly when the accused disputed being the owner or principal operator of the manufacturing facility.
Opposing bail, the prosecution alleged that a large-scale manufacturing operation involving flavoured tobacco (khaini)was being conducted from premises located at Bilahedi, Bhiwadi, under the brand name “Cool Lip”, without the requisite registration and without payment of applicable GST and Central Excise dues.
According to the prosecution, six FFS machines were found installed in a tin shed on the third floor of the premises. The investigation allegedly found that four machines were being used for manufacturing small packets of flavoured tobacco, while two machines were being used for making bulk packets containing approximately 32 pouches. Packaging material, tobacco, raw material and other items associated with the alleged manufacturing activity were also found at the premises.
The prosecution alleged that the raw material and machine parts required for the manufacturing process were supplied by Shambhu Singh and the accused. It was further alleged that the accused was overseeing the operations of the unregistered factory and participating in the manufacture of flavoured tobacco.
The DGGI alleged that for the period from February 1, 2026 to April 30, 2026, Central Excise duty amounting to approximately ₹9.96 crore remained unpaid.
The accused relied upon a rent agreement recovered during the search. According to the material considered by the Court, the premises had been rented to Govind Sharma for ₹41,800 per month on April 30, 2026. The defence argued that this demonstrated that the accused was not the owner of the factory and therefore could not automatically be treated as the person responsible for the alleged manufacturing activity.
The prosecution, however, relied on statements of persons allegedly found working at the premises. The statements indicated that the accused and Shambhu Singh were allegedly operating the machinery and arranging raw materials and machine parts.
The Court noted that the question of whether the factory was actually owned or operated by Harisingh alias Mama or by the accused would ultimately have to be determined on the basis of evidence during the trial.
The Court considered statements recorded during the investigation in which workers allegedly stated that the machines were being operated by Shambhu Singh and the accused and that they were also responsible for providing raw materials and machine parts.
One of the statements allegedly attributed the accused with supervising the factory’s operations and handling its overall affairs along with Shambhu Singh. The Court also noted the allegation that the accused was receiving rent from the premises in his capacity as landlord.
The Court observed that the question of who actually owned or operated the manufacturing unit was ultimately a matter to be determined on the basis of evidence. At the bail stage, the Court was not required to make a definitive finding on the merits of those allegations.
The investigation also encountered difficulty in determining the exact production capacity of the machines.
The order records that on April 17, 2026, fluctuations in electricity supply caused by a storm allegedly resulted in technical problems in the machines. Consequently, the investigating agency could not determine the maximum production speed of each machine by directly observing its operation.
The alleged production was therefore assessed on the basis of the production capacity of the FFS machines.
This aspect was relevant to the assessment of the alleged duty liability, with the prosecution maintaining that the unregistered manufacturing operation had resulted in substantial evasion of Central Excise duty.
The prosecution argued that the accused was involved in manufacturing flavoured tobacco on a large scale without registration and without payment of applicable taxes, resulting in significant loss of revenue to the exchequer.
The prosecution relied on several judicial decisions, including recent orders of the Supreme Court and High Courts, to oppose the bail application. Among the authorities cited were Umang Garg v. Union of India, Vijay Kumar Vijh @ Rana Thakur @ Rana Sahab v. State of Rajasthan, Ashish Goyal v. Union of India, Dheeraj Singhal v. Union of India, Basudev Mittal v. Union of India, Manoj Vijay v. Directorate General of Goods and Services Tax Intelligence and Hansraj Gurjar v. Union of India.
A key consideration for the High Court was that the investigation had not yet concluded.
The Court noted that the prosecution case involved allegations of operating an unregistered factory with FFS machines for manufacturing flavoured tobacco and evading Central Excise duty of approximately ₹9.96 crore during the relevant period. The Court also took note of the fact that the accused was alleged to have acted jointly with other accused persons in carrying out the manufacturing activity.
The prosecution submitted that the filing of the charge-sheet was still pending. It also argued that releasing the accused at this stage could create a possibility of his influencing or interfering with the evidence.
After considering the rival submissions and examining the case material, Justice Shrimali declined to grant bail.
The Court specifically refrained from making any final observation on the merits of the allegations. However, it found that the seriousness of the alleged offence, the circumstances emerging from the investigation and the fact that the investigation was still pending weighed against the accused at the bail stage.
The Court observed that the alleged evasion of Central Excise duty was a serious allegation affecting the country’s economy. It also found that the possibility of the accused influencing the evidence could not be ruled out if he were released while the investigation remained pending.
Accordingly, the High Court rejected and dismissed the bail application.
While denying bail, the High Court also took note of the fact that the accused had remained in custody since April 19, 2026.
The Court directed that the prosecution should present the result of the investigation before the competent court at the earliest. It also expected the trial court to make efforts for expeditious disposal of the case.
The Court expressly declined to comment on the merits of the allegations at the bail stage. The ultimate determination regarding the ownership, control and operation of the alleged tobacco manufacturing unit, as well as the actual extent of production and duty liability, remains subject to evidence and adjudication in the appropriate proceedings.
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