GUIDELINES ON SUMMONS, ARREST AND BAIL: GST

[Dr. Sanjiv Agarwal]

In any tax law, tax evasion as well as detection and investigation both are present and go hand-in-hand. It is obvious that tax evasion ought to be curbed at all costs and this may require severe and harsh action on the part of tax collectors and regulators. This includes inspection, investigation and search. For this purpose. ‘Summons proceedings’ are one of the most important tools in the hands of tax collectors. If the search conducted results in evidence of fraud or evasion, arrest of offenders follow. Then comes the bail.

Summons

As per Section 70 (1) of the CGST Act, 2017, summons can be issued by the proper officer to any person whose attendance is considered necessary either for giving evidence or producing a document or any other thing in an inquiry in the same manner, as provided in the case of a civil court under the provisions of Code of Civil Procedure, 1908.

As per Section 70(2) of CGST Act, 2017, securing such documentary and oral evidence under the said legal provision shall be deemed to be a "judicial proceedings" within the meaning of Section 193 and Section 228 of the Indian Penal Code, 1860. While issuing of summons is one of the instruments with the Department to get/obtain information or documents or statement from any person to find out the evasion of the tax etc., however, it needs to be ensured that exercise of such power is done judiciously and with due consideration.

Of late, there have been reports that summons are being issued casually and result into avoidable harassment of taxpayers or persons who are put to enquiry, many times just to collect confirmation and documents or to put the management under pressure. Though the Central Board of Indirect Taxes have been advising the field formations to use such power of summoning persons rarely and diligently, in view of increased number of such instances, fresh guidelines have been now issued.

New Summon Guidelines

CBIC (GST- Investigation Wing) has issued Instruction No. 3/2022-23 dated 17.08.2022 on issuance of summons u/s 70 of the CGST Act, 2017. Accordingly, following are some of the important points to be noted:

• Where summons are issued by Superintendent, prior written permission of officers not below the rank of DC/AC will be required
• Reasons to be recorded in writing for issue of summons
• Summons to be avoided to call for statutory documents already available on GSTN portal.
• Officer to record on file the appearance or non- appearance, as the case may be, in the file.
• Repeated summons without ensuring service of earlier summons to be avoided.
• Senior management /promoters (CMD, MD, CEO, CFO etc) of company or PSU should not be summoned unless their involvement is suspected or in the first instance.
• Summoned person should be aware as to whether he is being summoned as an accused, co-accused or witness.
• Summons to contain name of offender generally. However, same may be with held if it is likely to impact investigation.
• If the person summoned does not cooperate and join investigation even after repeated summons (generally three), complaint shall be filed u/s 172 and 174 of Indian Penal Code (IPC) before the Magistrate.
• It should be ensured that summons are duly served on the concerned person.

Arrest & Bail

A person can be arrested for eligible offences punishable under section 132 of the CGST Act, 2017. Arrests can be made under section 69 of CGST Act, 2017.

CBIC (GST-Investigation Wing) has issued guidelines for arrest and bail in relation to offences punishable under CGST Act, 2017.

It may be noted that Supreme Court in criminal Appeal No. 838 of 2021 [SLP (Criminal) No. 5442/2021] in SIDDHARTH VERSUS THE STATE OF UTTAR PRADESH & ANR. - 2021 (8) TMI 977 - SUPREME COURT observed and held that:

1. Merely because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of the power to arrest and the justification for exercise of it.
2. If the Investigating Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused.

CBIC has taken cognizance of same and issued guidelines on arrest and bail under CGST Act, 2017. Accordingly, following guidelines must be adhered to:

1. Before placing a person under arrest, the legal requirements must be fulfilled. The reasons to believe  to  arrive  at a decision  to  place  an  alleged  offender under arrest  must  be unambiguous and amply clear. The reasons to believe must be based on credible material.
2. Since arrest impinges on the personal liberty of an individual, the power to arrest must be exercised carefully. The arrest should not be made in routine and mechanical manner.
3. Approval to arrest should be granted only where the intent to evade tax or commit acts leading to availment or utilization of wrongful Input Tax Credit or fraudulent refund of tax or failure to pay amount collected as tax as specified in sub-section (1) of Section 132 of the CGST Act 2017, is evident and element of mens rea / guilty mind is palpable.
4. The relevant factors before deciding to arrest a person, apart from fulfillment of the legal requirements, must be that the need to ensure proper investigation and prevent the possibility of tampering with evidence or intimidating or influencing witnesses exists.
5. Arrest should, however, not be resorted to in cases of technical nature.
6. Pr. Commissioner/Commissioner shall record on file that after considering the nature of offence, the role of person involved and evidence available, he has reason to believe that the person has committed an offence as mentioned in Section 132 and may authorize an officer of central tax to arrest the concerned person(s).
7. The arrest memo must be in compliance with the directions of Hon'ble Supreme Court in the case of SHRI DK. BASU, ASHOK K. JOHRI VERSUS STATE OF WEST BENGAL, STATE OF UP. - 1996 (12) TMI 350 - SUPREME COURT
8. The arrest memo should indicate relevant section (s) of the CGST Act, 2017 or other laws attracted to the case and to the arrested person and inapplicable provisions should be struck off.
9. The grounds of arrest must be explained to the arrested person and this fact must be noted in the arrest memo.
10. The date and time of arrest shall be mentioned in the arrest memo and the arrest memo should be given to the person arrested under proper acknowledgment.
11. A separate arrest memo has to be made and provided to each individual/arrested person.
12.  A woman should be arrested only by a woman officer.
13. Medical examination of an arrested person should be conducted by a medical officer in the service of Central or State Government and in case the medical officer is not available, by a registered medical practitioner, soon after the arrest is made.
14. If an arrested person is a female, then such an examination shall be made only by or under supervision of a female medical officer, and in case the female medical officer is not available, by a female registered medical practitioner.
15. It shall be the duty of the person having the custody of an arrested person to take reasonable care of the health and safety of the arrested person.
16. Arrest should be made with minimal use of force and publicity, and without violence. The person arrested should be subjected to reasonable restraint to prevent escape.
17. In cases, where a person is arrested under sub-section (1) of Section 69 of the CGST Act, 2017, for an offence specified under sub-section (4) of Section 132 of the CGST Act, 2017, the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a bail bond.
18. The bail conditions should be informed in writing to the arrested person and also on telephone to the nominated person of the person (s) arrested. 
19. The amount to be indicated in the personal bail bond and surety will depend upon the facts and circumstances of each case, inter-alia, on the amount of tax involved. It has to be ensured that the amount of Bail bond /Surety should not be excessive and should be commensurate with the financial status of the arrested person.
20. If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail forthwith.
21. In cases, where a person is arrested under sub-section (1) of Section 69 of the CGST Act, 2017, for an offence specified under sub-section (5) of Section 132 of the CGST Act, 2017, the officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours.
22. It must be ensured that the arrested person should be  produced before the appropriate Magistrate within twenty four hours of arrest, exclusive of the time necessary for the journey from the place of arrest to the Magistrate's Court.
23. After arrest of the accused, efforts should be made to file prosecution complaint under Section 132 of the Act, before the competent court at the earliest, preferably within sixty days of arrest, where no bail is granted. In all other cases of arrest also, prosecution complaint should be filed within a definite time frame.
24. Every Commissionerate / Directorate should maintain a Bail Register containing the details of the case,  arrested person,  bail amount,  surety amount etc. 
25. Pr. Director-General (DGGI)/ Pr.  Chief Commissioner(s)/ Chief Commissioner(s) shall send a report on every arrest to Member (Compliance Management) as well as to the Zonal Member within 24 hours of the arrest