GUIDELINES FOR ARREST AND BAIL UNDER CENTRAL GOODS AND SERVICES TAX ACT, 2017

[Mr. M. GOVINDARAJAN]

Arrest

Section 69 of the Central Goods and Services Act, 2017 (‘Act’ for short) provides that where the Commissioner has reasons to believe that a person has committed any offence specified below-

• Section 132(1)(a) – supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made there under, with the intention to evade tax;
• Section 132 (1) (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 there under leading to wrongful availment or utilization of input tax credit or refund of tax;
• Section 132 (1)(c) - avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;
• Section 132 (1)(d) - collects any amount as tax but fails to pay the same to the Government beyond a period of 3 months from the date on which such payment becomes due;

Such persons shall be punishable-

• in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 5 crores, with imprisonment for a term which may extend to 5 years and with fine;
• in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 2 crores  but does not exceed Rs.5 crores , with imprisonment for a term which may extend to 3 years and with fine.

All these offences are cognizable offence and non baiable.   The Commissioner may, by order, authorize any officer of central tax to arrest such person.  If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a Magistrate within 24 hours of his arrest.

Observations of Supreme Court regarding arrest

In SIDDHARTH VERSUS THE STATE OF UTTAR PRADESH & ANR. - 2021 (8) TMI 977 - SUPREME COURT the Supreme Court observed that the personal liberty is an important aspect of constitutional mandate.  The occasion to arrest an accused during investigation arises when custodial investigation becomes necessary or it is heinous crime or where there is a possibility of influencing the witness or accused may abscond.  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.  If arrest is made routing, it can cause incalculable harm to the reputation and self-esteem of a person.  If the Investigating Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout co-operated with the investigation then why there should be a compulsion on the officer to arrest the accused.

Guidelines

The Board has examined the above judgment and it has felt that there is a need to issue guidelines with respect to arrest under the Act. 

Conditions precedent to arrest

The following are the guidelines in regard to conditions precedent to arrest under the Act-

• Before placing a person under arrest, the legal requirements under the Act must be fulfilled.
• The reasons to be arriving at a decision to arrest must be unambiguous, amply clear and must be based on credible material.
• The relevant facts before deciding to arrest a personal must be the need to ensure proper investigation and prevent the possibility of tampering with evidence or intimidating or influencing witnesses exits.
• Arrest should not be resorted to in cases of a technical nature.
• Other factors influencing the decision to arrest could be if the alleged offender is co-operating in the investigation i.e., compliance to summons, furnishing of documents called for, not giving evasive replies, voluntary payment of tax etc.

Procedure for arrest

The following is the procedure for arrest-

• The Principal Commissioner/Commissioner should record the reason to believe that the person has committed an offence as mentioned in Section 132.
• He may authorize an officer of Central Tax to arrest the concerned person(s).
• The provisions of Code of Criminal Procedure, 1973 read with section 69(3) of the Act relating to arrest and the procedure thereof must be adhered to.
• The arrest memo, in the prescribed format, should indicate the relevant section(s) of the Act or other laws attracted to the case.
• The grounds of arrest must be explained to the arrested person and this fact must be noted in the arrest memo.
• A nominated or authorized person of the arrested person should be informed immediately and this fact shall be mentioned in the arrest memo.
• 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.
• A separate arrest memo has to be made and provided to each individual/arrested person.
• Document Identification Number is mandatory on communication issued by officers of CBIC to tax payers and other concerned persons for the purpose of investigation. 
• A woman should be arrested only by a woman officer in accordance with section 46 of Code of Criminal Procedure, 1973.
• Medical examination of an arrested person should be conducted by a medical officer soon after the arrest is made. 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 medical officer.
• 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.
• Arrest should be made with minimal use of force and publicity, and without violence.

Post arrest formalities

The guidelines issued the following instructions that are to be observed in post arrest-

• In cases, where a person is arrested the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a bail bond informing the bail conditions.
• If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail.  In cases where the conditions are not fulfilled the arrested person shall be produced before the Magistrate without delay and within 24 hours of the arrest.
• If a person is arrested under Section 132(5) of the Act, the officer authorized to arrest the person should inform such person of the grounds of arrest and produce him before a Magistrate within 24 hours.
• The arrested person, if necessary, may be handed over to the nearest police station for his safe custody, during the night under a challan, before he is produced before the Court.
• 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.
• Every Commissionerate/Directorate should maintain a Bail Register containing the details of the case, arrested person, bail amount, surety amount etc. 

Reports

 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 giving the following details-

• Date of Arrest;
• Time of arrest;
• Place of arrest with address;
• Name of the person;
• Date of birth;
• S/o, D/o, W/o 
•  Identification document type ;
• Identification document number;
• Nationality:
• Offence committed;
• Details of offence (not more than 50 words);
• Whether any seizure made?
• If yes, specify.

From September, 2022 onwards, a monthly report of all persons arrested in the Zone shall be sent by the Principal Chief Commissioner(s)/Chief Commissioner(s) to the Directorate General of GST Intelligence, Headquarters, New Delhi in the following format, by the 5th of the succeeding month-

• Sl. No.
• CGST Zone;
• Name of the arrested person;
• Age;
• Date of arrest;
• Status of person [Proprietor, Partner, Director, Professional (Lawyer/Chartered Accountant/Company Secretary etc.)];
• Amount of tax evaded (Rs. crore);
• Name of the entity involved;
• GSTIN of the entitled involved;
• Brief description of the role played by the arrested person.