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2021 (2) TMI 762 - HC - GSTSeeking grant of Bail - Constitutional validity of section 132(1) (b) of the Central Goods and Services Tax Act 2017 - Seeking declaration that the power under section 69 of the CGST Act can only be exercised upon determination of the liability - HELD THAT - The Commissioner may authorize arrest of a person only if he has reasons to believe that such a person has committed any offence under the clauses mentioned therein. The expression reasons to believe is an expression of considerable import and in the context of the CGST Act confers jurisdiction upon the Commissioner to authorize any officer to arrest a person. This expression finds place in a number of statutes including fiscal and penal. Without dilating much it can safely be said that the expression reasons to belief postulates belief and the existence of reasons for that belief. The belief must be held in good faith it cannot be merely a pretence. Reasons to believe does not mean a purely subjective satisfaction. It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The belief must not be based on mere suspicion; it must be founded upon information. Such reasons to believe can be formed on the basis of direct or circumstantial evidence but not on mere suspicion gossip or rumour. It is open for a court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief. A rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the officer and the formation of his belief. Courts have also held that recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The Principal Additional Director General has recorded her reasons after going through the facts and the arrest proposal put up before her. She recorded that she had reasons to believe that the petitioner had committed the two offences as mentioned above which are cognizable and non-bailable. Thereafter she noted that during the course of the investigation petitioner had not co-operated with the department and had tried to mislead the investigation. Offences were committed with full disregard to the statutory provisions with intent to defraud Union of India of its legitimate revenue. Therefore she agreed with the proposal to arrest the petitioner in order to ensure that he does not tamper with crucial evidence and does not influence the witnesses as well as does not hamper in the investigation process. The requirement under sub-section (1) of section 69 is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. From a perusal of the reasons recorded by the Principal Additional Director General we find that other than paraphrasing the requirement of section 41 Cr.P.C. no concrete incident has been mentioned therein recording any act of tampering of evidence by the petitioner or threatening / inducing any witness besides not co-operating with the investigation not to speak of fleeing from investigation. In such circumstances we are of the view that the Principal Additional Director General could not have formed a reason to believe that the petitioner should be arrested. Bail jurisprudence which has evolved over the years stands on a different footing altogether. This is more so in the present case when admittedly respondents have not lodged any first information before the police under section 154 Cr.P.C. Respondents have also not filed any complaint before the competent magistrate under section 200 Cr.P.C. In fact there was no formal accusation against the petitioner prior to arrest. The first time such accusation has been placed on record was after arrest that too in the form of remand application. A remand application by its very nature cannot be construed to be a first information or a complaint as is understood in law. If the remand application is excluded then till today after 26 days of custody of the petitioner there is still no formal accusation against the petitioner - the continuing the detention of the petitioner may not at all be justified. In a case of this nature it is the duty of the constitutional court to strike a fine balance between the need for custodial interrogation and the right of an accused to personal liberty. It is directed that the petitioner shall be enlarged on bail subject to the following conditions - 1) petitioner shall be released on bail on furnishing cash surety of 5, 00, 000.00 before the Additional Chief Metropolitan Magistrate 8th Court Esplanade Mumbai and within two weeks of his release to furnish two solvent sureties of the like amount before the said authority; 2) petitioner shall co-operate in the investigation and shall not make any attempt to interfere with the ongoing investigation; 3) petitioner shall not tamper with any evidence or try to influence or intimidate any witness; 4) petitioner shall also deposit his passport before the Additional Chief Metropolitan Magistrate 8th Court Esplanade Mumbai.
Issues Involved:
1. Constitutional validity of Section 132(1)(b) of the CGST Act, 2017. 2. Exercise of power under Section 69 of the CGST Act. 3. Restraint on filing criminal complaints for compoundable offences. 4. Direction to decide on compounding applications. 5. Interim bail for the petitioner. Issue-wise Detailed Analysis: 1. Constitutional Validity of Section 132(1)(b) of the CGST Act, 2017: The petitioner challenged the constitutional validity of Section 132(1)(b) of the CGST Act, which deals with the punishment for issuing invoices without the actual supply of goods or services, leading to wrongful availment or utilization of input tax credit (ITC). The court examined the provisions and noted that the section provides for stringent penalties, including imprisonment for a term which may extend to five years and a fine if the amount involved exceeds ?500 lakh. The court did not find any merit in the challenge to the constitutional validity of this section. 2. Exercise of Power under Section 69 of the CGST Act: The petitioner argued that the power under Section 69, which allows for the arrest of a person by the Commissioner, should only be exercised upon the determination of liability. The court analyzed the provisions of Section 69, which allows the Commissioner to authorize the arrest if there are "reasons to believe" that the person has committed an offence under Section 132. The court emphasized the importance of the expression "reasons to believe," which must be based on credible material and not mere suspicion. The court found that the reasons recorded by the Principal Additional Director General for the petitioner's arrest were not concrete and lacked specific incidents of tampering with evidence or non-cooperation, thus deeming the arrest unjustified. 3. Restraint on Filing Criminal Complaints for Compoundable Offences: The petitioner sought a restraint on the respondents from filing any criminal complaint against him for alleged violations of the CGST Act, which are compoundable offences. The court noted that under Section 138 of the CGST Act, offences can be compounded by the Commissioner on payment of the compounding amount, and no further proceedings shall be initiated once compounding takes place. The court did not issue a specific restraint but highlighted the provision for compounding. 4. Direction to Decide on Compounding Applications: The petitioner requested a direction for respondent Nos. 2 and 3 to decide on the compounding applications filed by him and the companies he is a director of. The court acknowledged the filing of compounding applications and directed the respondents to take a decision on these applications by passing a speaking order. 5. Interim Bail for the Petitioner: The petitioner sought interim bail, arguing that his arrest was arbitrary and that he had cooperated with the investigation. The court considered the principles of bail jurisprudence, noting that the basic rule is "bail not jail" unless the offence is of a heinous nature. The court found that the petitioner's continued detention was not justified, especially since there was no formal accusation against him before his arrest. The court directed the petitioner to be enlarged on bail subject to certain conditions, including furnishing a cash surety, cooperating with the investigation, not tampering with evidence, and depositing significant sums with the respondents. Conclusion: The court addressed each issue comprehensively, balancing the need for custodial interrogation with the petitioner's right to personal liberty. The petitioner was granted bail with stringent conditions to ensure cooperation with the investigation and safeguard the interests of the revenue. The court's decision emphasized the importance of credible material for exercising the power of arrest and highlighted the provision for compounding offences under the CGST Act.
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