Deposit Can’t Make Rs. 5 Crore + GST Offence Compoundable, But Bail Need Not Be Cancelled: Rajasthan HC

The Rajasthan High Court, Jaipur Bench has dismissed a bail cancellation application filed by the Union of India against businessman Arun Jindal, who is accused of evading Goods and Services Tax (GST) amounting to Rs. 9.39 crore, holding that the grant of bail was not based solely on the deposit of money and did not warrant interference. The bench of Justice Praveer Bhatnagar declined to cancel the bail granted earlier by the trial court, despite acknowledging that the trial court’s legal reasoning on compounding and classification of offences under the Central Goods and Services Tax Act, 2017 (CGST Act) was flawed. The Directorate General of GST Intelligence (DGGI), Jaipur Zonal Unit, alleged that Arun Jindal clandestinely supplied 1,49,17,395 kilograms of ingots without issuing invoices, with the help of co-accused persons. The alleged taxable value of the supplies stood at ₹52.21 crore, resulting in a GST evasion of ₹9,39,79,589. Jindal was booked under Sections 132(1)(a), (f), (h) and (l) of the CGST Act, offences that carry a maximum punishment of five years’ imprisonment where tax evasion exceeds ₹5 crore. The trial court had granted bail to Jindal on 11 March 2025, inter alia, after he deposited ₹5 crore before the court. Challenging this order, the Union of India sought cancellation of bail, contending that the bail order was illegal and contrary to settled principles of law. The department argued that offences involving GST evasion exceeding Rs. 5 crore are cognizable and non-bailable under Section 132 of the CGST Act. The trial court incorrectly treated the offence as compoundable, despite Section 138 clearly barring compounding where tax evasion exceeds ₹5 crore. Grant of bail conditional upon deposit of money violated the Supreme Court’s ruling in Gajanan Dattaray Gore v. State of Maharashtra (2025), which held that bail cannot be granted merely on the basis of monetary undertakings. Economic offences involving large-scale tax evasion constitute a grave class of offences, requiring stricter scrutiny, as held in Mahipal v. Rajesh Kumar and Y.S. Jagan Mohan Reddy v. CBI. On these grounds, the department contended that the trial court’s order suffered from perversity and deserved to be set aside. The High Court agreed with the department on one crucial legal issue:The trial court’s interpretation that deposit of ₹5 crore could render the offence compoundable was legally incorrect. The court clarified that deposit of any amount does not alter the nature of the offence once the alleged tax evasion exceeds ₹5 crore. Offences above ₹5 crore are non-compoundable and non-bailable, and the trial court’s analogy on this aspect was flawed. However, the Court emphasised that bail was not granted solely on this erroneous reasoning. Despite the legal error, the High Court refused to cancel bail, citing the various factors. Firstly, the respondent accused had already spent time in judicial custody. Secondly, the maximum punishment is five years, triable by a Magistrate. Thirdly, there was no allegation of misuse of liberty, witness intimidation, or violation of bail conditions. Lastly, most witnesses were official witnesses, reducing the risk of interference. Other similarly placed co-accused had been granted bail by higher courts. The deposit of Rs. 5 crore was only one of the considerations, and not the sole basis for granting bail. The Court distinguished the Supreme Court’s ruling in Gajanan Dattaray Gore, observing that in the present case, the bail order was not exclusively founded on monetary deposit. The Court held that while the trial court’s understanding of Sections 132 and 138 of the CGST Act was incorrect, the overall exercise of discretion in granting bail did not warrant cancellation. The court dismissed the bail cancellation application and granted the bail to Arun Jindal who continues to operate. Case Details Case Title: UOI Versus Arun Jindal Case No.: S.B. Criminal Bail Cancellation Application No. 71/2025 Date: 28/ 01/2026 Counsel For Petitioner: Ajatshatru Mina Counsel For Respondent: Swadeep Singh Hora Click Here To Read Order Read More: Uploading GST Notices on Portal Alone Is an ‘Empty Formality’: Madras High Court Quashes Ex Parte Assessment

Deposit Can’t Make Rs. 5 Crore + GST Offence Compoundable, But Bail Need Not Be Cancelled: Rajasthan HC

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