Calcutta HC grants Businessman Bail in Rs. 37.29 Cr GST Input Tax Credit Case based on Toll Data [Read Order]

In a significant development that underscores judicial vigilance over the use of arrest powers under tax laws, the Calcutta High Court granted bail on April 17, 2025, to Santosh Kumar Sah, a businessman arrested under the Central Goods and Services Tax (CGST) Act for alleged wrongful availment of Input Tax Credit (ITC) worth Rs. 37.29 crore.

Justice Biswaroop Chowdhury, delivering the order, strongly criticized the procedural lapses by the tax authorities and noted that the arrest—made on March 31, just one day before the financial year-end—was premature and unsupported by a conclusive adjudication under Section 74 of the CGST Act.

The arrest was primarily based on the allegation that vehicles listed in 232 E-way bills did not appear in toll plaza data, suggesting that goods were never received.

However, the Court emphasized that toll data discrepancies alone cannot constitute conclusive proof of non-receipt, especially in the absence of corroborative material or fresh incriminating evidence.

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In a detailed judgment, the Court noted the following: –

• The petitioner had fully cooperated during the search operations;

• The physical stock verification conducted on March 30 confirmed receipt of goods, matching invoice batch numbers;

• CCTV footage clearly showed vehicle arrivals and unloading at the warehouse;

• No unaccounted stock or suspicious material was found during the search;

• There was no quantification of demand or complaint filed prior to arrest, violating the statutory safeguards under Section 69 of the CGST Act.

The Court further noted that the arrest contravened the Supreme Court’s directives in Arvind Kejriwal v. Directorate of Enforcement [(2025) 2 SCC P-248], which mandate strict scrutiny of “reasons to believe” before any arrest under economic laws.

Despite the pending bail application before the Sessions Court, Justice Chowdhury invoked inherent powers to grant bail, recognizing that the accused had no knowledge of parallel proceedings and that prolonged custody was unwarranted.

To Read the full text of the Order CLICK HERE

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