Result Of Assessment Proceedings Has Bearing On Criminal Prosecution Under GST: Allahabad High Court

The Allahabad High Court on 20 May held that the outcome of assessment proceedings can have a material bearing on criminal prosecution under the Goods and Services Tax (GST) regime.

Justice Vikram D. Chauhan granted bail to Shakib Qureshi and observed that, although criminal prosecution and assessment proceedings are independent, findings in assessment proceedings may affect a criminal case. He observed:

“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.”

The case arose from a complaint alleging fraudulent claims of inward supplies worth Rs. 4–5 crores by Sundar Trader. During the investigation, authorities issued notices to several entities that had claimed input tax credit (ITC) on transactions with Sundar Trader. One such entity, Sunshine Steel, also came under scrutiny.

According to the prosecution, authorities attempted to contact the applicant but could not trace him. The investigation allegedly revealed that he had used fake credentials to create fictitious firms and file GST returns on their behalf.

Counsel for the applicant argued that authorities arrested him without initiating proceedings under Sections 73 or 74 of the CGST Act. The applicant contended that he had remained in custody since November 2025 and that the authorities could not lawfully commence criminal prosecution without first completing adjudication proceedings under Sections 73 and 74.

The Court noted that no proceedings under Sections 73 or 74 had been initiated against the applicant. It observed that the proceedings undertaken by the authorities were in the nature of assessment proceedings and that, while criminal prosecution was not barred, the outcome of such proceedings could influence the criminal case.

It further noted that the applicant had no criminal history, had remained in jail since 2025, and that the trial court had not framed charges. Referring to the presumption of innocence at the pre-trial stage, the Bench observed:

“The ultimate justification for such deprivation of liberty can only be, the accused being found guilty of the offences for which they have been charged. If such a finding is not likely to be arrived at within a reasonable time some relief becomes necessary. Timely delivery of justice is part of human rights and denial of speedy justice is a threat to public confidence in the administration of justice. No material has been shown by State to demonstrate that the conduct of applicant while in jail would disentitle the applicant to be released on bail.”

Accordingly, The High Court granted bail.

For Applicant(s): Ajatshatru Pandey, Niraj Kumar Singh

For Opposite Party(s) : Dhananjay Awasthi