2025 (5) TMI 996 - HC - GST

Validity of arrest of the petitioner under Section 132(1)(c) of the CGST Act 2017 read with Section 20 of the IGST Act 2017 - non-compliance with mandatory procedural safeguards under the BNSS 2023 and the CGST Act - absence of a prior notice under Section 35 of BNSS 2023 - lack of authorization by the Commissioner as mandated u/s 69 of the CGST Act - violation of principles of natural justice - HELD THAT - It is not in dispute that Section 41(A) notice is mandatory in case the offence is punishable up to 7 years of imprisonment which is not followed in this case. It is also not in dispute that u/s 132 (1) of CGST Act 2017 the maximum sentence is of 5 years with fine. It is true that another case is pending against the petitioner before the Court of learned Magistrate however in this case also charge-sheet has been laid. The petitioner has been detained in custody for more than 3 months. In the case of Satender Kumar Antil 2022 (8) TMI 152 - SUPREME COURT it was directed to the Investigating Agencies and the Courts that (ii) The Investigating Agencies and their officers are duty bound to comply with the mandate of Sections 41 and 41(A) Cr.PC and the directions issued by the Supreme Court in Arnesh Kumar (2014) 8 SCC 273. Any dereliction on their part has to be brought to the notice of the higher authorities by the Court followed by appropriate action. (iii) The Courts will have to satisfy themselves on the compliance of Sections 41 and 41 (A) Cr.PC. Any non-compliance would entitle the accused for grant of bail. In view of the aforesaid discussion and the law laid down by the Hon ble Apex Court as above this Court is inclined to grant bail to the petitioner - Accordingly the petitioner namely 1. Sri Aniket Sovasaria shall be released on bail on furnishing bail bond of Rs.50, 000/- with two suitable sureties of the like amount to the satisfaction of learned Chief Judicial Magistrate Kamrup(M) Guwahati. Bail application allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the arrest of the petitioner under Section 132(1)(c) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 was lawful, particularly in light of the alleged non-compliance with mandatory procedural safeguards under the BNSS, 2023 and the CGST Act, including the absence of a prior notice under Section 35 of BNSS, 2023 and the lack of authorization by the Commissioner as mandated under Section 69 of the CGST Act.

(b) Whether the mandatory issuance of a notice under Section 41A of the Code of Criminal Procedure (Cr.PC), as incorporated by Section 35(3) of BNSS, 2023, was complied with before arresting the petitioner, considering the maximum punishment prescribed is up to five years.

(c) Whether the petitioner is entitled to bail despite the pendency of multiple cases against him, in light of Section 479(2) of BNSS, 2023, which restricts bail where multiple investigations or trials are pending.

(d) The applicability of Supreme Court precedents requiring strict compliance with procedural safeguards in arrests and investigations, including the directions in Arnesh Kumar and Satender Kumar Antil.

(e) Whether the petitioner's continued custodial detention beyond 98 days is justified, given the completion of investigation and filing of charge-sheet.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Lawfulness of Arrest and Procedural Compliance

The petitioner's counsel contended that the arrest was illegal and arbitrary as it was effected without issuance of a notice under Section 35 of BNSS, 2023, without fulfilling pre-conditions prescribed under Section 69 of the CGST Act, and without any assessment proceedings determining tax liability. Specifically, the arrest lacked the "reason to believe" requirement and was not authorized by the Commissioner, rendering it without legal authority.

The Court analyzed the statutory framework, noting that Section 69 of the CGST Act mandates Commissioner's authorization for arrest, and Section 35 of BNSS, 2023 requires issuance of notice prior to arrest. The Court observed that these procedural safeguards are mandatory and non-compliance vitiates the arrest.

Reliance was placed on precedents including Arnesh Kumar (2014) 8 SCC 273, which emphasized the necessity of compliance with Sections 41 and 41A Cr.PC before arrest, and Satender Kumar Antil (2022) 10 SCC 51, which reiterated the duty of investigating agencies to comply with procedural mandates and the entitlement to bail upon non-compliance.

