2025 (5) TMI 903 - HC - GST

Seeking grant of bail - compliance with mandatory procedural safeguards including the provisions of Sections 41 41A of the Cr.P.C. and Sections 47 48 of BNSS or not - HELD THAT - It is seen that there is no dispute in regards to the Arrest Memo issued by the respondent authorities by complying all necessary formalities under Section 69 of the CGST Act. But it is the issue raised by the petitioner that there was no proper compliance of Section 41/41A of Cr.P.C. which are mandatorily required to be followed. From the view expressed by the Hon ble Supreme Court in case of Radhika Agarwal 2025 (2) TMI 1162 - SUPREME COURT (LB) it is evident that though the CGST is a special enactment but the same cannot be considered as a complete Code in itself as regards to the provision of search seizure and arrest and as stated above the provision of Code of Criminal Procedure would be applicable unless it is expressly or impliedly barred by the provision of the said Act. But here in the instant case it is seen that there is no compliance of Section 41/41A of Cr.P.C. which is mandatorily required to be followed as per the guideline of Hon ble Supreme Court in the cases of Arnesh Kumar Vs. State of Bihar 2014 (7) TMI 1143 - SUPREME COURT and reiterated in Satender Kumar Antil Vs. CBI 2022 (8) TMI 152 - SUPREME COURT . More so there was also no compliance of Sections 47/48 of BNSS at the time of arrest made by the respondent authorities which is in violation of Article 21 22(1) of the Constitution of India and the ratio laid down by the Hon ble Supreme Court in the cases of Vihaan Kumar Vs. State of Haryana 2025 (2) TMI 1104 - SUPREME COURT and Prabir Purkayastha Vs. State (NCT of Delhi) 2024 (5) TMI 1104 - SUPREME COURT . Coming to the communication of reasons to believe it is seen that admittedly the reasons to believe was duly recorded in the file at the time of issuing Authorization Letter of Arrest. It is also an admitted fact that it is an internal and confidential document when the arresting authority will record their reasons to believe before issuing any Authorization Letter - there is no compliance of Section 41/41A Cr.P.C. viz- a-viz the Grounds of Arrest was also not communicated which are mandatorily required to be furnished and in the same time the reasons to believe as recorded by the authority concerned was also not communicated to the present accused/petitioner which may be a grounds for consideration of bail. There is sufficient progress in the investigation of the case and most of the relevant documents are also found to be collected by the I.O. during investigation it is found that further custodial interrogation of the present petitioner may not be necessary for the interest of investigation and therefore this is a fit case to extend the privilege of bail to the accused/ petitioner. Conclusion - i) The reasons to believe should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest. Exceptions are available in one-off cases where appropriate redactions are permissible but the onus to justify redaction lies on the Department of Enforcement and the court is the final arbiter. ii) The absence of Document Identification Number (DIN) in the Authorization Letter and Grounds of Arrest which are mandatory as per Circular No. 122/41/2019-GST renders such documents invalid and is a good ground for granting bail. The petitioner is granted bail subject to conditions imposed - bail application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the accused/petitioner is entitled to bail under Section 483 of BNSS, 2023, given the allegations under Section 132(5) of the CGST Act, 2017.

- Whether the arrest of the petitioner complied with mandatory procedural safeguards, including the provisions of Sections 41, 41A of the Cr.P.C. and Sections 47, 48 of BNSS.

- Whether the absence of Document Identification Number (DIN) in key arrest-related documents renders the arrest invalid.

- Whether the "reasons to believe" for arrest were properly communicated to the accused, enabling him to challenge the legality of the arrest.

- Whether the special enactment CGST Act, 2017 is a complete code in itself or whether Cr.P.C. procedural provisions apply.

- Whether the petitioner's physical disability (100% visual impairment) impacts the nature of custodial treatment and entitlement to bail.

- Whether further custodial interrogation of the petitioner is necessary for the investigation.

- The applicability of judicial precedents on economic offences, procedural safeguards, and bail jurisprudence to the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Compliance with Procedural Safeguards (Sections 41/41A Cr.P.C. and Sections 47/48 BNSS):
The petitioner contended that the arrest was made without compliance to mandatory procedural safeguards under Sections 41 and 41A of the Code of Criminal Procedure (Cr.P.C.), which govern arrest without warrant and require issuance of notice prior to arrest. Additionally, Sections 47 and 48 of BNSS, which correspond to these Cr.P.C. provisions, were also not complied with. The petitioner relied on Supreme Court rulings in Arnesh Kumar Vs. State of Bihar and Satender Kumar Antil Vs. CBI, which emphasize strict adherence to these procedural mandates to prevent arbitrary arrests.
The Court acknowledged that while the CGST Act is a special statute, it does not constitute a complete code with respect to arrest procedures, and thus the Cr.P.C. provisions apply unless expressly or impliedly excluded. The Court found non-compliance with Sections 41/41A Cr.P.C. and Sections 47/48 BNSS, constituting a violation of Article 21 and 22(1) of the Constitution. This non-compliance was considered a significant procedural lapse favoring the grant of bail.

