The Delhi High Court granted regular bail to Anurag Sinha, a partner in a firm accused of evading cess and excise duty amounting to approximately Rs. 66.55 crores, holding that apprehension of repetition of offence without explicit basis, in the absence of antecedents and after seizure of machinery, cannot justify denying liberty.
Background & Facts
The Dispute
The petitioner, Anurag Sinha, a partner in a firm (along with his wife), was arrested in connection with a raid conducted by the Directorate General of GST Intelligence (DGGI) on the premises of the firm. The raid, based on secret information, led to the recovery of certain machines and material. The respondent (DDGI, Gurugram Zonal Office) alleged that the recovered material indicated illegal production and sale of pan masala and zarda, resulting in evasion of cess and excise duty amounting to approximately Rs. 66.55 crores under Section 19(1)(a) of the Health Security SE National Security Cess Act, 2025, read with Section 9(1)(b) of the Central Excise Act.
Key Facts
- The raid was conducted on the basis of secret information at the premises of the firm where the applicant is a partner with his wife.
- The recovered material showed illegal production and sale of pan masala and zarda.
- The alleged evasion of cess and excise duty was approximately Rs. 66.55 crores.
- The applicant has been in custody since 10.07.2026.
- The offence under Section 19(1)(a) of the Health Security SE National Security Cess Act, 2025 is punishable with imprisonment up to five years.
- The offence under Section 9(1)(b) of the Central Excise Act is punishable with imprisonment up to seven years.
- The respondent had already seized the concerned machinery and filed a complaint.
Procedural History
- 10.07.2026: Date of arrest/custody of the applicant (as stated: "he is in custody since 10.07.2026").
- The bail application (BAIL APPLN. 3194/2026) was filed and heard.
- The application was also accompanied by CRL.M.A. 24019/2026.
- The judgment was pronounced on 25.09.2026.
The Parties' Positions
- For the Applicant: Learned counsel contended that the Health Security SE National Security Cess Act, 2025 had been declared unconstitutional by the Karnataka High Court (in Dhariwal Industries Pvt Ltd. & Ors. vs Union of India) and that the decision would prevail across the country unless another High Court takes a contrary view. However, it was later informed that a Division Bench of Karnataka High Court had stayed the operation of the Dhariwal Industries order by order dated 13.08.2026. The applicant also pointed out that he had been in custody since 10.07.2026 and that the offence was punishable with only five years imprisonment (under the Cess Act) but also noted the seven-year punishment under the Central Excise Act.
- For the Respondent: Learned counsel opposed the bail application, submitting that the offence of evasion of cess and duty did not deserve bail and that if released, the applicant would indulge in the same offence. However, the respondent also submitted that they had already seized the machinery and filed a complaint which would take its due course.
Relief Sought
The applicant sought enlargement on regular bail.
The Legal Issue
The central question was whether the mere recovery and seizure of machinery, coupled with the apprehension of repetition of offence without any explicit basis and in the absence of antecedents, justified denying bail to an accused charged with evasion of cess and excise duty.
Arguments Presented
For the Applicant/Petitioner
The applicant's counsel argued that the Health Security SE National Security Cess Act, 2025 had been struck down by the Karnataka High Court (Dhariwal Industries case) and that the decision would have nationwide application unless another High Court took a contrary view. However, they acknowledged that a Division Bench of the Karnataka High Court had stayed the Dhariwal Industries order on 13.08.2026. They also emphasized the applicant's custody since 10.07.2026 and the relatively short sentence (five years) for the offence under the Cess Act.
For the Respondent/State
The respondent's counsel opposed bail, contending that the offence of evasion of cess and duty was serious and that the applicant, if released, would likely repeat the offence. They relied on the recovery of machinery and material as evidence of ongoing illegal activity.
The Court's Analysis
The Court began by noting the circumstances: the raid, the recovery of machinery and material, the alleged evasion of Rs. 66.55 crores, and the applicant's custody since 10.07.2026. The Court then addressed two main concerns raised by the respondent: (1) the computation of evasion and (2) the apprehension of repetition.
On the computation of evasion, the Court observed that the mere recovery and seizure of machinery was not a scientific basis to compute the suspected evasion of cess and/or duty. Although Rule 32 of the HSNS Cess Rules, 2026 provided a computation formula for machinery installed without registration, the Court noted that the validity of the Rule had not been challenged and, for the limited purpose of the bail application, it could not be convinced of the rationale behind the computation solely based on machinery recovery.
On the apprehension of repetition, the Court held that on the basis of such apprehension without any explicit basis, coupled with the admitted position of no antecedents and the already effected seizure of machinery, the apprehension expressed cannot be a justified ground to deny liberty to the accused/applicant. The Court emphasized that the seizure of machinery and the filing of a complaint by the respondent were sufficient to prevent repetition.
The Court concluded that there was no reason to deprive the applicant of further liberty and allowed the bail application.
"Then comes the apprehension of the respondent that once released on bail, the accused/applicant shall indulge again in a similar activity. To say the least, on the basis of such apprehension without any explicit basis and the admitted position of no antecedents, coupled with the already effected seizure of machinery the apprehension expressed cannot be a justified ground to deny liberty to the accused/applicant."
The Verdict
The accused/applicant succeeded in the bail application. The Court directed the release of Anurag Sinha on bail upon furnishing a personal bond of Rs. 50,000/- with one surety in the like amount to the satisfaction of the Trial Court/Duty Magistrate. The accompanying application (CRL.M.A. 24019/2026) was also disposed of. The order was to be immediately transmitted to the concerned Jail Superintendent.
What This Means For Similar Cases
Apprehension of Repetition Requires Explicit Basis
The judgment clarifies that a mere apprehension of repetition of offence, without any explicit basis, cannot be a ground to deny bail, especially when the accused has no antecedents and the instrumentalities of the offence (machinery) have been seized. Practitioners must now ensure that in bail applications for economic offences, the prosecution provides explicit evidence of repetition risk beyond mere apprehension.
Seizure of Instrumentalities as a Safeguard
The seizure of machinery and the filing of a complaint by the investigating agency were considered sufficient to mitigate the risk of repetition, thereby supporting the grant of bail. This establishes that recovery of instrumentalities weighs in favor of bail when assessing repetition risk.
Limited Role of Computation Rules in Bail Proceedings
The Court held that for the purpose of determining bail, it was not necessary to delve into the computational aspects of the alleged evasion, particularly when the validity of the computational rule had not been challenged and the machinery recovery alone was insufficient for such computation. Courts will avoid entering into complex computational disputes at the bail stage if the validity of the method is not in question.
- In bail applications for economic offences, the prosecution must prove repetition risk with explicit evidence.
- Seizure of machinery or documentary evidence strengthens the case for bail.
- Courts will not examine computational methodologies at the bail stage unless their validity is directly challenged.
A New Threshold for Bail in Economic Offences
This judgment sets a higher threshold for denying bail in economic offences, requiring concrete proof of repetition risk rather than relying on general apprehensions. It reinforces the principle that liberty is the rule and detention the exception, even in cases involving substantial financial allegations.
- Denial of bail requires specific, evidence-based apprehension of repetition.
- Absence of antecedents and seizure of instrumentalities create a strong presumption in favor of bail.
- The financial quantum alone, without proof of repetition risk, cannot justify continued incarceration.
