TMI Blog2021 (10) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... to his subordinate. A very same reasonable belief will be that of the authority upon whom the power is delegated. Thus, the power under Section 69 of the GGST Act can be exercised by the authority upon whom the power is delegated provided the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the GGST Act. Thus, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power under Section 69 of the Act remains the same. Thus, this Court is of the view that the submissions canvassed by learned advocate for the applicants on this aspect is misconceived. It is alleged by the prosecution that the present applicants in connivance with other persons, entered into transaction with 36 dummy firms and false invoices and sales were raised and in pursuance thereto, the Company has issued cheques to 36 dummy firms including four person, who are now arrested by the respondent department. There were receipts of more than ₹ 737.00 Crores and amount has been withdrawn by bearer cheque or transferred to other Company or by RTGS to dummy firms and during the course of investigation from one Mr. Afzal, certain mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate for the applicants submitted that the applicant viz., Nileshbhai Natubhai Patel of Criminal Misc. Application No.17697/2021 is the Chairman and Whole-Time Director of M/s. Madhav Copper Limited (hereinafter referred to as the Company for short), whereas the applicant viz., Divya Arvindbhai Monpara of Criminal Misc. Application No.17700/2021 is the Director of the said Company and the applicant viz., Rohitbhai Bhikhabhai Chauhan of Criminal Misc. Application No.17702/2021 is the Chairman and Whole-Time Director of the Company. It is submitted that the Company is a Public Limited Company listed on the National Stock Exchange (NSE) and is governed by the strict Rules framed by the Securities and Exchange Board of India (SEBI) and audited accounts are required to be submitted to NSE periodically. It is submitted that the Company of the applicants is a producer Company which produces the finished goods of Copper and the raw material is acquired from the local markets and also from the abroad and the purchases and sales data matches, inspite of that, the allegations are leveled by the respondents that the purchase is not genuine one and the goods have not been moved from the seller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an explanation could be called for and after the explanation is found satisfactory, no further action would be taken, however, where the explanation is not accepted, the concerned officer may proceed and take action under Sections 65, 66 and 67 of the GGST Act or to proceed to determine tax under Sections 73 and 74 of the GGST Act. It is contended that no explanation has been called for by the respondent department from the Company except communication dated 18.07.2019 and in response thereto, the Company gave explanation on 12.08.2019. It is further submitted that in relation to the search conducted on 04.10.2019, a show cause notice was issued to the Company on 05.11.2020 in relation to the period from 01.07.2017 to 03.10.2019 raising total demand of ₹ 10,43,33,762/-, to which, the Company gave its reply. At this stage, it is also contended that the Company has deposited a sum of ₹ 7,71,22,360/- to avoid further financial burden under protest pending adjudication of the ITC. Learned advocate has also submitted that no proceedings for determination of tax and other dues have been initiated for the period subsequent to 04.10.2019 or pursuant to the search conducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e infructuous and, therefore, this Court may release the applicants on anticipatory bail. 8. Learned advocate would at this stage contend that even bare reading of Section 69 of the GGST Act suggests that powers can be exercised only in relation to Section 132 of the GGST Act, where the Commissioner has reasons to believe that a person has committed any offence as specified in the said provision. It is also contended that Section 132 of the GGST Act requires prior adjudication and the said provision is required to be interpreted strictly. It is also pointed out at this stage that the Commissioner cannot delegate the powers to his subordinate, inspite of that, as per the affidavit filed by the concerned officer before the Hon ble Supreme Court, power is delegated by the Commissioner to the Joint Commissioner, which is not permissible. 9. Learned advocate for the applicants further submits that the applicants have purchased the material from the concerned parties, which were holding valid registration number at the time of execution of the transaction, however subsequent to the transaction, registration numbers of the concerned firms were cancelled and, therefore merely becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Amin, after referring to relevant documents, submitted that the prosecution has made out prima facie case against the applicants and, therefore interrogation of the applicants would be required and while considering the anticipatory bail application filed by the applicants, conduct/ behavior of the applicants is also required to be kept in view. Learned Public Prosecutor submitted that there are other operators i.e. the concerned persons of the fictitious firms and out of them, four persons have been arrested, whereas one person is not available for the purpose of interrogation. Learned Public Prosecutor has supplied separate confidential papers, from which, it is pointed out that the applicants used to raise false invoices and during the period between 2019 to 2021, there were 700 transactions and in fact, 36 dummy firms were created and false invoices and sales were raised and in pursuance thereto, Company has issued cheques to 36 dummy firms including four persons, who have been arrested and there were receipts of more than 737 Crores and amount has been withdrawn by bearer cheques or transferred to other Company or by RTGS to dummy firms. It is further submitted that certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to Paragraph Nos.14, 17, 34, 38 and 92 of the said decision. 