TMI Blog2021 (2) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion; it must be founded upon information. Such reasons to believe can be formed on the basis of direct or circumstantial evidence but not on mere suspicion, gossip or rumour. It is open for a court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief. A rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the officer and the formation of his belief. Courts have also held that recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The Principal Additional Director General has recorded her reasons after going through the facts and the arrest proposal put up before her. She recorded that she had reasons to believe that the petitioner had committed the two offences as mentioned above, which are cognizable and non-bailable. Thereafter she noted that during the course of the investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing conditions:- 1) petitioner shall be released on bail on furnishing cash surety of ₹ 5,00,000.00 before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai and within two weeks of his release, to furnish two solvent sureties of the like amount before the said authority; 2) petitioner shall co-operate in the investigation and shall not make any attempt to interfere with the ongoing investigation; 3) petitioner shall not tamper with any evidence or try to influence or intimidate any witness; 4) petitioner shall also deposit his passport before the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Mumbai. - WRIT PETITION NO.471 OF 2021 - - - Dated:- 15-2-2021 - UJJAL BHUYAN MILIND N. JADHAV, JJ. Mr. Ashish Batra a/w. Mr. Pankaj D. Jain a/w. Ms. Tejashree R. Kamble and Mr. Arun Lambe i/b. P. D. Jain Co. for Petitioner. Mr. Pradeep S. Jetly, Senior Advocate a/w. Mr. J. B. Mishra for Respondents. ORAL ORDER : (Per Ujjal Bhuyan, J.) Heard Mr. Batra, learned counsel for the petitioner and Mr. Pradeep S. Jetly, learned senior counsel along with Mr. Mishra, learned counsel for the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with remand application. Remand application disclosed that petitioner is accused of committing offence under section 132(1)(c) of the CGST Act as his companies had fraudulently availed and utilized ineligible input tax credit (ITC) amounting to ₹ 122.59 crores approximately on the strength of bogus invoices without actual receipt of goods or services as mentioned in the respective invoices; besides committing an offence under section 132(1) (b) as it was alleged that companies of the petitioner had fraudulently issued bogus invoices and passed on ineligible ITC to various companies without actual supply of goods or services mentioned in the respective invoices thereby leading to wrongful passing on of ITC amounting to approximately ₹ 191.66 crores to the recipient companies. By the said remand application, the arresting authority sought for judicial custody of the petitioner for a period of 14 days seeking liberty to interrogate the petitioner in jail custody. 7. It is stated that following his arrest, petitioner has been lodged in judicial custody as on today. 8. In the meanwhile, on behalf of the petitioner and the two companies of which he is the directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that petitioner through his companies has availed inadmissible ITC to the extent of ₹ 191.66 crores and has also passed on inadmissible ITC to the tune of ₹ 122.59 crores to other companies, totaling ₹ 314.25 crores. 12.1. Referring to sections 69 and 132 of the CGST Act, it is contended that there are inbuilt internal safeguards in the said provisions as no arrest and prosecution can be made or launched without the previous sanction of the Commissioner of Central Tax. Thereafter reference has been made to a decision of the Telangana High Court in the case of P. V. Ramana Reddy Vs. Union of India, (2019) 73 GST 727 in which the Telangana High Court declined the prayer for pre-arrest bail where the petitioner faced identical allegations. Reference has also been made to the order passed by the Supreme Court on 27.05.2019 dismissing the Special Leave Petitions filed against the decision of the Telangana High Court. Reference has also been made to the observations of the Supreme Court in Union of India Vs. Sapna Jain, S.L.P. (Criminal) No.4322 of 2019 dated 29.05.2020 . In that case, SLP was filed against the decision of the Bombay High Court granting interi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his culpability in the commission of offence of utilizing ITC generated fraudulently without there being any transfer of goods. 