The Court found that the respondents failed to issue the mandatory notice under Section 41A Cr.PC (incorporated in BNSS, 2023), and did not comply with the authorization requirement under Section 69 CGST Act. Consequently, the arrest was held to be without authority of law.

(b) Requirement of Notice under Section 41A Cr.PC

The petitioner's counsel highlighted that since the offence under Section 132(1)(c) CGST Act attracts punishment up to five years, the mandatory notice under Section 41A Cr.PC (reflected in Section 35(3) BNSS, 2023) should have been issued before arrest. The absence of such notice was argued to be fatal to the legality of the arrest.

The Court agreed with this submission, referencing the judgment in Radhika Agarwal Vs. Union of India, which underscored the mandatory nature of such notice in cases punishable with imprisonment up to seven years. The Court noted that the maximum sentence under Section 132(1) CGST Act is five years, thus attracting the requirement of Section 41A notice, which was not complied with.

The respondent invoked Section 479(2) BNSS, 2023, which bars bail if multiple investigations or trials are pending against the accused. It was submitted that the petitioner had prior arrests and pending cases, including one involving forged documents and GST evasion.

The Court acknowledged the existence of multiple cases but noted that in the present case, the charge-sheet had been filed and investigation completed. The Court observed that the petitioner had been in custody for over three months, and the non-compliance with mandatory procedural safeguards weighed heavily in favor of granting bail.

The Court distinguished the present facts from the absolute bar under Section 479(2) by emphasizing the procedural lapses and the petitioner's right to liberty pending trial.

(d) Application of Supreme Court Precedents

The Court relied extensively on the Supreme Court's rulings in Arnesh Kumar and Satender Kumar Antil, which mandate strict adherence to procedural requirements for arrest and emphasize that failure to comply entitles the accused to bail. The Court reiterated the duty of investigating agencies to comply with Sections 41 and 41A Cr.PC and the necessity for courts to ensure such compliance before denying bail.

The Court also considered other cited precedents such as Vineet Jain and Natwar Kumar Jalan, which reinforce the principles of lawful arrest and procedural fairness in GST-related offences.

(e) Custodial Detention and Completion of Investigation

The petitioner had been in judicial custody for 98 days since arrest on 23.01.2025. The charge-sheet had been filed, indicating completion of investigation. The Court recognized that prolonged detention without trial or lawful arrest procedures infringes upon the petitioner's rights.

Balancing the interests of justice and liberty, the Court found that continued custodial detention was not warranted, especially given the procedural irregularities in arrest and the petitioner's cooperation with investigation.

3. SIGNIFICANT HOLDINGS

The Court held that:

"It is not in dispute that Section 41(A) notice is mandatory in case the offence is punishable up to 7 years of imprisonment which is not followed in this case."

"The Investigating Agencies and their officers are duty bound to comply with the mandate of Sections 41 and 41(A) Cr.PC and the directions issued by the Supreme Court in Arnesh Kumar, (2014) 8 SCC 273. Any dereliction on their part has to be brought to the notice of the higher authorities by the Court followed by appropriate action."

"The Courts will have to satisfy themselves on the compliance of Sections 41 and 41 (A) Cr.PC. Any non-compliance would entitle the accused for grant of bail ..."

Accordingly, the Court concluded that the arrest of the petitioner was without authority of law due to non-compliance with mandatory procedural safeguards, entitling the petitioner to bail.

The Court granted bail on furnishing a bond of Rs.50,000 with two sureties of the like amount, subject to conditions including:

(a) No leaving the territorial jurisdiction without prior permission;

(b) Regular attendance and cooperation with the trial court;

(d) No commission of similar offences in the future.

The Court clarified that the observations were limited to the bail application and did not express any opinion on the merits of the case.

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