TMI Blog2019 (4) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the only way they can seek protection against pre-trial arrest (actually pre-prosecution arrest) is to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Under sub-Section (1) of Section 70 of the CGST Act, 2017 the proper officer under the CGST Act 2017 has the power to summon a person either to give evidence or to produce a document. The power has to be exercised in the manner as provided in the case of a civil Court under the CPC. - The interesting part of Section 70 is sub-Section (2) of Section 70. This sub-Section declares every enquiry to which Section 70(1) relates, to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code. As a consequence, a person who is summoned under Section 70(1) of the CGST Act, 2017, to give evidence or to produce document becomes liable for punishment, if he intentionally gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant. Where the applicability of Section 438 Cr.P.C. is specifically excluded, the High Court would be extremely cautious in exercising the same power indirec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner to order the arrest of a person, who has committed an offence which is non-cognizable and bailable, sub-Section (3) of Section 69 of the CGST Act, 2017 deals with the grant of bail, remand to custody and the procedure for grant of bail to a person accused of the commission of non-cognizable and bailable offences. Thus, there is some incongruity between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act, 2017. Once it is found that Article 226 of the Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under the SC/ST Act where it stands expressly excluded) and once it is found that the limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to a person sought to be arrested under Section 69(1) of the CGST Act, 2017 (though the necessity to record reasons in the authorization for arrest may not be there), it should follow as a coronary that the writ petitions cannot be said to be not maintainable. Protection against arrest - HELD THAT:- A prosecution can be launched only after the completion of the assessment, goes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions arise, differ marginally from each other, we shall bring out the facts of each case separately: ( i) Brief facts in WP No.4764 of 2019 : The petitioner in this writ petition is the Managing Director of a Company, by name, Infinity Metals Products India Limited, engaged in the manufacture of iron and steel products. The Company is a listed company. A search was conducted in the premises of the Company by the officials of the GST Commissionerate on 27.02.2019 and a summon dated 27.02.2019 was issued to the petitioner under Section 70 of the CGST Act calling upon the petitioner to appear on 28.02.2019, to give evidence truthfully on the matters concerning the enquiry. According to the petitioner, he was traveling on an urgent work on 27.02.2019 and hence, he made a request to grant time for appearing and cooperating with the investigation. But a second summon dated 01.03.2019 was issued directing the petitioner to appear on 05.03.2019. The petitioner admittedly did not appear on 05.03.2019, but gave a letter seeking two weeks time. Therefore, a third summon dated 05.03.2019 was issued calling upon the petitioner to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, which is also a listed Company, by name, EBC Bearings India Limited, engaged in the manufacture of iron and steel products. A search was conducted in the premises of the said company by the officials of the GST Commissionerate on 27.02.2019 and a summon dated 27.02.2019 was issued to him under Section 70 of the Act. According to the petitioner, he appeared before the concerned authority in response to the summons on 27.02.2019, but was made to wait till 1.30 p.m. Thereafter, he was questioned from 6.00 p.m. onwards on 27.02.2019 till 3.00 a.m. on 28.02.2019. The petitioner claims that he was harassed without food or water and was coerced to sign a statement at 3.00 a.m. on 28.02.2019, though the date was recorded in the statement as 27.02.2019. This led to the petitioner suffering a setback in his health. According to the petitioner he was admitted in the hospital on 28.02.2019, but he was again served with a summon calling upon him to appear for an enquiry on 01.03.2019. The petitioner claims to have sent a reply seeking time on the ground of ill health. According to the petitioner, the officials of the GST Commissionerate stormed the hospital on 06.03.2019 and threatened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts in WP No.5329 of 2019: This writ petition is filed by a lady, who claims to be a sleeping partner (her husband is the only other partner) in a Partnership Firm, by name, M/s.Hyderabad Steels. According to the petitioner, her husband J. Satya Sridhar Reddy is the Managing Partner of the Firm. On 27.02.2019 a search of the residential premises of the petitioner was conducted by the officials of the GST Commissionerate, on the basis of a search warrant. After the search, an undated summon under Section 70 of the Act was served calling upon the petitioner to appear on 