Subhash Chouhan walked out of jail. Then the court demanded Rs. 70 lakhs.

Bail at Rs. 70 Lakhs: The GST Condition the Supreme Court Struck Down

When Subhash Chouhan walked out of jail in Bilaspur, he thought he was free. The High Court of Chhattisgarh had granted him bail. But there was a catch: deposit Rs. 70 lakhs under protest within 45 days, or go back inside. Chouhan was accused of wrongfully claiming Input Tax Credit worth about Rs. 6.95 crores under the GST regime. The bail condition effectively asked him to pay 10% of the alleged liability before his guilt was even tested. The Supreme Court of India, in Subhash Chouhan v. Union of India & Anr., 2023 LiveLaw (SC) 61, said no.

The stakes were simple: personal liberty versus an unassessed tax demand. The Court, in a crisp order authored by Justice Krishna Murari with Justice B.V. Nagarathna concurring, held that a bail condition requiring a deposit towards an alleged tax liability cannot stand when no final assessment has been made under the taxing statute. The condition presumed a liability that had not been adjudicated. That, the Court ruled, was impermissible.

What the High Court ordered

Chouhan moved an application for bail before the High Court of Chhattisgarh at Bilaspur in MCRC No. 900/2022. The High Court, by order dated 21 June 2022, granted bail. But it imposed a condition: Chouhan must deposit Rs. 70 lakhs under protest in favour of the Principal Commissioner, CGST, Raipur within 45 days of his release. The rest of the bail conditions were standard — surrender of passport, reporting to the investigating officer, not tampering with evidence.

Chouhan did not challenge the bail itself. He challenged the deposit condition. He approached the Supreme Court by way of Special Leave Petition, arguing that the condition was excessive and effectively treated an unassessed tax liability as a precondition for personal liberty.

The Union's own concession

Here is where the case gets interesting. The Additional Solicitor General for the Union of India fairly conceded before the Supreme Court that such a deposit condition cannot be imposed while granting bail. This was not a grudging concession. The ASG acknowledged that the Centre's own position is that pre-assessment monetary conditions in bail orders are impermissible in GST and economic offence cases.

This concession is significant. It means that even the prosecution does not support such bail conditions. Lower courts imposing them are acting against the stated position of the Union government. The Supreme Court noted this concession in its order, and it will be hard for any trial court or High Court to argue otherwise in future cases.

The doctrine: no liability before adjudication

The ratio decidendi is straightforward but powerful. The Court held that a bail condition requiring deposit of money towards an alleged tax liability cannot be sustained when no final assessment has been made under the relevant taxing statute. It amounts to presuming a legal liability that has not yet been adjudicated.

Think about what this means. Under the GST regime, Input Tax Credit is claimed on the basis of returns filed. The authorities may suspect that the credit was wrongfully availed. But until a proper assessment is completed — after notice, hearing, and a speaking order — the liability is merely an allegation. To make a person deposit money towards that allegation as a condition of bail is to treat the allegation as proven.

The Court did not say that monetary conditions in bail are always bad. It said that such conditions must be linked to something that has been adjudicated, not to a mere accusation. If the tax department wants to recover money, it must follow the assessment process under the GST Act. It cannot use the bail court as a collection agency.

THE PLAY: When challenging a bail condition that requires deposit of an alleged tax liability, argue that no final assessment has been made under the taxing statute, and that the condition presumes liability without adjudication — citing Subhash Chouhan v. Union of India and the Union's own concession.

What the Supreme Court actually did

The operative order is precise. The condition directing Chouhan to deposit Rs. 70 lakhs was set aside. All other bail conditions in the impugned order were sustained. The appeal was allowed to that extent. Pending applications, if any, stood disposed of.

This means Chouhan's bail remains valid. He does not have to pay Rs. 70 lakhs. But he must comply with the other conditions — reporting to the investigating officer, not leaving the country without permission, and so on. The Supreme Court did not interfere with the High Court's discretion to grant bail. It only corrected the error of imposing a pre-assessment monetary condition.

Why this matters for practitioners

This judgment is a weapon for defence lawyers in economic offence cases. Every time a trial court or High Court imposes a condition requiring deposit of money towards an alleged tax liability, the defence can cite Subhash Chouhan. The principle applies not just to GST but to any taxing statute where the liability has not been finally assessed.

For prosecutors, the message is clear: do not ask for such conditions. The Union government has already conceded that they are impermissible. If the ASG says so in the Supreme Court, it will be difficult for a public prosecutor to argue otherwise in a lower court.

For founders and CFOs, the takeaway is practical. If you or your company faces a GST-related criminal case and the court imposes a deposit condition as a condition of bail, you have a strong ground to challenge it. The Supreme Court has held that personal liberty cannot be held hostage to an unassessed tax demand.

The limits of the judgment

This is not a blanket ban on monetary conditions in bail. The Court did not say that a court can never ask for a deposit. It said that the deposit must be linked to an adjudicated liability, not a mere allegation. If the tax department completes its assessment and determines a specific amount due, a court may consider that in fixing bail conditions. But until then, the condition is premature.

Also, the judgment does not affect cases where the accused has admitted the liability or where the assessment has been completed. It applies only to pre-assessment situations. Practitioners should check the stage of the assessment before citing this case.

The bottom line

When the State wants your money before it proves you owe it, the Supreme Court says: finish your assessment first. Personal liberty does not come with a price tag of unadjudicated tax demands.