Seized machinery alone cannot justify detention where duty-evasion computation is prima facie unscientific.

The applicant, a partner in a firm along with his wife, was arrested in connection with File No. DGGI/124/2026-GR-O/o-ADG-DGGI-ZU-Gurugram after machines and material were recovered from the firm’s premises pursuant to a raid based on secret information.

The respondent alleged that the applicant was involved in the illegal manufacture and sale of pan masala and zarda, resulting in evasion of cess and excise duty of approximately ₹66.55 crores.

Proceedings were initiated for offences under the Health Security SE National Security Cess Act, 2025 and Section 9(1)(b) of the Central Excise Act; the alleged offences carried maximum punishments of five and seven years, respectively.

The applicant had been in custody since 10 July 2026 and had not obtained default bail.

The respondent opposed regular bail on the grounds of alleged revenue evasion and the apprehension of repetition, while acknowledging that the machinery had been seized and the complaint filed.

1. Whether the applicant was entitled to regular bail considering the nature of the allegations, the statutory punishments, the period of custody, and the fact that the machinery had already been seized.

2. Whether the alleged amount of cess and duty evasion could, at the bail stage, be scientifically or legally assessed solely on the basis of recovery and seizure of machinery under Rule 32 of the HSNS Cess Rules, 2026.

3. Whether the respondent’s apprehension that the applicant would repeat the alleged offence constituted sufficient ground to deny bail in the absence of prior criminal antecedents.

The Court considered the alleged offences under Section 19(1)(a) of the Health Security SE National Security Cess Act, 2025, stated to be punishable with imprisonment up to five years, and Section 9(1)(b) of the Central Excise Act, stated to be punishable with imprisonment up to seven years.

It also considered Rule 32 of the HSNS Cess Rules, 2026, which prescribes a formula for computing liability where machinery is installed without registration, while clarifying that the Rule’s validity had not been challenged and that its observations were only prima facie.

The Court noted the applicant’s reliance on Dhariwal Industries Pvt. Ltd. v. Union of India and Kusum Ingots & Alloys Ltd. v. Union of India concerning the effect of a High Court judgment invalidating a Central enactment; however, the Karnataka High Court’s judgment in Dhariwal Industries had subsequently been stayed by a Division Bench.

The governing bail principle applied was that pre-trial liberty should not be denied merely on speculative apprehensions, particularly where the investigation-related seizure has been completed, the accused has no antecedents, and the prosecution’s case requires assessment at trial.

The Court held that the mere recovery and seizure of machinery did not, at the prima facie stage, provide a scientifically convincing basis for computing alleged cess or duty evasion of ₹66.55 crores, despite the respondent’s reliance on Rule 32.

The Court expressly limited this observation to the question of continued detention and left the validity and application of the Rule to the competent court and the trial court’s assessment on evidence.

Although the respondent alleged a serious economic offence and invoked the possibility of recurrence, the machinery had already been seized, the complaint had been filed, and no specific basis or antecedents supported the apprehension of repetition.

Considering these circumstances, together with the statutory punishment and the applicant’s custody since 10 July 2026, the Court found no sufficient justification for further deprivation of liberty.

The Court clarified that its prima facie observations regarding computation of cess or duty were confined to the bail stage and would not bind the trial court at the stage of framing of charge or conclusion of trial.

The accompanying application was disposed of, and the order was directed to be transmitted to the concerned Jail Superintendent.