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2019 (11) TMI 942 - HC - GSTRefund of IGST - dummy owners - power to arrest - pleaded case of the Petitioners is that Petitioner No. 1 as an Advocate, on behalf of four exporters who had retracted their statements made at the first instance filed Writ Petitions before Delhi High Court against DGGI - Petitioners contends that it is case of vendetta and there is no evidence against Petitioners to connect them with fraud if any committed by alleged four dummy exporters or alleged owner Ramesh Wadhera - arrest during investigation - HELD THAT - It is consistent opinion of courts that power of arrest should be resorted in exceptional circumstances and with full circumspection. The maximum sentence prescribed under GST is 5 years and it is directly linked with quantum of evasion of tax. Prosecution of any person is directly linked with determination of evasion of tax because if there is no evasion of tax, there cannot be criminal liability - The determination of tax liability does not fall within realm of criminal courts whereas liability of tax and penalty is determined by adjudicating authority under GST Act which is subject to challenge before Tribunal and Courts. To record statement under CGST Act, 2017 summons are served and if any person complies with summons, the mandate of Section 41 and 41A of Criminal Procedure Code should be taken care of. The provisions of CGST Act are not subject to exclusion of Criminal Procedure Code rather Section 67(10) as well Section 69(3) borrow provisions of Code of Criminal Procedure, 1973. As per Section 41(1)(b) as amended by Code of Criminal Procedure (Amendment) Act, 2008 applicable w.e.f. 01.11.2010, a person may be arrested if he has committed a cognizable offence punishable with imprisonment which may be less than 7 year or may extent to 7 year if conditions specified therein are satisfied. As per Section 41A of Cr.P.C., a notice shall be issued to the person against whom complaint has been made or creditable information has been received or reasonable suspicion exists and he shall not be arrested if he complies with the notice. The persons who are having established manufacturing units and paying good amount of direct or indirect taxes; persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in the evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty - Similarly, arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud merely on the basis of statement without any corroborative evidence linking the professional with alleged offence should be avoided. It is well known that if top brass of a running concern is arrested, there are all possibilities of closure of unit which results into unemployment and wastage of precious natural resources. It is case of some mis-understanding between Petitioners and officers of Respondent/DGGI who now want to implicate Petitioner and his family members. The investigation is going on for last couple of months and Respondents are unable to produce any evidence showing direct involvement of Petitioners. The Respondent did not record statement while both the Petitioners were in judicial custody for a week in FIR dated 15.8.2019 lodged at the instance of DGGI, and till date no statement of Petitioner No. 2 has been recorded though he is in judicial custody since 13.9.2019. The Respondent-DGGI handed over Petitioner No. 2 to DRI after recording his statement and there is nothing on record to show that he made any confession - Intention of Respondents seems only to arrest Petitioner No. 1, one way or the other, which is evident from the fact that Petitioner No. 2 was handed over to DRI without concluding investigation at least qua petitioner no.2 and there is nothing contained in different affidavits of Respondent, filed before this Court, indicating that involvement of Petitioner No. 2 is apparent from his statements. The Petitioner No. 2 was handed over to DRI on 12.9.2019 and since 13.9.2019 he is in judicial custody, hence no direction is warranted qua him, however qua Petitioner No. 1 (Akhil Krishan Maggu), we deem it appropriate to direct to Respondent not to take him in custody without prior approval of this court - Petition disposed off.
Issues Involved:
1. Quashing of summons issued by the Senior Intelligence Officer (SIO), Directorate General of GST Intelligence (DGGI). 2. Allegations against petitioners regarding involvement in fraudulent IGST refunds. 3. Arrest and detention of petitioners and their family members by DGGI. 4. Legal principles concerning the power of arrest under CGST Act, 2017 and related judicial pronouncements. Detailed Analysis: 1. Quashing of Summons: The petitioners sought quashing of the summons dated 28.8.2019 issued by the SIO, DGGI. The summons directed the petitioners to appear before the SIO to tender their statements in connection with exports made by alleged dummy firms. The petitioners contended that the summons were a result of vendetta due to their involvement in filing writ petitions on behalf of four exporters against the DGGI. 2. Allegations Against Petitioners: The DGGI alleged that the petitioners were involved in a fraudulent scheme to avail IGST refunds through dummy export firms. The petitioners were accused of creating bogus firms in connivance with Ramesh Wadhera and Mukesh Kumar. The DGGI claimed that the petitioners misused their professional positions to facilitate the fraud. 3. Arrest and Detention: The petitioners were arrested on 15.8.2019 following a commotion at Ramesh Wadhera’s residence during a DGGI search. They were released on bail on 22.8.2019. Subsequently, the DGGI recorded statements of dummy exporters implicating the petitioners and conducted another search at the petitioners' residence on 28.8.2019. Petitioner No. 2 was handed over to the Directorate of Revenue Intelligence (DRI) and has been in judicial custody since 13.9.2019. The petitioners argued that the arrests were intended to tarnish their reputation and coerce them into self-incriminating confessions. 4. Legal Principles on Power of Arrest: The court referred to various judicial pronouncements regarding the power of arrest under the CGST Act, 2017. Key judgments included: - Make My Trip Vs. Union of India (Delhi High Court): Emphasized that the power of arrest should be used with great circumspection and not casually. Arrest should follow the determination of tax liability. - Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST & C. Ex. (Madras High Court): Reiterated that punishment under Section 132 of the CGST Act can only be imposed post-determination of demand due from an assessee. - Vimal Yashwantgiri Goswami Vs. State of Gujarat (Gujarat High Court): Stressed that prosecution should normally be launched only after adjudication is completed. - Siddharam Satlingappa Mhetre Vs. State of Maharashtra (Supreme Court): Highlighted that arrest should be the last option and exercised only in exceptional cases. The court concluded that the power of arrest should not be exercised whimsically and must be based on credible material. The arrest should be avoided for professionals like Chartered Accountants or Advocates unless there is concrete evidence linking them to the alleged offense. Conclusion: The court found that the investigation had not produced concrete evidence directly implicating the petitioners in the fraudulent IGST refunds. The petitioners had complied with summons and there was no justification for their arrest. The court directed that Petitioner No. 1 should not be taken into custody without prior approval of the court and should appear before the respondent as summoned. The petition was disposed of with these directions, allowing the investigation to continue as per law.
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