Custodial Interrogation Not Mandatory For GST Offences Punishable Up to 5 Years: Karnataka High Court Grants Bail In ₹31 Cr Tax Evasion Case

The Karnataka High Court held that custodial interrogation is not mandatory in GST offences punishable with imprisonment up to five years, even though such offences are economic in nature. The bench further stated that the prescribed punishment under the CGST (Central Goods and Services Tax) Act must be considered while determining the gravity of the offence.

Justice Shivashankar Amarannavar stated that one of the most prominent criminal sanctions imposed with regard to economic offences is that of arrest. It is widely acknowledged that arrests result in deprivation of liberty of a person. Thus, while it is imperative to maintain law and order in society, the power to arrest must also always be subject to necessary safeguards.

In the case at hand, the accused/petitioner was alleged to have fraudulently availed and utilised input tax credit to the tune of Rs.31.33 Crores on the strength of fake invoices without receipt of any goods/services.

The department alleged that the commission of offences punishable under Sections 132(1)(b) and 132(1)(c) of the CGST Act.

Apprehending arrest during the investigation, the accused has filed a bail application before the Karnataka High Court.

As per the department, the offence alleged against the accused is a cognizable and non-bailable offence, and the punishment provided is imprisonment for five years and a fine.

The bench noted that there is no embargo under the CGST Act restraining the petitioner/accused from seeking pre-arrest bail. Economic offences such as tax evasion, money laundering, etc., affect the economy of the country and thus are considered grave in nature. To deter persons from indulging in such economic offences, criminal sanctions are required to be imposed.

Against this backdrop, analysing the arrest provisions under the goods and services tax law, with a view to study the adequacy of the safeguards and authorisation built into the text of the statute, the interplay between these provisions and the standards of arrest has to be established through judicial precedents, as well as other sources such as the Constitution of India and general statutes such as the Code of Criminal Procedure, stated the bench.

The bench, after referring to various case laws, opined that there cannot be any conflict with the fact that the petitioner/accused has been charged with an economic offence. However, it is to be reiterated that the offence does not contemplate punishment for more than five years or commission of any serious offence along with the economic offence, as it is usually the case in offences under other special statutes dealing with economic offences like the Prevention of Money Laundering Act, 2003.

As per the scheme of the CGST Act, though the offence is of an economic nature, the punishment prescribed cannot be ignored to determine the heinousness of the offence, added the bench.

The bench concluded that the offences under the Act are not grave to the extent that the custody of the accused can be held to be sine qua non.

The bench noted that the Department might get the information as required if the accused co-operates with the authorities concerned, and arrest might not be necessary. The custodial interrogation in the instant matter is neither warranted nor provided for by the statute.

In view of the above, the bench allowed the petition and granted bail to the accused.

Case Title: Sri Akram Pasha v. Senior Intelligence Officer

Case Number: CRIMINAL PETITION No.15066/2025

Counsel for Petitioner: Sri Hashmath Pasha, Senior Counsel For Sri Kariappa N A

Counsel for Respondent: Sri Madhu N Rao, Senior Standing Counsel

Citation: 2026 LLBiz HC (KAR) 2

Citation: 2026 LiveLaw (Kar) 3

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