27.02.2019 at 17.00 hours. According to the petitioner, she appeared for the enquiry and was detained under the guise of investigation till 1.30 a.m. on 28.02.2019 without providing food or water. The petitioner claims that a statement was forcibly extracted from her at 1.00 a.m. on 28.02.2019, with the date 27.02.2019. Thereafter, she was allowed to go at 2.00 a.m. on 28.02.2019. According to the petitioner, a second summon was issued on 28.02.2019 asking her to appear at 3.30 p.m. The petitioner duly complied with the same and was again detained till 2.00 a.m. on the next day. During this period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted under coercion to the effect as though the petitioner created fake invoices in the names of five proprietary concerns run by him and through such fake invoices, without actual movement of goods, ITC claims were passed on; that the petitioner was again summoned to appear on 05.04.2019; and that since he apprehended arrest, he was compelled to file the writ petition. 4. Since the petitioners in these writ petitions were apprehending arrest, at the time when they came up before this Court, we granted interim protective orders, not to arrest the petitioners, but on condition that they appeared before the concerned authorities, whenever summoned and also cooperated in the investigation. Thereafter, the Superintendent (Anti Evasion), who is the 3rd respondent in most of the writ petitions, has come up with a counter affidavit. Contents of the Counter affidavit : 5. Since an investigation is now pending, which if results in the prosecution of the petitioners, may lead to the petitioners being tried for certain offences punishable under the Act, we will only record the gist of the averments contained in the counter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ITC to the tune of ₹ 26.95 crores; xiii) that one of these entities availed fraudulent ITC to the tune of ₹ 39.29 crores without actual receipt of goods; xiv) that one company availed ITC to the tune of ₹ 24.85 crores without actual receipt of goods, but paid a GST amount of ₹ 27,853/- only; xv) that many GST invoices and E-way bills of these entities showed that these entitles have shown transportation of goods weighing more than double the capacity of the lorries/trucks in which they were allegedly sent showing thereby that all these documents are fabricated documents; xvi) that the creation of fake E-way bills is an offence punishable under the Act; xvii) that one of these entities generated 10 invoices on a single day as though there was sale of a huge quantity of TMT Bars to another company, which created documents to show that all of them were resold by that company to a third company on the very same day; xviii) that these documents clearly showed circular trading without there being any actual trading; xix) that one of these entities availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy, learned Senior counsel appearing for the petitioners are: ( i) that the maximum punishment that could be imposed under Section 132 of the CGST Act, 2017 is only an imprisonment for 5 years, apart from fine and that therefore, under sections 41 and 41-A of the Code of Criminal Procedure, after its amendment, a person cannot be arrested so long as such person complies and continues to comply with the notice for his appearance; ( ii) that though Section 41A (3) of the Code confers discretion upon the police officer to arrest a person despite such person complying with the notice, the same has to be done only for reasons to be recorded; ( iii) that since it is always open to the respondents to scrutinise the books of accounts and pass orders of assessment reversing the input tax credits availed by the dealers under the Act, there is no necessity to arrest the petitioners, especially when no adjudication has taken place under the Act; ( iv) that since the officers under the CGST Act, 2017 are not police officers and they are not entitled to seek custody of the persons arrested under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clauses (a) to (l), ( 6) that 5 out of these 12 offences are cognizable and non-bailable in view of Section 132(5) of CGST Act, ( 7) that the remaining 7 offences are non-cognizable and bailable in view of Section 132(4) of the CGST Act, ( 8) that under Section 136 of the CGST Act, a statement made and signed by a person on appearance in response to any summons issued under Section 70 of the Act shall be relevant, to the extent indicated therein, and ( 9) that the petitioners are not entitled to convert the writ Court into a Court of anticipatory bail. 10. The learned Additional Solicitor General placed reliance upon several judgments of the Supreme Court to drive home the point that the proceedings under the Act till the stage of launching of the prosecution are not criminal proceedings and that the Commissioner or the appropriate officer under the Revenue Laws are not police officers and that at the stage of issue of notices under Section 70 of the Act, the Court cannot interfere. 11. We have carefully considered the above rival contention. