2024 (12) TMI 1225 - HC - GST

Legality of the arrest and detention of petitioner - evasion of GST by falsely claiming ITC - power of the detention under Section 69 of the GST Act - reasons to believe - HELD THAT - Section 69 of the CGST Act, 2017 confers the power to arrest, where the Commissioner has reasons to believe that the persons had committed any offence specified in Clause (A) or Clause (B) or Clause (C) or Clause (D) of Sub-section 1 of Section 132 which is punishable under Clause (I) (II) of Sub-section (1) for (2) of the said Section, he, the Commissioner may by order authorize any officer of central excise to arrest such a person. Having notice to the provisions of Section 69 of the Central GST Act, a reference to Section 132 which provides for punishments for certain offences is also necessary for the purposes of this proceedings. Only the relevant portion of this section is referred to. Under Section 132 (1) (c) whoever commits or causes to commit and retain the benefits arising out of input tax credit using invoice and bill referred to in Clause (B) or fraudulently avails input tax credit without any invoice or bill shall be punishable - in cases where the amount of tax evaded or the input tax credit wrongly availed or used the amount of refund wrongly taken exceeds Rs. 500 Lakhs, with imprisonment for a term which may extend to 5 years and with fine. The records produced before this Court by the learned Standing Counsel of the respondent reveals that pursuant to the summons issued the petitioner had appeared before the investigating authority and his statements have also been recorded. The records also reveal that the authorization as required under provisions of Section 69 has been issued by the Commissioner and the petitioner also does not deny that the grounds of arrest have been supplied to them within the prescribed period under the statute. The investigation still underway and therefore, the respondents have have sought for extension of the remand before the competent court of criminal jurisdiction. The power of writ court to issue direction to release from custody has been discussed in several judgments of the Apex Court as well as the High Courts of this country. The power although available is to be used sparingly where the facts demand. In THE STATE OF GUJARAT ETC. VERSUS CHOODAMANI PARMESHWARAN IYER ANR. ETC. 2023 (7) TMI 1008 - SUPREME COURT while dealing with the proceeding where pursuant to summons issued by the Goods and Services Authority, the assessee, apprehending arrest had approached the Gujarat High Court praying for grant of Pre-arrest bail. The Gujarat High court disposed of the writ petition directing the petitioner to appear before the authority and if any apprehension is necessary, the authority will give further opportunity of two weeks. Perusal of the records reveals that the authorization required under the statue has been given by the Commissioner on the ground that he has reasons to believe on the materials placed before the authority. However, what is not seen from the materials placed before the court at this stage is the determination of the liability as is required for recovery of taxes from any assessee. No material has been shown that such determination of the liability had been arrived at by the respondent authorities on whom the Commissioner had concluded that he had reasons to believe that the person has committed any offence specified under the various Clauses under Section 132. While there is no quarrel with the proposition that Section 69 does confer power on the Commissioner to order arrest in case any of the specified offences under Section 132 of the CGST Act, the question remains is whether arrest or detention is called for merely because is power is available on the authority to do so. In ARNAB MANORANJAN GOSWAMI VERSUS THE STATE OF MAHARASHTRA AND ORS. 2020 (11) TMI 965 - SUPREME COURT it was held that the principles have involved over a period of time and had emanated from the series of decisions and such principles are equally applicable while exercising jurisdiction under 226 of the Constitution of India when the court is call upon to secure the liberty of the accuse/petitioner. Coming to the present proceedings as discussed from the records produced it is seen that the petitioner has cooperated with the investigating authority and his statement has been recorded there is no material to suggest that he will abscond or not respond to summons issued. There is also no material which prima facie suggests that the determination of the liability has been arrived that by the Commissioner or the investigating officer. Under such circumstances this court of the view that continued detention of the petitioner at the stage of investigation is not required. This therefore court considers that the petitioner can be released on interim bail until further orders. The petitioner is directed to be released on interim bail subject to furnishing personal bond of Rs. 1 Lakh as well as execute a bail bond of Rs. 1 Lakh with two local sureties of the like amount to the satisfaction of the learned Chief Judicial Magistrate, Kamrup (M) and the subject to fulfilment of conditions imposed - bail application allowed.

Summary

Issues Involved:

1. Legality of the arrest and detention under Section 132 (1) (c) of the CGST Act, 2017.
2. Application of Article 226 of the Constitution for release from detention.
3. Compliance with procedural requirements under Section 69 of the CGST Act.
4. Consideration of precedents regarding arrest and bail under GST law.

Detailed Analysis:

1. Legality of the Arrest and Detention:

The petitioner challenged the proceedings initiated under Section 132 (1) (c) of the CGST Act, 2017, concerning alleged GST evasion by falsely claiming Input Tax Credit (ITC) amounting to Rs. 10.29 crore. The petitioner argued that the arrest and detention were unwarranted as the quantum of demand had not been assessed, and the petitioner had cooperated with the authorities. The court noted that the allegations involved fraudulent availing of ITC without actual receipt of goods, which is punishable under Section 132 (1) (c) with imprisonment and fine if the amount exceeds Rs. 500 Lakhs. However, the court observed that the investigation was ongoing, and the actual determination of liability had not been completed.

2. Application of Article 226 for Release from Detention:

The petitioner sought release from detention under Article 226 of the Constitution. The court considered precedents, including the Apex Court's judgment in State of Gujarat Vs. Choodamani Parmeshwaran Iyer, which highlighted that while the power under Article 226 is available, it should be exercised sparingly. The court noted that the petitioner was produced before a competent court and remanded to custody, with an application for extension of detention filed. The court emphasized that the power to issue a writ of mandamus should compel statutory duties and not prevent officers from performing statutory functions.

3. Compliance with Procedural Requirements:

The court examined the procedural compliance under Section 69 of the CGST Act, which allows the Commissioner to authorize arrests if there are "reasons to believe" an offence has been committed. The records showed the authorization for arrest was issued, and the grounds of arrest were communicated to the petitioner. However, the court found no concrete evidence of tampering with evidence or non-cooperation by the petitioner, questioning the necessity of detention. The court emphasized the need for a balance between the power to arrest and the justification for its exercise, referencing the Apex Court's guidance in Siddharth Vs. State of Uttar Pradesh.

4. Consideration of Precedents:

The court referred to several precedents, including the Bombay High Court's judgment in Daulat Samirmal Mehta, which interfered with detention orders under similar circumstances. The Apex Court had upheld the bail granted in that case, modifying certain conditions. The court also considered the principles from Arnab Manoranjan Goswami's case, which outlined factors for granting bail under Article 226, such as the nature of the offence, potential for witness tampering, and the accused's cooperation with the investigation. The court concluded that the petitioner's continued detention was not justified and granted interim bail, subject to conditions ensuring cooperation with the investigation and preventing interference with evidence.

Conclusion:

The court directed the release of the petitioner on interim bail, subject to specific conditions, emphasizing the need for cooperation with the investigation and non-interference with evidence. The matter was listed for further proceedings, allowing the respondents to complete their instructions and file necessary affidavits. The decision underscored the careful application of arrest powers under the GST Act, balancing statutory authority with individual liberty.