Ayush Sureshchandra Shah Vs State of Gujarat & Anr. (Gujarat High Court)
Summary: The Gujarat High Court, in Ayush Sureshchandra Shah Vs State of Gujarat & Anr., granted regular bail to two applicants, a father and son associated with M/s. Mandovara Trading Co., Jamnagar, in connection with allegations of fraudulent availment of Input Tax Credit (ITC) worth approximately ₹325 crore through 21 allegedly fictitious firms. The proceedings arose under Sections 132(1)(b) and 132(1)(c) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017. The applications were filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023. The applicants had been arrested on 22 June 2026, and the department alleged that transactions involving fictitious firms and movement of goods without actual transportation had caused substantial loss to the public exchequer. The Court also recorded alleged GST evasion of ₹23.08 crore in connection with the business activities of the applicants.
The applicants submitted that they had been falsely implicated, that the chargesheet had already been filed, and that all relevant books of account, materials and electronic devices had been seized by the department. They argued that no further recovery or discovery was required, neither applicant had criminal antecedents, and the maximum punishment under Section 132 of the CGST Act was five years. They further contended that the alleged offences were triable by a Judicial Magistrate First Class and that suitable bail conditions could address any apprehension concerning the investigation. The prosecution opposed bail, alleging that the father and son had acted in collusion to create 21 fictitious firms and fraudulently avail ITC worth ₹325 crore without actual transportation of goods. It maintained that further investigation and recording of witness statements were continuing, that the amount involved could increase, and that the applicants might tamper with electronic evidence or fail to appear for trial if released.
The High Court observed that the grant of bail requires consideration of the nature and gravity of the accusation, severity of punishment, prosecution materials, possibility of witness intimidation or evidence tampering, likelihood of absconding, personal circumstances of the accused and larger public interest. However, it held that continuation of further investigation, by itself, could not justify refusal of bail indefinitely, particularly when the statutory period had elapsed and the chargesheet had been filed. The Court observed that investigation could not continue endlessly and that apprehensions regarding interference with evidence could be addressed through appropriate conditions after applying the established triple test. It relied upon Vineet Jain Vs Union of India for the principle that bail in economic offences carrying limited sentences should ordinarily be granted unless extraordinary circumstances exist.
The Court also considered the Supreme Court decisions in Sanjay Chandra Vs Central Bureau of Investigation, (2012) 1 SCC 40 and Gudikanti Narasimhulu And Ors Vs Public Prosecutor, High Court of Andhra Pradesh, (1978) 1 SCC 240. It emphasised that prolonged incarceration pending a trial that would take considerable time could effectively amount to punishment before conviction, contrary to the principle that bail is the rule and jail is the exception and the protection of personal liberty under Article 21 of the Constitution. Considering the maximum five-year sentence, the documentary nature of the case, the absence of any remaining recovery requirement and the likely duration of trial, the Court allowed both bail applications without expressing any final opinion on the allegations.
Accordingly, by its common order dated 27 October 2026, the Gujarat High Court directed the release of both applicants on regular bail upon furnishing a personal bond of ₹25,000 each with one surety of the same amount. The conditions included surrender of passports, restriction on leaving Gujarat without permission, attendance before the department twice monthly for three months, cooperation with further investigation, disclosure of identity and contact particulars, prohibition on contacting witnesses and non-interference with evidence. The department was given liberty to seek cancellation of bail in the event of violation of conditions. The Court further clarified that its observations were preliminary and would not influence the trial Court’s determination of the criminal proceedings.
Cases Discussed
- Vineet Jain Vs Union of India (Supreme Court of India), Criminal Appeal No. 2269 of 2025, decided on 28/04/2025 — The High Court relied on this Supreme Court decision while considering the grant of bail in economic offences punishable with imprisonment extending to five years. The Supreme Court held that bail should ordinarily be granted in such cases unless extraordinary circumstances justify continued custody. The Gujarat High Court order cites this authority as 2023 SCC OnLine (SC) 2331; that citation requires correction against the original Supreme Court decision.
- Sanjay Chandra Vs Central Bureau of Investigation (Supreme Court of India), (2012) 1 SCC 40 — Considered for the principles governing bail in economic offences, particularly the effect of completed investigation, prolonged pretrial detention and the likelihood of delay in concluding trial. The Court applied the principle that detention before conviction should not become punitive.
