Case Law Details
Mohsin Shabbir Khan. Vs State of Telangana (Telangana High Court)
₹12 Crore Cess Evasion: Telangana HC Grants Bail to Accused in Clandestine Pan Masala Manufacturing Ring
Material Facts
The petitioner sought regular bail in a case registered by the Superintendent of Central Tax Anti-Evasion Section, Hyderabad GST Commissionerate for offences under Sections 18(1)(a), 18(1)(b) and 18(1)(c) read with Section 19(1) of the HSNS Cess Act, 2025. Based on searches conducted on 09.05.2026, the prosecution alleged that four packing machines, “Kalakaar” branded Pan Masala, raw materials and packing materials were seized. It was alleged that the petitioner, along with others, clandestinely manufactured and cleared Pan Masala through undeclared packing machines without registration under the HSNS Cess Act, 2025 and without payment of HSNS Cess, resulting in an estimated evasion of about ₹12 crore. The petitioner was arrested on 17.06.2026.
Parties’ Submissions
The petitioner submitted that the alleged offences were punishable with imprisonment of less than five years and that he was arrested without service of notice under Section 35(3) of the BNSS. It was also submitted that the HSNS Cess Act is a new enactment.
The State opposed the bail application, contending that the petitioner had played a major role in the alleged offence and that another accused, described as the kingpin, was absconding and had filed an anticipatory bail application.
Court’s Findings
The High Court noted that the petitioner had been in custody since 18.06.2026, that the alleged offences were punishable with less than five years’ imprisonment, and that although the investigation was continuing, no custody petition had been filed.
Final Ruling
The High Court allowed the criminal petition and granted bail subject to conditions. The petitioner was directed to execute a personal bond of ₹25,000 with two sureties of the like amount, appear before the concerned SHO every Monday at 11:00 a.m. for eight weeks or until filing of the charge sheet, whichever was earlier, and thereafter as required, and comply with the conditions stipulated under Section 437(3) of the Cr.P.C. (presently Section 480(3) of the BNSS). Pending miscellaneous applications were ordered to stand closed.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
This Criminal Petition is filed praying this Court to enlarge the petitioner on bail who is arrayed as accused in Crime No. F.No.HQAE/V/01/2026-27-HYD-GST-AE of Superintendent of Central Tax Anti Evasion Section, Hyderabad, GST Commissionerate, registered for the offence punishable under Sections 18(1)(a)(b)(c) of HSNS Cess Act.
2. The brief facts of the case are that the officers of the Anti-Evasion Section, Hyderabad GST Commissionerate, on the basis of specific intelligence, conducted searches on 09.05.2026 at various premises allegedly connected with the petitioner. During the searches, four packing machines, substantial quantities of “Kalakaar” branded Pan Masala, raw materials and packing materials were allegedly found and seized. The prosecution alleges that the petitioner, in collusion with others, was clandestinely manufacturing and clearing Pan Masala through undeclared packing machines without obtaining registration under the Health Security Se National Security Cess Act, 2025 and without payment of the applicable HSNS Cess, thereby causing an estimated evasion of about ₹12 crores. It is further alleged that the petitioner was the person controlling and managing the affairs of the entities involved and had adopted proxy directors and sham arrangements to evade payment of cess. Based on the material collected during investigation, the petitioner was arrested on 17.06.2026 for the offences punishable under Sections 18(1)(a), 18(1)(b) and 18(1)(c) read with Section 19(1) of the HSNS Act, 2025, and the present bail application has been filed seeking his release on regular bail.3. Heard Sri Enuganti Sudhanshu Rao, learned counsel for petitioner, and Sri D.Raghavendar Rao, learned standing counsel appearing for respondent – State.
4. Learned counsel for the petitioner submitted that the offences alleged against the petitioner are punishable for less than five years, and still without serving notice under Section 35(3) of BNSS, the petitioner was arrested. He averred that the HSNS Cess Act, being new, there is no such jurisdiction to the economic offence. Therefore, he prayed to enlarge the petitioner on bail.
5. Learned standing counsel appearing for respondent– State, opposed the submissions made by learned counsel for the petitioner and contended that petitioner is involved in this case and has played major role, and the Accused No.2 who is kingpin in this case is absconding and is allegedly in another Country who has filed anticipatory bail. While averring that the bail cannot be granted to petitioner, he prayed this Court to dismiss the criminal petition.
6.Having regard to the rival submissions made, and on perusing the material placed on record, it is noted that the petitioner is in jail from 18.06.2026 and the offences alleged against the petitioner are punishable for less than five years. It is to be noted that though investigation is pending as on today, no custody petition is filed. Considering the facts and circumstances of the case, and the period of incarceration of petitioner, this Court is of the opinion that it is a fit case to grant bail to the petitioner, subject to the compliance of following stringent conditions:
i. The petitioner shall execute a personal bond for a sum of Rs.25,000/- (Rupees Twenty Five Thousand only) with two sureties for a like sum each to the satisfaction of the Special Court for Trial of Economic Offence Cases, Hyderabad.
ii The petitioner shall appear before the concerned SHO at 11:00 a.m. on every Monday for a period of eight (8) weeks or till filing of charge sheet, whichever is earlier, for the purpose of investigation, and thereafter, as and when required.
iii. The petitioner shall abide by the conditions stipulated in Section 437(3) of Cr.P.C. (presently Section 480(3) of the BNSS).
7. Accordingly, the Criminal Petition is allowed.
Miscellaneous applications, if any pending, shall stand closed.
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