In a significant ruling highlighting the relationship between tax adjudication and criminal proceedings under the Goods and Services Tax (GST) framework, the Allahabad High Court has held that although criminal prosecution and assessment proceedings are legally independent, the outcome of assessment proceedings may materially influence criminal prosecution.
The decision came in the matter of Shakib Qureshi v. Anti Evasion CGST and Others (Criminal Misc. Bail Application No. 44278 of 2025), where the Court granted bail to the applicant after considering the absence of assessment proceedings under the GST law and prolonged custody.
Background of the Case
The case originated from allegations of fraudulent availment of Input Tax Credit (ITC) involving transactions worth approximately ₹4–5 crore.
According to the prosecution, authorities were investigating transactions connected to an entity named Sundar Trader, which was allegedly involved in wrongful inward supply claims. During the course of investigation, notices were reportedly issued to several entities that had claimed ITC based on transactions linked to Sundar Trader.
One such entity that came under scrutiny was Sunshine Steel.
The prosecution alleged that attempts were made to locate the applicant during the investigation, but authorities were unable to trace him. It was further claimed that the applicant had created and operated fictitious business entities using forged or fabricated credentials and had filed GST returns through those entities.
Based on these allegations, criminal action was initiated against the applicant.
Applicant’s Arguments Before the Court
Counsel appearing for the applicant challenged the legality of the prosecution and arrest.
The primary argument raised was that authorities had arrested the applicant without initiating adjudication proceedings under Sections 73 or 74 of the Central Goods and Services Tax (CGST) Act, 2017.
The applicant argued that proceedings under these provisions are intended to determine tax liability and establish whether any tax short payment, wrongful ITC claim, or tax evasion has actually occurred.
It was further submitted that:
- The applicant had been in judicial custody since November 2025.
- No adjudication proceedings had been initiated against him.
- Criminal prosecution had commenced without completion of assessment-related proceedings.
- Continued detention was unjustified in the absence of any final determination of tax liability.
The defence therefore sought bail while the criminal proceedings remained pending.
Allahabad High Court’s Observations
Justice Vikram D. Chauhan examined the interplay between GST assessment proceedings and criminal prosecution.
The Court clarified that criminal prosecution under GST is not automatically barred merely because assessment proceedings are pending or not yet concluded.
However, the Court made an important observation regarding the practical impact of assessment findings.
The Bench observed that where assessment proceedings ultimately conclude that a taxpayer has not violated GST provisions, such findings may significantly affect the criminal prosecution arising from the same allegations.
The Court noted:
“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.”
This observation reinforces the principle that while tax adjudication and criminal liability operate independently, factual findings in one proceeding may influence the other.
Bail Granted Considering Delay and Presumption of Innocence
While deciding the bail application, the Court also considered broader constitutional and procedural concerns.
The Court observed that:
- No proceedings under Sections 73 or 74 had been initiated.
- Charges had not yet been framed by the trial court.
- The applicant had no criminal antecedents.
- The applicant had already spent a substantial period in custody.
The Bench emphasized the importance of the presumption of innocence at the pre-trial stage and reiterated that deprivation of personal liberty cannot continue indefinitely without timely adjudication.
The Court further observed that speedy justice forms an essential component of human rights and prolonged incarceration without progress in trial undermines public confidence in the justice system.
Since no material was placed before the Court to demonstrate that the applicant’s conduct in custody warranted continued detention, the Court found it appropriate to grant bail.
Key Takeaway
This ruling is important for GST litigation and criminal tax enforcement in India. The Allahabad High Court has reaffirmed that criminal prosecution under GST can proceed independently of assessment proceedings. However, the judgment also recognizes that findings in tax adjudication may have a meaningful impact on criminal liability.
The decision highlights the growing judicial emphasis on balancing tax enforcement with procedural fairness, personal liberty, and the right to speedy justice.
Case Title: Shakib Qureshi v. Anti Evasion CGST and 2 Others
Case Number: Criminal Misc. Bail Application No. 44278 of 2025
Court: Allahabad High Court
Follow the Link below to watch the video: