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2019 (4) TMI 1320 - HC - GSTPossibility of arrest - Possibility of detention to custody - Grant of anticipatory bail - Input Tax Credit - fake invoices - input tax credit claimed on the basis of certain invoices without there being any actual physical receipt of goods - issuance of fake GST invoices - fabricated and fake E-way bills. Grant of anticipatory bail - Arrest in exercise of the power conferred by Section 69(1) of the CGST Act 2017 - Whether Article 226 can be used as a substitute to section 438 Cr.P.C? - HELD THAT - Since no first information report gets registered before the power of arrest under Section 69(1) of the CGST Act 2017 is invoked the petitioners cannot invoke Section 438 of the Code of Criminal Procedure for anticipatory bail. Therefore the only way they can seek protection against pre-trial arrest (actually pre-prosecution arrest) is to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Under sub-Section (1) of Section 70 of the CGST Act 2017 the proper officer under the CGST Act 2017 has the power to summon a person either to give evidence or to produce a document. The power has to be exercised in the manner as provided in the case of a civil Court under the CPC. - The interesting part of Section 70 is sub-Section (2) of Section 70. This sub-Section declares every enquiry to which Section 70(1) relates to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code. As a consequence a person who is summoned under Section 70(1) of the CGST Act 2017 to give evidence or to produce document becomes liable for punishment if he intentionally gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant. Where the applicability of Section 438 Cr.P.C. is specifically excluded the High Court would be extremely cautious in exercising the same power indirectly by resorting to Article 226 of the Constitution of India. Arrest under Section 69 (1) of the CGST Act 2017 - argument of petitioners is that since the maximum punishment prescribed under Section 132 of the CGST Act 2017 is imprisonment for five years and also since the petitioners have complied with the notices for appearance there is no necessity for the Commissioner to order their arrest under Section 69 (1) of the CGST Act 2017 - HELD THAT - It is clear from sub-Section (1) of Section 69 of the CGST Act that the power of the Commissioner to order the arrest of a person can be exercised only in cases where such a person is believed to have committed a cognizable and nonbailable offence. As we have pointed out elsewhere Section 132(1) of CGST Act 2017 lists out 12 different types of offences from clauses (a) to (l). The offences specified in clauses (a) to (d) of sub- Section (1) of Section 132 are declared cognizable and non-bailable under sub-Section (5) of Section 132 CGST Act 2017. All the other offences specified in clauses (f) to (l) of sub-Section (1) of Section 132 of the CGST 2017 Act are declared as non-cognizable and bailable under sub-Section (4) of Section 132 of CGST Act 2017 - But the incongruity between Section 69(1) and sub-Sections (4) and (5) of Section 132 of CGST Act 2017 is that when the very power to order arrest under Section 69(1) is confined only to congnizable and non-bailable offences we do not know how an order for arrest can be passed under Section 69(1) in respect of offences which are declared non-cognizable and bailable under sub-Section (4) of Section 132 of CGST Act. Section 69(1) of CGST Act 2017 very clearly delineates the power of the Commissioner to order the arrest of a person whom he has reasons to believe to have committed an offence which is cognizable and non-bailable. Therefore we do not know how a person whom the Commissioner believes to have committed an offence specified in clauses (f) to (l) of sub-Section (1) of Section 132 of CGST Act which are non-cognizable and bailable could be arrested at all since Section 69(1) of the CGST Act 2017 does not confer power of arrest in such cases. Congruence between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act 2017 - HELD THAT - Even though Section 69(1) of the CGST Act 2017 does not confer any power upon the Commissioner to order the arrest of a person who has committed an offence which is non-cognizable and bailable sub-Section (3) of Section 69 of the CGST Act 2017 deals with the grant of bail remand to custody and the procedure for grant of bail to a person accused of the commission of non-cognizable and bailable offences. Thus there is some incongruity between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act 2017. Once it is found that Article 226 of the Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under the SC/ST Act where it stands expressly excluded) and once it is found that the limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to a person sought to be arrested under Section 69(1) of the CGST Act 2017 (though the necessity to record reasons in the authorization for arrest may not be there) it should follow as a coronary that the writ petitions cannot be said to be not maintainable. Protection against arrest - HELD THAT - A prosecution can be launched only after the completion of the assessment goes contrary to Section 132 of the CGST Act 2017. The list of offences included in sub-Section (1) of Section 132 of CGST Act 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills are made offences under clauses (b) and (c) of sub-Section (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment. Therefore the argument that there cannot be an arrest even before adjudication or assessment does not appeal to us. Thus. despite our finding that the writ petitions are maintainable and despite our finding that the protection under Sections 41 and 41-A of Cr.P.C. may be available to persons said to have committed cognizable and non-bailable offences under this Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act 2017 we do not wish to grant relief to the petitioners against arrest. Petition dismissed.