16. Learned Public Prosecutor would thereafter refer to and rely upon Section 5(3) of the GGST Act. It is contended that as per the said provision, power of the Commissioner can be delegated and there is no embargo as contended by learned advocate for the applicants. 17. Learned Public Prosecutor has placed reliance upon the judgment dated 04.02.2020 passed by the Division Bench of this Court in case of Nathalal Maganlal Chauhan Vs. State of Gujarat in Special Civil Application No.513/2020 with Special Civil Application No.2741/2020. 18. At this stage, learned Public Prosecutor submits that the contention raised by learned advocate for the applicants that in order to invoke the provision of Section 69 read with Section 132 of the GGST Act, two conditions need to be satisfied cumulatively i.e. first, the Commissioner has reasons to believe that a person has committed any offence as specified in the said GGST Act and second, it is determined that the concerned person has committed offence, which has to be necessarily the post-determination of the demand by following due process of law. It is pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of investigation arising out of File No.DCST/ENF-2/AC-6/CONFIDENTIAL/2021-22; (ii) Declare the process instituted, commenced and continued by the Respondents qua the petitioners vide File No.DCST/ENF-2/AC-6- CONFIDENTIAL/2021-22 as no nest, illegal, void ab initio for not following the mandatory procedure under Chapter XII of Code of Criminal Procedure, 1973 and therefore, violative of the procedure established by law : (iii) Issue an appropriate writ order or direction declaring that the provisions of section 69 of the Central Goods and Service Tax Act, 2017 to be ultra vires the constitution being arbitrary and in violation of Article 14, 19, 20 and 21 of the Constitution of India. (iv) And/or pass any other or further orders which Your Lordships may deem fit and proper in the interest of justice. 22. In the aforesaid Writ Petition, the Hon ble Supreme Court has initially passed an interim order dated 15.09.2021 and thereby directed the present applicants to remain present before the respondent authority on 17.09.2021 and interim protection was granted to the applicants till 21.09.2021 and, thereafter on 21.09.2021, the Hon ble Supreme Court has passed furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner and not of the delegated authority. The argument is that the Parliament has chosen and thought fit to repose confidence in the Commissioner and that is the reason why in Section 69 the phrase 'Commissioner has reasons to believe' has been stated. 12. Mr.Pandya would submit that the words 'reason to believe' contemplates an objective determination based on intelligent care and deliberation as distinguished from a purely subjective consideration. If such is the mandate of the Legislature, then such a power can never be delegated. Mr.Pandya would submit that the impugned Notification is contrary to the mandate of Section 6 of the Gujarat Goods and Services Tax Act, 2017. According to Mr.Pandya, while passing an order under Section 69 of the GGST Act, 2017, a simultaneous order under the CGST Act, 2017 shall also have to be passed. Under the CGST Act, 2017, the Commissioner or the Additional Director General of Central Tax would exercise the power under Section 69 of the Act, 2017. The Additional Commissioner of State Tax is subordinate in rank compared to the Commissioner of Central Tax. He pointed out that for the GGST Act, 2017, it is the Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the GGST Act. Thus, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power under Section 69 of the Act remains the same. Thus, this Court is of the view that the submissions canvassed by learned advocate for the applicants on this aspect is misconceived because of the aforesaid decision rendered by the Division Bench is clear on this point. 27. In the judgment of the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra), it has been observed in Paragraph Nos.11, 48 and 77 as under, 11. The learned Senior Advocate Mr. Hemani thereafter submitted on merits of the matter that in order to invoke the provisions of section 69 read with section 132 of the CGST Act, the twin conditions need to be satisfied cumulatively i.e. (1) the Commissioner has reasons to believe that a person has committed the specified offence and (2) It is determined that the concerned person has committed an offence which has to be necessarily the post-determination of the demand by following the due process of law. 48. The other ancillary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adjudication for the assessment as provided under the provisions of the Chapter VIII of the CGST Act. The reference to section 132 in section 69 of the CGST Act is only for the purpose of indicating the nature of the offences on the basis of the same the reasonable belief is formed and recorded by the Commissioner for the purpose of passing an order of arrest. (2) Q. whether the provisions of section 69 of the CGST Act envisages that the Commissioner is obliged