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2025 (4) TMI 1498 - DSC - GSTLawful arrest of petitioner or not - failure to explain grounds for arrest when she was co-operating - alleged crime relates to tax evasion completely on documentary evidence - violation of principles of natural justice - HELD THAT - During her judicial custody it appears no any inquiry conducted with her. It is stated by the applicant that applicant has no intention to avoid payment of GST amount. It appears that the revenue is adequately secured. Thus it appears further custody of applicant is no more required. The arrest memo shows that accused was arrested on 29.03.2025 at 10 30 am hours and produced before court on the same day and sought her judicial custody. The grounds of arrest were explained to the accused and her father. The authorisation/order of arrest stated all the details of the case and grounds of arrest and delegated the powers to arrest under Section 69 of the Act. It bears signature of the accused and panch witnesses. Thus it cannot be said that the arrest is illegal. The further investigation if any will take its long time. The accused is prepared to furnish bail. The offence is triable by this court. Accused is a female. Considering the nature of offence she is entitle to be released on bail. Bail application allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legality of Arrest and Compliance with Procedural Safeguards The applicant contended that the arrest was arbitrary and illegal as it was made without proper grounds and without compliance with the procedural safeguards mandated under the Cr.P.C. and BNSS, particularly citing the Supreme Court's ruling in Radhika Agarwal v. Union of India. The applicant argued that the summons issued was only a witness summons and not a summons under Section 41A Cr.P.C. or Section 35 BNSS, which are required for arrest in GST investigations. The Court examined the arrest memo and the authorization/order of arrest under Section 69 of the MGST Act. It was found that the arrest order contained all necessary details, grounds for arrest, and was duly signed by the accused and panch witnesses. The Court noted that the arrest was made after the applicant was given summons and that the grounds of arrest were explained to her and her family. Therefore, the Court held that the arrest was not illegal or arbitrary. The Court also observed that the investigation had been ongoing since October 2024 and that the arrest was conducted in accordance with delegated powers under the MGST Act. The Court rejected the argument that the arrest was made without explanation or grounds, holding that procedural requirements were met. Issue 2: Quantum and Legitimacy of GST Demand and Threshold for Arrest The applicant challenged the sudden increase in the GST demand from Rs. 5.49 crores (as per DRC 22 intimation dated 26.03.2025) to Rs. 11.15 crores without any explanation, alleging that the department inflated the demand to meet the Rs. 5 crore threshold necessary for arrest under the MGST Act. The respondent (GST department) asserted that the applicant had claimed fraudulent input tax credit (ITC) of Rs. 11.15 crores from non-genuine entities, and that the transactions were paper transactions with no actual supply of goods or services. The department maintained that the burden of proof lay on the applicant to establish the genuineness of the ITC claimed. The Court noted that the applicant admitted that the demand as per DRC 22 was Rs. 5.49 crores and that this amount had been paid through reversal of ITC and bank transfers. However, the Court observed that the difference of approximately Rs. 5.51 crores represented inadmissible ITC claimed by the applicant. Given that the threshold for arrest is Rs. 5 crores and above, the Court found that the applicant's involvement in claiming inadmissible ITC over Rs. 5 crores justified arrest under the MGST Act. Issue 3: Necessity of Custodial Interrogation and Cooperation with Investigation The applicant contended that she was cooperating with the investigation and that custodial interrogation was not necessary since the alleged offence related to documentary evidence and the revenue was secured through provisional attachment of bank accounts and payment of GST dues. The respondent argued that the applicant had not cooperated fully and failed to explain the transactions relating to ITC, necessitating custodial interrogation to further the investigation. The Court found that the applicant had been in judicial custody for a considerable period without any inquiry conducted during custody. It also noted the applicant's assertion of no intention to avoid payment of GST and that the revenue was adequately secured. Consequently, the Court held that further custody was not required and that the applicant was entitled to bail, especially considering her status as a female accused and the nature of the offence. Issue 4: Grant of Bail and Conditions Thereof Considering the nature of the offence, the ongoing investigation, the applicant's cooperation, and the fact that the revenue was secured, the Court allowed the bail application. The Court imposed conditions to ensure the applicant's presence during investigation and trial, prevent tampering with evidence or witnesses, and restrict international travel without prior permission. The Court directed the applicant to execute a personal bond with sureties and allowed provisional release on furnishing cash bail for two months. The applicant was also ordered to surrender her passport for six months, furnish residential and contact details, and provide information about nearest relatives for communication if required. 3. SIGNIFICANT HOLDINGS "The arrest memo shows that accused was arrested on 29.03.2025 at 10:30 am hours and produced before court on the same day and sought her judicial custody. The grounds of arrest were explained to the accused and her father. The authorisation/order of arrest stated all the details of the case and grounds of arrest and delegated the powers to arrest under Section 69 of the Act. It bears signature of the accused and panch witnesses. Thus it cannot be said that the arrest is illegal." "It is admitted to the respondent that as per DRC intimation the demand of Rs. 5.49 crores have been paid by way of GST credit reverse and by bank transfers. As a matter of fact the threshold to arrest the accused for alleged offence is Rs. 5 crores and more. Thus it shows utilisation of inadmissible input tax credit by applicant around 5.51 crores." "During her judicial custody it appears no any inquiry conducted with her. It is stated by the applicant that applicant has no intention to avoid payment of GST amount. It appears that, the revenue is adequately secured. Thus it appears further custody of applicant is no more required." Core principles established include:
Final determinations:
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