14.2. In so far sections 69 and 132 of the CGST Act are concerned, he submits that though the power to arrest by the revenue officials under the aforesaid provisions has been conceded by the Parliament in the larger interest of the society, nonetheless it cannot be said that these two provisions provide for an unbridled power of arrest rendering such power arbitrary and unreasonable. There are inbuilt procedural safeguards in these two provisions. In this connection, he has referred to the judgment of the Telangana High Court in the case of P. V. Ramana Reddy (supra) and submits that the present case is identical to the one dealt with by the Telangana High Court. In that case, Telangana High Court had rejected the prayer for pre-arrest bail of the petitioner accused of committing identical offence which decision has not been interfered with by the Supreme Court by rejecting the special leave petitions. Distinguishing the Delhi High Court judgment in the case of Makemytrip (India) Private Limited (supra), Mr. Jetly submits that was a case pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of M/s. Twinstar Industries Limited and other companies has committed offence under section 132(1)(c) of the CGST Act in as much as his companies have fraudulently availed and utilized ineligible input tax credit amounting to ₹ 122.59 crores approximately on the strength of bogus invoices without actual receipt of goods or services as mentioned in the respective invoices and that he has also committed offence under section 132(1)(b) of the CGST Act in as much as his companies have fraudulently issued bogus invoices and passed on ineligible ITC to various companies without actual supply of goods or services mentioned in the respective invoices thereby leading to wrongful passing on of ITC amounting to ₹ 191.66 crores approximately to the recipient companies. It was mentioned that these two offences are cognizable and non-bailable as per provisions of section 132(5) of the CGST Act read with section 137 thereof and punishable with imprisonment for a term which may extend to five years and fine. Accordingly, the accused (petitioner) was arrested on 21.01.2021 at 13:45 hours. After narrating in detail about the offences allegedly committed by the petitioner, prayer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of crucial importance because the same is the sine qua non for exercise of power to arrest by the Commissioner. However, we will deal with this aspect a little later. 22.1. One more aspect which needs mention is that under sub-section (3) of section 69, arrest under sub-section (1) has been made subject to the provisions of Cr.P.C., which would include section 41 and 41-A thereof. 23. Chapter XIX deals with offences and penalties. Section 132 is part of Chapter XIX. It provides for punishment for committing certain offences. As per sub-section (1), whoever commits any of the twelve offences mentioned therein shall be punished in the manner provided in clauses (i) to (iv) of sub-section (1). In this case, we are concerned with offences under clauses (b) and (c) of sub-section (1). As per clause (c), the offence is availing input tax credit using invoice or bill without the supply of goods or services or both in violation of the CGST Act; and as per clause (b), a person who issues any invoice or bill without supply of goods or services or both in violation of the provisions of the CGST Act or the rules made thereunder leading to wrongful availment or utilization of input tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. Section 136 of the CGST Act deals with relevancy of statements under certain circumstances. It says that a statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under the CGST Act shall be relevant for the purpose of proving in any prosecution for an offence under the CGST Act, the truth of the facts which it contains when a person who made the statement is examined as a witness in the case before the court and the court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. 26. Though we are aware that section 136 of the CGST Act will only come into play at the time where the trial commences nonetheless the said provision is important to highlight the fact that an admission made by a person before the revenue officials under the CGST Act would not be per se admissible in evidence unless it receives the imprimatur of the Court. 27. Having briefly noted the aforesaid provision, we may now revert back to what we had discussed about the sine qua non for exercising the power of arrest under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to defraud Union of India of its legitimate revenue. Therefore, she agreed with the proposal to arrest the petitioner in order to ensure that he does not tamper with crucial evidence and does not influence the witnesses as well as does not hamper in the investigation process. 29. In Arnesh Kumar Vs. State of Bihar, (2014) 8 SCC 273, Supreme Court was examining a plea of pre-arrest bail by the petitioner accused of committing an offence under section 498A of the Indian Penal Code, 1860 as well section 4 of the Dowry Prohibition Act, 1961. While laying down various guidelines and expressing its opinion, Supreme Court clarified that the directions issued would not only be applicable to cases under section 498A of the Indian Penal Code, 1860 or section 4 of the Dowry Prohibition Act, 1961 but would also cover such cases where offence is punishable with imprisonment for a term which may be less than seven years or which may extend to seven years whether with or without fine. 29.1. Supreme Court referred to section 41 Cr.P.C. and held that a person accused of an offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me a handy tool to the police officers who lack sensitivity or act with oblique motive. 