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) that as a consequence, there is no protection for such persons under Article 20(3) of the Constitution of India, as the persons summoned for enquiry are not persons accused of any offence within the meaning of Article 20(3) of the Constitution of India. 14. The learned Senior Counsel appearing for the petitioners have no quarrel about the above propositions. In fact, the petitioners have not come up with these writ petitions contending (i) that the enquiry before the respondents partake the character of criminal proceedings and (ii) that the officers of Central Tax are police officers and that therefore the statements made to them are inadmissible. The petitioners are not even seeking the protection of Article 20(3) of the Constitution of India. On the other hand, the petitioners agree and undertake to appear before the officers and cooperate in the investigation. Their main grievance is about the possibility of their arrest and detention to custody. But the objection of the respondents is that writ proceedings are not to be converted into proceedings for anticipatory bail. Whether Article 226 can be used as a substitute to section 438, Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act, 2017 the proper officer under the CGST Act 2017 has the power to summon a person either to give evidence or to produce a document. The power has to be exercised in the manner as provided in the case of a civil Court under the CPC. In other words, the Proper Officer under the Act can be taken to have been conferred with the powers conferred upon the civil Court under Order XVI CPC. 19. The interesting part of Section 70 is sub-Section (2) of Section 70. This sub-Section declares every enquiry to which Section 70(1) relates, to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code. As a consequence, a person who is summoned under Section 70(1) of the CGST Act, 2017, to give evidence or to produce document becomes liable for punishment, if he intentionally gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant. 20. Therefore, even if the enquiry before the Proper Officer under CGST Act, 2017 is not by its nature, a criminal proceeding, it is nevertheless a judicial proceeding and hence, the person summon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutorily making it a case of casus omissus. 23. But, nevertheless, the learned Judge also held that the High Court is not completely denuded of its powers under Article 226 of the Constitution of India, to grant such a relief in appropriate and deserving cases. The learned Judge pointed out that this power is to be exercised with extreme caution and sparingly in those cases where the arrest of a person would lead to total miscarriage of justice. 24. Therefore, the contention of the learned Additional Solicitor General that the writ petitions are not maintainable, may not be correct in view of the decision of the Constitution Bench in Kartar Singh and the decision in Km. Hema Mishra . But, nevertheless, this Court has to keep in mind two things, namely, (1) the note of caution issued by the Supreme Court that this power should be exercised sparingly in appropriate cases and (2) that as a fundamental principle, a writ of Mandamus would lie only to compel the performance of a statutory or other duty. There is a fundamental distinction between a petition for anticipatory bail and the writ of mandamus to direct an officer not to effect arrest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub VRS, J PKR,J WP No.4764 Batch 28 section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person. ( 2) Where a person is arrested under sub-section (1) for an offence specified under subsection (5) of section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours. ( 3) Subject to the provisions of the Code of Criminal Procedure, 1973, ( a) where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate; ( b) in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les made thereunder, with the intention to evade tax; ( b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; ( c) avails input tax credit using such invoice or bill referred to in clause (b); ( d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; ( e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d); ( f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act; ( g) obstructs or prevents any officer in the discharge of his duties under this Act; ( h) acquires possession of, or in any way concerns himself in transporting, rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine. ( 3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months. ( 4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be noncognizable and bailable. ( 5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable. ( 6) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner. Explanation. - For the purposes of this section, the term tax shall include the amount of tax evaded or the amount of input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and bailable offence. While clause (a) of sub-Section (3) gives two options to the Officer carrying out the arrest, namely, to grant bail by himself or to forward the arrested person to the custody of the Magistrate, clause (b) confers the powers of an Officer incharge of a police station, upon the Deputy Commissioner or the Assistant Commissioner (GST), for the purpose of releasing an arrested person on bail, in the case of non-cognizable and bailable offences. 