Validity of Arrest and Absence of DIN in Documents:
The petitioner argued that the Arrest Memo, Grounds of Arrest, and Authorization Letter lacked the mandatory Document Identification Number (DIN) as required by Circular No. 122/41/2019-GST dated 05.11.2019. The absence of DIN renders these documents invalid and the arrest consequently defective.
The respondent contested this, producing records showing DIN presence in the Arrest Memo, though the petitioner pointed out that the DIN in the Arrest Memo appeared to be handwritten and possibly inserted later, whereas the other documents lacked DIN altogether.
The Court held that the absence of DIN in key documents like Authorization Letter and Grounds of Arrest, which were communicated to the accused, violates the mandatory requirements prescribed by the GST Commissioner's Circular. The Court deemed this a valid ground for bail consideration.

Communication of "Reasons to Believe" and Grounds of Arrest:
The petitioner submitted that although the "reasons to believe" were recorded internally by the authority before issuing the Authorization Letter of Arrest, these were never communicated to him, thereby violating his fundamental right to challenge the legality of the arrest.
The petitioner relied on the Supreme Court's decision in Radhika Agarwal Vs. Union of India, which mandates furnishing the "reasons to believe" to the arrestee, except in exceptional cases with appropriate redactions. The Court emphasized that withholding such reasons prevents the accused from exercising the right to challenge the arrest.
The respondent claimed the reasons were recorded in the file and grounds of arrest were communicated, but the Court found that the "reasons to believe" were not furnished to the petitioner, nor were the grounds of arrest adequately communicated, constituting a violation of procedural safeguards.

Applicability of CGST Act as a Complete Code:
The petitioner contended that the CGST Act is not a complete code regarding arrest and investigation procedures, thus Cr.P.C. provisions apply. The respondent argued that CGST Act is a complete code with specific powers vested in the Commissioner, including arrest under Section 69.
The Court, relying on the Supreme Court's precedent in Radhika Agarwal, held that the CGST Act does not exclude Cr.P.C. provisions unless expressly stated. Therefore, procedural safeguards under Cr.P.C. apply alongside the CGST Act. This was crucial in assessing the validity of arrest and investigation procedures.

Necessity of Further Custodial Interrogation:
The petitioner highlighted that he has been in custody for about 30 days, during which no police remand or custodial interrogation was sought by the Investigating Officer (I.O.), indicating custodial interrogation may no longer be necessary.
The respondent maintained that further custodial interrogation may be necessary for the investigation.
The Court observed that sufficient progress had been made in the investigation, relevant documents were recovered, and the petitioner had cooperated. Given the absence of any request for further custodial interrogation, the Court concluded that further detention was not necessary in the interest of investigation.

Petitioner's Physical Disability and Custodial Conditions:
The petitioner claimed 100% visual impairment and argued that it is improbable for a totally blind person to be involved in the alleged complex GST fraud. He also submitted that custodial conditions were causing him hardship.
The respondent challenged the genuineness of the disability certificate and the petitioner's claim of blindness, citing his admitted use of mobile phones and involvement in issuing fake invoices.
The Court noted that the disability certificate was issued prior to the case and suggested the trial court may constitute a medical board to verify the genuineness of the disability. The Court acknowledged the petitioner's cooperation despite physical disability but did not find this alone sufficient to deny bail.

Nature of Offence and Bail Jurisprudence in Economic Offences:
The respondent emphasized that economic offences, especially involving large public funds, require a stringent approach to bail. The Court considered the Supreme Court's ruling in Y.S. Jagan Mohan Reddy Vs. CBI, which treats economic offences as a distinct class requiring serious scrutiny.
The Court balanced this with the procedural lapses and the petitioner's cooperation, concluding that the procedural violations and non-necessity of further custodial interrogation outweighed the gravity of the offence for bail purposes.

Assessment of Tax and Penalty:
The petitioner argued that no proper assessment of tax, cess, penalty, or interest was undertaken, and the figures of Rs. 8.10 Crores GST and Rs. 6.57 Crores Compensation Cess were arbitrarily imposed.
The Court did not elaborate extensively on this point but implicitly considered the absence of proper assessment as part of the procedural irregularities favoring bail.

3. SIGNIFICANT HOLDINGS

"Though the CGST Act is a special enactment, it is not a complete Code in itself as regards to the provision of search, seizure and arrest and the provision of the Code of Criminal Procedure would equally apply unless expressly or impliedly excluded by the provision of CGST Act."

"The 'reasons to believe' should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest. Exceptions are available in one-off cases where appropriate redactions are permissible, but the onus to justify redaction lies on the Department of Enforcement and the court is the final arbiter."

"The absence of Document Identification Number (DIN) in the Authorization Letter and Grounds of Arrest, which are mandatory as per Circular No. 122/41/2019-GST, renders such documents invalid and is a good ground for granting bail."

"Non-compliance with Sections 41/41A of Cr.P.C. and Sections 47/48 of BNSS at the time of arrest violates Article 21 and 22(1) of the Constitution and established Supreme Court precedents, and constitutes a procedural lapse justifying bail."

"Economic offences require a different approach in bail matters, considering the nature of accusations, evidence, severity of punishment, character of accused, and larger public interest."

"Sufficient progress in investigation and absence of necessity for further custodial interrogation are relevant factors in considering bail."

Final determination: The Court granted bail to the accused/petitioner on furnishing a bond of Rs. 50,000 with one surety of like amount, subject to conditions of cooperation with investigation, non-interference with witnesses, and not leaving jurisdiction without permission.