- Gudikanti Narasimhulu And Ors Vs Public Prosecutor, High Court of Andhra Pradesh (Supreme Court of India), (1978) 1 SCC 240 — Considered in support of the established jurisprudence governing judicial discretion in bail matters, the protection of personal liberty and the requirement to balance individual liberty against public interest and the administration of criminal justice.
Appellant Was Represented By: Mr. N. D. Nanavaty, Senior Advocate, with Mr. Apurva N. Mehta.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF GUJARAT HIGH COURT
Since both these applications arise out of the one and common complaint, they are being heard, decided and disposed of by this common order.
[1.0] RULE. Learned APP waives service of notice of Rule for and on behalf of the respondent Nos.1 and 2.
[2.0] Both these applications are filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short “BNSS”) for regular bail in connection with File No.DCST/ENF-11/AC1/JUNAGADH/AYUSH SHAH/2026-27/Ow.No.65 (CR.MA No.23616/2026) and File No.DCST/ENF-11/AC1/JUNAGADH/2026-27/Ow.No.66 (CR.MA No.23599/2026) registered with the Assistant Commissioner of State Tax (1), Enforcement, Div-11, Junagadh for the offence under Sections 132(1)(b) and 132(1)(c) of the Gujarat Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017.
[3.0] Learned Senior Advocate Mr. N.D. Nanavaty assisted by learned advocate Mr. A.N. Mehta appearing on behalf of the applicants submits that the applicants are innocent and have been falsely implicated in the offence. He has further submitted that since charge-sheet is filed, nothing is required to be recovered or discovered from the applicants and maximum punishment is upto 5 years as per section 132 of the CGST Act. The applicants are in jail since 22.06.2026. It is submitted that applicants are business professionals and there in no possibility of tampering with the evidence and even the applicants are not having any past antecedent and the offence is triable by the Court of learned JMFC. He has further submitted that all the books of account, material and electronic devices have already been seized by the department and there is no possibility to influence or tamper the evidence. It is further submitted that, considering the nature of the offence, the applicants may be granted regular bail with the imposition of suitable conditions.
[4.0] Learned APP has vehemently opposed the present applications relying and reiterating the contents of objections filed on behalf of respondent No.2 has submitted that applicants herein, who happens to be father and son, in collusion and connivance of each other created 21 fictitious firms and without actually transporting the goods, they have illegally availed Input Tax Credit worth 325 Crores and caused huge loss to the public exchequer and still further investigation is going on and statement of witnesses have been recorded from which further of involvement of applicants is likely to be found out and there is possibility that amount of fraud may escalate and therefore, if the applicants are released on bail then the possibility of tampering with evidence cannot be ruled out. He has further submitted that since the data is volatile data in form of electronic, tampering of same is quite possible. He has also argued that if the applicants are released on bail then there is no possibility of present applicants to stand to trial. He has therefore, requested to dismiss the present applications seeking regular bail, looking to the nature and gravity of the offence.
[5.0] While granting bail, the Court has to consider the involvement of the accused in the alleged offence, the jurisdiction to grant bail has to be exercised on the basis of the well settled principles having regard to the facts and circumstances of each case and the following factors are to be taken into consideration while considering an application for bail: (i) the nature of accusation and the severity of the punishment and the nature of the materials relied upon by the prosecution; (ii) reasonable apprehension of tampering with the witnesses and threat to the complainant or the witnesses; (iii) reasonable possibility of securing the presence of the accused at the time of trial or the likelihood of his abscondence; (iv) character behaviour and standing of the accused and the circumstances which are peculiar to the accused; (v) larger interest of the public or the State and similar other considerations are required to be considered.