to record his reasons of belief and furnish the same to the person who is sought to be arrested? A. (i) The Commissioner is required to record reasons of belief to arrest a person as per sub-section (1) of Section 69 of the CGST Act. However sub-section (2) and sub-section (3) of section 69 with reference to the provisions of subsection( 4) and subsection (5) of section 132 of the CGST Act, differentiates between the cognizable and non cognizable offences. The sub-section (2) of section 69 provides for informing such a person about grounds of arrest if he is alleged to have committed a cognizable and non bailable offence and sub-section (3) authorises the Deputy Commissioner or Assistant Commissioner subject to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the CGST Act with a view to adjudging the evasion of GST and availing illegal input tax credit and imposing penalty. (iii) The order authorising any officer to arrest may be justified if the Commissioner or any other authority empowered in law has reasons to believe that the person concerned has committed the offence under section 132 of the Act. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. (iv) The power conferred upon the authority under Section 69 of the Act for arrest could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (v) The power under Section 69 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (vi) The above are merely the incidents of personal liberty guaranteed under the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and in such circumstances, the authorised Officer is not obliged to follow the dictum of the Supreme Court as laid in the case of Lalitha Kumari (supra). (ii)When any person is arrested by the authorised officer, in exercise of his powers under Section 69 of the CGST Act, the authorised officer effecting the arrest is not obliged in law to comply with the provisions of Sections 154 to 157 of the Code of Criminal Procedure, 1973. The authorised officer, after arresting such person, has to inform that person of the grounds for such arrest, and the person arrested will have to be taken to a Magistrate without unnecessary delay, if the offences are cognizable and non bailable. However, the provisions of Sections 154 to 157 of the Code will have no application at that point of time. Otherwise, subsection (3) of section 69 provides for granting bail as the provision does not confer upon the GST officers, the powers of the officer in charge of a police station in respect of the investigation and report. Instead of defining the power to grant bail in detail, saying as to what they should do or what they should not do, the short and expedient way of referring to the powers of another o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddress ourselves on the last question as regards the applicability of the safeguards pertaining to arrest as explained by the Supreme Court in case of D.K. Basu (supra), referred to above. It is significant to note that in D.K. Basu (supra), the Supreme Court did not confine itself to the actions of police officers taken in terms of powers vested in them under the Code but also of the officers of the Enforcement Directorate including the Directorate of Revenue Intelligence ('DRI'). This also included officers exercising powers under the Customs Act, 1962 the Central Excise Act, 1944 and the Foreign Exchange Regulation Act, 1973 (FERA') now replaced by the Foreign Exchange Management Act, 1999 ('FEMA') as well. It observed: 30. Apart from the police, there are several other governmental authorities also like Directorate of Revenue Intelligence, Directorate of Enforcement, Costal Guard, Central Reserve Police Force (CRPF), Border Security Force (BSF), the Central Industrial Security Force (CISF), the State Armed Police, Intelligence Agencies like the Intelligence Bureau, R.A.W, Central Bureau of Investigation (CBI) , CID, Tariff Police, Mounted Police and ITB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information, extract confession or drive knowledge about his accomplices, weapons etc. His Constitutional right cannot be abridged except in the manner permitted by law, though in the very nature of things there would be qualitative difference in the methods of interrogation of such a person as compared to an ordinary criminal.... These constitutional safeguards emphasised in the context of the powers of police officers under the Code of Criminal Procedure and of officers of central excise, customs and enforcement directorates, are applicable to the exercise of powers under the GST Act in equal measure. An officer whether of the Central Excise department or another agency like the DGCEI, authorised to exercise powers under the Central Excise Act and/or the FA will have to be conscious of the constitutional limitations on the exercise of such power. However, in context of D.K.Basu(supra), we would like to clarify that the law laid down by the Supreme Court in case of Poolpandi and others v. Superintendent, Central Excise and others reported in (1992) 3 SCC 259 has either been set aside or has been deviated from. It appears in paragraph no. 38 of the said judgment itself, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licants are misconceived in view of the observation made by the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra). It is specifically held by the Division Bench of this Court in the aforesaid decision in Paragraph No.77 that any person can be arrested for any offence under Section 69 of the GGTS Act by the authorized officer to whom the authority to arrest is given by the Commissioner if the Commissioner has reasons to believe that such person has committed an offence punishable under Section 132 of the GGST Act. It is also held that when any person is arrested by the authorized officer in exercise of power under Section 69 of the GGST Act, the authorized officer effecting arrest is not obliged in law to comply with the provision of Sections 154 to 157 of the Code, however, the authorized officer, after arresting such person, has to inform such person about grounds of his arrest and the person arrested will have to be taken to Magistrate without unnecessary delay if the offences are cognizable and non-bailable. 