Issues Involved:
1. Validity of summons issued under Section 70 of the CGST Act. 2. Invocation of penal provisions under Section 69 of the CGST Act. 3. Arrest and detention of individuals under Section 69 of the CGST Act. 4. Applicability of Sections 41 and 41-A of the Cr.P.C. to CGST Act proceedings. 5. Entitlement to protection against arrest under Article 226 of the Constitution of India. 6. Interpretation of "reasons to believe" under Section 69(1) of the CGST Act. 7. Compoundability of offences under Section 138 of the CGST Act. Detailed Analysis: 1. Validity of Summons Issued Under Section 70 of the CGST Act: The petitioners, comprising directors and CFOs of various companies, challenged the summons issued under Section 70 of the CGST Act. The court noted that the proper officer under this section has the power to summon any person to give evidence or produce documents necessary for an inquiry, and such inquiries are deemed judicial proceedings. The petitioners' main grievance was the potential for arrest and detention following these summonses. 2. Invocation of Penal Provisions Under Section 69 of the CGST Act: Section 69(1) empowers the Commissioner to authorize the arrest of a person believed to have committed cognizable and non-bailable offences under Section 132(1)(a) to (d). The court found that the Commissioner must have "reasons to believe" to authorize such arrests, which should be recorded in the files, though not necessarily in the arrest authorization itself. 3. Arrest and Detention of Individuals Under Section 69 of the CGST Act: The court examined the circumstances under which the petitioners were summoned and detained. It was noted that the petitioners were accused of circular trading and fraudulent ITC claims amounting to ?225 crores. Despite the petitioners' compliance with the summons, the court found the respondents' actions justified due to the severity of the alleged offences and the potential threat to the GST regime. 4. Applicability of Sections 41 and 41-A of the Cr.P.C. to CGST Act Proceedings: The court discussed the applicability of Sections 41 and 41-A of the Cr.P.C. to arrests under the CGST Act. It was concluded that these provisions, which provide safeguards against arrest, could be applicable even in CGST Act cases. However, the court noted that the phrase "reasons to believe" under Section 69(1) of the CGST Act differs from "reasons to be recorded" under Section 41A(3) of the Cr.P.C. 5. Entitlement to Protection Against Arrest Under Article 226 of the Constitution of India: The court acknowledged that Article 226 could be invoked for protection against arrest, especially when Section 438 Cr.P.C. (anticipatory bail) is not applicable. However, it emphasized that this jurisdiction should be exercised sparingly and only in exceptional cases. The court found that the petitioners' cases did not warrant such protection due to the gravity of the allegations. 6. Interpretation of "Reasons to Believe" Under Section 69(1) of the CGST Act: The court clarified that "reasons to believe" under Section 69(1) of the CGST Act implies that the Commissioner must have sufficient cause to believe that an offence has been committed. This belief must be based on recorded reasons, which need not be disclosed in the arrest authorization but should be present in the official files. 7. Compoundability of Offences Under Section 138 of the CGST Act: The petitioners argued that since all offences under the CGST Act are compoundable, arrest was unnecessary. The court rejected this argument, noting that compounding requires payment of tax, interest, and penalty. Given the substantial alleged liability of ?225 crores, the court found compounding impractical in this case. Conclusion: The court dismissed the writ petitions, finding that the petitioners were not entitled to protection against arrest due to the serious nature of the allegations and the potential threat to the GST regime. The court emphasized the importance of maintaining the integrity of the GST system, especially given its nascent stage. Consequently, the miscellaneous petitions were also dismissed, and no costs were awarded.
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