6. Law Commissions, Police Commissions and this Court in a large number of judgments emphasized the need to maintain a balance between individual liberty and societal order while exercising the power of arrest. Police officers make arrest as they believe that they possess the power to do so. As the arrest curtails freedom, brings humiliation and casts scars forever, we feel differently. We believe that no arrest should be made only because the offence is non-bailable and cognizable and therefore, lawful for the police officers to do so. The existence of the power to arrest is one thing, the justification for the exercise of it is quite another. Apart from power to arrest, the police officers must be able to justify the reasons thereof. No arrest can be made in a routine manner on a mere allegation of commission of an offence made against a person. It would be prudent and wise for a police officer that no arrest is made without a reasonable satisfaction reached after some investigation as to the genuineness of the allegation. Despite this legal position, the Legislature did not find any impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that decision to arrest a person must not be taken on whimsical grounds. Reasons to believe must be based on credible material . Of course, that was a case under sections 90 and 91 of the Finance Act, 1994 regarding allegation of evasion of service tax by the petitioner but the fact remains that under section 91 also, the Commissioner was required to have reason to believe that any person had committed an offence as specified to clothe him with the jurisdiction to arrest such person. 31. The requirement under sub-section (1) of section 69 is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. From a perusal of the reasons recorded by the Principal Additional Director General, we find that other than paraphrasing the requirement of section 41 Cr.P.C., no concrete incident has been mentioned therein recording any act of tampering of evidence by the petitioner or threatening / inducing any witness besides not co-operating with the investigation, not to speak of fleeing from investigation. In such circumstances, we are of the view that the Principal Additional Director General could not have formed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, relief against arrest was denied to the petitioners in view of the special circumstances of that case which the Telangana High Court highlighted. 33.1. SLPs filed against the decision of the Telangana High Court were dismissed by the Supreme Court. 34. In the S.L.P. filed by the Union of India against the decision of the Bombay High Court granting pre-arrest bail to Sapna Jain, Supreme Court while issuing notice on 29.05.2019 observed that while it did not interfere with the privilege of pre-arrest bail granted by the High Court, in future while entertaining such request for pre-arrest bail, High Court should keep in mind that Supreme Court had dismissed the S.L.P. filed against the decision of the Telangana High Court. 34.1. We have carefully perused and given our thoughtful consideration to the decision of the Telangana High Court and the observations of the Supreme Court as alluded to hereinabove. 35. Facts in P. V. Ramana Reddy (supra) are clearly distinguishable from the facts of the present case. While in the former summons issued under section 70 were challenged, in the present case there is compliance to such summons by the petitioner who co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. This is more so in the present case when admittedly respondents have not lodged any first information before the police under section 154 Cr.P.C. Respondents have also not filed any complaint before the competent magistrate under section 200 Cr.P.C. In fact there was no formal accusation against the petitioner prior to arrest. The first time such accusation has been placed on record was after arrest that too in the form of remand application. A remand application by its very nature cannot be construed to be a first information or a complaint as is understood in law. If the remand application is excluded, then till today after 26 days of custody of the petitioner, there is still no formal accusation against the petitioner. 39. Reverting back to Arnab Manoranjan Goswami (supra), Supreme Court has once again reminded us that the basic rule of our criminal justice system is bail not jail . In cases at the under-trial stage not involving heinous offences like rape, murder, terrorism etc., it is bail and not jail which is the norm. In so far the present case is concerned, notwithstanding the allegation of serious financial impropriety against the petitioner, the case against him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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