29. Similar view is taken by the Division Bench of this Court in case of Sandeep Mahendrakumar Sanghavi (supra), where the Division Bench was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the Police Officers during the course of investigation under the Code. (8) The expression 'any person' in Section 104 of the Customs Act includes a person who is suspected or believed to be concerned in the smuggling of goods. However, a person arrested by a Customs Officer because he is found to be in possession of smuggled goods or on suspicion that he is concerned in smuggling goods is not, when called upon by the Customs Officer to make a statement or to produce a document or thing, a person is accused of an offence within the meaning of Article 20(3) of the Constitution of India. Where a Customs Officer arrests a person and informs that person of the grounds of his arrest, for the purposes of holding an inquiry into the infringement of the provisions of the Customs Act which he has reason to believe has taken place, there is no formal accusation of an offence. The accusation could be said to have been made when a complaint is lodged by an officer competent in that behalf before the Magistrate. The arrest and detention are only for the purpose of holding effective inquiry under Sections 107 and 108 of the Customs Act with a view to adjudging confiscation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended by learned Public Prosecutor that after the withdrawal of the amount by dummy firms, the said amount is transferred to the applicants through Angadia in cash. The respondent department has collected certain material during the course of investigation with other accused, who have been arrested. It is the specific case of the department that the transaction worth of ₹ 737.00 Crores were entered into with 36 dummy firms and there would be liability of more than ₹ 137.00 Crores. Thus this Court is of the view that in the facts of the present case, the custodial interrogation of the applicants would be required. 31. Now it is the case of learned advocate for the applicants that the applicants have complied with the requirements of GGST Act and the Company has entered into transaction with the firms, which have valid registration numbers at the time of transaction, however subsequently, the said registration has been cancelled with retrospective effect. It is also the contention of learned advocate for the applicants that the sales and purchase transactions were matched and no action was taken by the respondent department for a particular period and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l (Crl) No.1803/2020, wherein the Hon ble Supreme Court has passed following order, The allegation against the petitioner is that he has created about 555 fake firms and has committed fraud to the tune of ₹ 74,00,00,000/- (Rupees seventy four crore only). Mr. K.M. Natraj, learned additional solicitor general, submits that the investigation is still pending and more number of fake firms created by the petitioner are being detected. It is not in dispute that the maximum punishment to be imposed on the petitioner, if convicted, is five years. It is also not in dispute that the petitioner has already undergone one year andeight months imprisonment. It is brought to our notice that some of the accused are released on bail. Be that as it may, having regard to the totality of facts and circumstances, we deem it appropriate to pass the following order: The State shall make endeavour to complete the investigation within three months from today. In case the investigation is not completed within three months from this day, the petitioner shall be released on bail by the Trial Court by imposing appropriate terms and conditions. If the investigation is completed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of his submission that before taking preliminary inquiry, registration of FIR under Section 154 of the Code is mandatory. This Court is not disputing the proposition laid down by the Hon ble Supreme Court in the said decision, however, the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra) has considered the aspect as to whether the provision of Sections 154 to 157 and 172 of the Code are applicable for the purpose of invoking power to arrest under Section 69 of the GGST Act and after considering various provision of the Act has categorically held in Paragraph No.77 that when any person is arrested by the authorized officer in exercise of power under Section 69 of the GGST Act, the authorized officer effecting arrest is not obliged in law to comply with the aforesaid provisions. 38. In case of Sushila Aggarwal (supra), the Hon ble Supreme Court has observed and laid down the guidelines for considering the application under Section 438 of the Code. This Court has kept in view the said decision while considering the present applications and in the facts of the present case, this Court is of the view that the applicants are not entitled to be rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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