[6.0] I have heard the learned Counsel appearing on behalf of the respective parties and perused the investigation papers as well as the objections filed on behalf of respondent No.2. Following aspects have been considered:
(1) Applicant of CR.MA No.23599/2026 is the proprietor whereas applicant of CR.MA No.23616 is the son of proprietor as well as key Managerial person of M/s. Mandovara Trading Co. and are doing the business of trading in metal scrap at Jamnagar. A search was conducted at the principle place of business of M/s. Mandovara Trading Co., Jamnagar and it was found that applicants herein have committed commercial fraud resulting in evasion of GST to the tune of Rs.23.08 Crore and have fraudulently availed Input Tax Credit worth 325 Crores and caused huge loss to the public exchequer and it is further alleged that applicants have used 21 different firms for availing fake Input Tax Credit in clandestine manner pursuant to which an offence was registered under Sections 132(1)(b) & (c) of the CGST Act and applicants were arrested under Section 69 of the CGST Act on 22.06.2026;
(2) As statutory period is over, merely because further investigation is still going on and department is going to record statements of other witnesses, is not a ground to refuse bail merely on the ground that further investigation is going on since any investigation cannot go on endlessly;
(3) So far as apprehension of respondents as regards possibility of tampering with evidence is concerned, whether investigation is going on or is concluded, while enlarging the accused on bail, the Court has to always keep in mind the triple test and impose suitable condition to take care of the apprehension raised by the Department – respondent No.2 herein more particularly in view of the decision of the Hon’ble Supreme Court in the case of Vineet Jain vs. Union of India reported in 2023 SCC OnLine (SC) 2331 wherein it has been held that in economic offences carrying limited sentences, bail should normally be granted unless extraordinary circumstances exist. Herein, maximum punishment and sentence under section 132(1) of the CGST is only 5 years and the offence is triable by the Court of learned JMFC;
(4) Now, nothing is required to be discovered or recovered from the applicants / accused;
(5) Obviously commencement and conclusion of trial will take its own time.
[7.0] This Court has also taken into consideration the law laid down by the Hon’ble Apex Court in the case of Sanjay Chandra vs. Central Bureau of Investigation reported in [2012]1 SCC 40 as well as in the case of Gudikanti Narasimhulu And Ors vs. Public Prosecutor, High Court of Andhra Pradesh reported in (1978)1 SCC 240. Obviously, the conclusion of trial will take time and keeping the accused behind the bars is nothing but amounts to pre-trial conviction and therefore, considering the celebrated principle of bail jurisprudence is that “bail is a rule and jail is exception” as well as the concept of personal liberty guaranteed under Article 21 of the Constitution of India, present application deserves consideration.
[8.0] In the facts and circumstances of the case and considering the nature of the allegations made against the applicants in the FIR, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicants on regular bail. Hence, the present applications are allowed. The applicants are ordered to be released on regular bail in connection with File No. DCST / ENF-11 /AC1 / JUNAGADH / AYUSH SHAH / 2026-27 / Ow.No.65 (CR.MA No.23616/2026) and File No.DCST / ENF-11 / AC1/ JUNAGADH / 2026-27 / Ow.No.66 (CR.MA No.23599/2026) registered with the Assistant Commissioner of State Tax (1), Enforcement, Div-11, Junagadh executing a personal bond of Rs.25,000/- (Rupees Twenty-five Thousand only) each with ONE SURETY of the like amount to the satisfaction of the trial Court and subject to the conditions that they shall;
(a) not take undue advantage of liberty or misuse liberty;
(b) not act in a manner injurious to the interest of the prosecution & shall not obstruct or hamper the police investigation and shall not to play mischief with the evidence collected or yet to be collected by the police;
(c) surrender passport, if any, to the Trial Court within a week;
(d) not leave the territory of State of Gujarat without prior permission of the Trial Court concerned;
(e) Shall mark their presence before the concerned Department twice in a month for a period of THREE MONTHS between 11.00 a.m. and 2.00 p.m. and shall thereafter appear, as and when required;
(f) furnish the UIDAI Number, Contact Number/s, Passport Number (if they are having the passport), E-mail address and present address of his residence to the Investigating Officer and also to the Court at the time of execution of the bond and shall not change the residence without prior permission of Trial Court;
(g) shall join and fully cooperate with the further investigation and shall appear before the concerned authority as and when summoned or called upon by Respondent No.2, since further investigation is going on;
(h) shall not contact witnesses directly or indirectly and shall not indulge in any illegal activity or any similar type of offence failing which the concerned authority/officer of Department shall have liberty to file an application for cancellation of bail against the present applicants.
In case of breach of any conditions, the concerned Trial Court shall have liberty to cancel the bail of the present applicants;
(i) shall not take undue advantage of the present order and shall not prolong the trial in any manner and the applicants shall regularly mark remain present before the Court/concerned Court as and when required;
[9.0] The authorities will release the applicants only if they are not required in connection with any other offence for the time being. If breach of any of the above conditions is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter.
[10.0] Bail bond to be executed before the lower Court having jurisdiction to try the case. It will be open for the concerned Court to delete, modify and/or relax any of the above conditions, in accordance with law.
[11.0] At the trial, the trial Court shall not be influenced by the observations of preliminary nature qua the evidence at this stage made by this Court while enlarging the applicant/ on bail.
[12.0] Rule is made absolute to the aforesaid extent. Direct service is permitted.
A copy of this order be kept in CR.MA No.23599/2026.
