GST Authority Finding In Assessment Proceedings May Affect Criminal Case: Allahabad High Court

The Allahabad High Court on 11 August held that where assessment proceedings under the Central Goods and Services Tax Act, 2017 end in a finding that a taxpayer has not violated the law, such finding may have a bearing on criminal prosecution arising from the same allegations, even though the two proceedings are independent.

Justice Vikram D. Chauhan made the observation while granting bail to Javed Akhtar, who was accused of fraudulently availing input tax credit, noting that no proceedings under Sections 73 and 74 of the Act had been initiated against him. The Bench held:

“It is not in dispute that till date proceedings under Sections 73 and 74 of CGST Act has not been initiated. The said proceedings are in the nature of assessment proceedings in respect of alleged violation where show cause notice can be issued to tax payer. Although criminal prosecution is not barred and are independent proceedings. However, where in assessment proceedings, it is found that taxpayer has not violated any law, the same may have bearing on the criminal prosecution.”

Akhtar was booked under Sections 132(1)(c) and 132(1)(i) of the Central Goods and Services Tax Act on the allegation that he had fraudulently availed input tax credit on the strength of invoices issued by firms that did not exist.

His counsel submitted that the transactions related to 2020, while searches were conducted in 2021. It was also submitted that the investigation had been completed, the maximum punishment for the alleged offence was five years, and Akhtar had been in custody since 29 January 2026.

Opposing bail, the Union referred to Akhtar's criminal history in Case Crime No. 181 of 2023. It submitted that he had earlier been released pursuant to an order of the Supreme Court passed during the COVID-19 pandemic, with a direction to surrender within a stipulated period, but had failed to do so.

The Court referred to Ash Mohammad v. Shiv Raj Singh, in which the Supreme Court held that merely describing an accused as a history-sheeter does not mean that bail can never be granted, although criminal antecedents remain a significant factor having regard to the nature of the crime. In Prabhakar Tewari v. State of U.P., the Supreme Court observed that the pendency of several criminal cases cannot by itself be a basis for refusing bail.

It observed that nothing had been placed before it to show that Akhtar had tampered with evidence, intimidated witnesses in his earlier cases or attempted to evade the process of law. It noted:

“If the accused is otherwise found to be entitled to bail, he cannot be denied bail only on the ground of criminal history, no exceptional circumstances on the basis of criminal antecedents have been shown to deny bail to accused, hence, the Court does not feel it proper to deny bail to the applicant just on the ground that he had criminal antecedent.”

Further, the Bench held that the presumption of innocence applies to an undertrial and that continued custody must be justified even where a prima facie case has been made out. It stated:

“Even if prima facie case is made out, the constitutional Court while considering the bail application are required to examine whether it is reasonable to keep the accused in custody during trial and in only exceptional cases (like heinous crime) the bail can be denied.”

The Court also noted that the offence was triable by a Magistrate, the investigation had been completed and it had not been shown that charges had been framed against Akhtar. It further observed that the trial would not conclude within a year even if it commenced shortly and reiterated that bail is the rule and jail the exception.

It held that no exceptional circumstance had been shown to warrant continued detention, and allowed the bail application and directed Akhtar's release on a personal bond and two sureties of Rs.50,000 each.

The Bench imposed conditions including that Akhtar would not leave India without its prior permission and would inform the concerned court in writing of any change in his residential address. It clarified that breach of any condition would leave the prosecution at liberty to seek cancellation of bail.

Accordingly, the High Court allowed the bail application.

Counsel for Applicant: Shashi Dhar Shukla