37. In other words, even though Section 69(1) of the CGST Act, 2017 does not confer any power upon the Commissioner to order the arrest of a person, who has committed an offence which is non-cognizable and bailable, sub-Section (3) of Section 69 of the CGST Act, 2017 deals with the grant of bail, remand to custody and the procedure for grant of bail to a person accused of the commission of non-cognizable and bailable offences. Thus, there is some incongruity between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act, 2017. 38. Another difficulty with Section 69 of the CGST Act, 2017 is that sub-Sections (1) and (2) of Section 69 which deal with the power o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d bailable offence, (3) the reference to Cr.P.C. in Section 132 (4) while making all offences under the CGST Act, 2017 except those specified in clauses (a) to (d) of Section 132 (1) of CGST Act, 2017 as non-cognizable and bailable and (4) the reference to Sections 193 and 228 of IPC in Section 70(2) of the CGST Act, 2017. Therefore, the contention of learned Additional Solicitor General that in view of Section 69(3) of the CGST Act, 2017, the petitioners cannot fall back upon the limited protection against arrest, found in Sections 41 and 41A of Cr.P.C., may not be correct. As pointed out earlier, Section 41-A was inserted in Cr.P.C. by Section 6 of the Code of Criminal Procedure (Amendment) Act, 2008. Under sub-Section (3) of Section 41A Cr.P.C., a person who complies with a notice for appearance and who continues to comply with the notice for appearance before the Summoning Officer, shall not be arrested. In fact, the duty imposed upon a Police Officer under Section 41A(1) Cr.P.C., to summon a person for enquiry in relation to a cognizable offence, is what is substantially ingrained in Section 70(1) of the CGST Act . Though Section 69(1) which confers powers upon the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 69(1) of the CGST Act. Since Section 69(1) of the CGST Act, 2017 specifically uses the words reasons to believe , in contrast to the words reasons to be recorded appearing in Section 41A(3) of Cr.P.C., we think that it is enough if the reasons are found in the file, though not disclosed in the order authorizing the arrest. 47. Once it is found that Article 226 of the Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under the SC/ST Act where it stands expressly excluded) and once it is found that the limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to a person sought to be arrested under Section 69(1) of the CGST Act, 2017 (though the necessity to record reasons in the authorization for arrest may not be there), it should follow as a coronary that the writ petitions cannot be said to be not maintainable. 48. That takes us to the next question as to whether the petitioners are entitled to protection against arrest, in the facts and circumstances of the case. We have already indicated on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-Section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of sub-Section (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment. Therefore, the argument that there cannot be an arrest even before adjudication or assessment, does not appeal to us. 53. An argument was advanced by Mr. Raghunandan Rao, learned Senior Counsel for the petitioners that all the offences under the Act are compoundable under sub-Section (1) of Section 138 of the CGST Act, 2017, subject to the restrictions contained in the proviso thereto and that therefore, there is no necessity to arrest a person for the alleged commission of an offence which is compoundable. 54. On the surface of it, the said argument of Mr. Raghunandan Rao, learned Senior Counsel for the petitioners is quite appealing. But, on a deeper scrutiny, it can be found that the argument is not sustainable for two reasons: ( 1) Any offence under CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly object of arresting a person pending investigation is just to facilitate further investigation. However, it is not so. The objects of pre-trial arrest and detention to custody pending trial, are manifold as indicated in section 41 of the Code. They are: ( a) to prevent such person from committing any further offence; ( b) proper investigation of the offence; ( c) to prevent such person from causing the evidence of the offence to disappear or tampering with such evidence in any manner; ( d) to prevent such person from making any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to the police officer; Therefore, it is not correct to say that the object of arrest is only to proceed with further investigation with the arrested person. 57. It is true that in some cases arising out of similar provisions for arrest under the Customs Act and other fiscal laws, the Supreme Court indicated that the object of arrest is to further the process of enquiry. But, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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