2025 (3) TMI 1022 - HC - GST

Challenge to petitioner s arrest and subsequent judicial custody - non-compliance with the statutory requirement for the issuance of a notice under Section 35 (3) of BNSS 2023. HELD THAT - It is well established in modern criminal jurisprudence and constitutional law that any challenge to the legality of an arrest involves a contest between the entrenched right to life and liberty and the larger public interest and state obligation to punish the guilty. Thus any interpretative exercise by this Court whether under its writ jurisdiction or inherent powers must employ a test of proportionality. In the case of Satender Kumar Antil v. CBI 2022 (8) TMI 152 - SUPREME COURT the Apex Court observed in respect of grant of bail to persons accused of offences punishable with less than seven years of imprisonment that one would expect a better exercise of discretion on the part of the court in favour of the accused . The Apex Court in Ashok Munilal Jain and Anr. v. Assistant Director Directorate of Enforcement 2017 (3) TMI 1642 - SUPREME COURT held that the procedure prescribed under the Criminal Procedure Code (CrPC) 1973 is equally applicable to criminal proceedings arising under the CGST Act 2017. The inherent powers of a High Court are not negated by any overlap with the judicial review powers conferred under Articles 226 and 227. Writs are extraordinary constitutional remedies and operate independently of the statutory right under Section 528 to address grievances not specifically provided for in the Sanhita - The High Court may at its discretion entertain a petition under Article 227 of the Constitution or under Section 528 of BNSS to address a substantial question of law that goes to the root of the matter or the genesis of the prosecution. A perusal of Section 69 (3) (a) of CGST Act 2017 reveals that the said Act envisages that the arrestee charged with a cognizable and non-bailable offence as under Section 132 (4) of the said Act shall be forwarded to the custody of the Magistrate in default of bail. The statute does not provide for custody of the arrestee to either police or the proper officer. Therefore the authority of the Magistrate to either admit the said arrestee on bail or remand him to judicial custody is to be necessarily exercised in accordance with the provisions of the BNSS 2023 (i.e. CrPC 1973) - the instant petition is maintainable under Section 528 of BNSS 2017 particularly where the grounds of challenge to the arrest include non-compliance with the statutory provision of Section 35 (3) of BNSS 2017. The Apex Court in Arnesh Kumar v. State of Bihar 2014 (7) TMI 1143 - SUPREME COURT held that an arrest without a warrant by a police officer for a cognizable offence punishable with imprisonment of up to seven years must satisfy not only the requirement of having reason to believe that the arrestee has committed the alleged offence but also that the arrest is necessary for one or more of the purposes enumerated in sub-clauses (a) to (e) of clause (1) of Section 41 CrPC (with Section 35(1) of BNSS corresponding to Section 41 CrPC). As to the issue of notice of appearance under Section 35 (3) of BNSS (i.e. Section 41-A of CrPC) the Court observed that such notice must be served on the accused within two weeks from the date of institution of the case with an extension by the Superintendent of Police possible for reasons recorded in writing. In the case at hand the petitioner however is an arrestee who has been in custody since 30.01.2025 who had tendered evidence and cooperated with the conduct of inquiry and thus had compiled with the summons issued on 02.01.2025 - under Section 70 of the CGST Act 2017. The subject of challenge herein is not the issuance of summons but the arrest effected in pursuance of the said summons when the same was so made without issuance of the notice of appearance under Section 35 (3) of BNSS 2023 (or section 41-A(1) of CrPC 1973). The case at hand involves a complaint of wrongful availment of ITC by the petitioner to the tune of INR 5.10 crores only and the petitioner has been in remand since the date of his arrest on 30.01.2025 - The CGST Act 2017 provides for assessment under Section 59 provisional assessment under section 60 scrutiny of returns under Section 61 assessment of persons who do not file returns under Section 62 assessment of unregistered persons under Section 63 summary assessment in special cases under Section 64 and audit under Sections 65 and 66. It is undisputed that while a prosecution can be launched prior to conduct of summary assessment or special audit determining liability no offence can be said to be made out in respect of purported discrepancies in the furnished returns until completion of the said audits. In light of the fact that the petitioner-arrestee was arrested against the offence punishable with no more than five years of imprisonment plus fine but without the issuance of notice of appearance directing him to appear before the officer authorised under Section 69(1) of the CGST Act and the fact that the petitioner has been incarcerated since 30.1.2025 coupled with the settled bail jurisprudence to exercise discretion in favour of accused of such nature it is deemed fit that the petitioner be enlarged on bail. Conclusion - The petitioner s arrest is vitiated due to non-compliance with Section 35 (3) of BNSS. Petition is granted bail subject to fulfilment of conditions imposed - application allowed.

Summary

The issues presented and considered in the judgment involve the legality of the petitioner's arrest and subsequent judicial custody in connection with offences under the Central Goods and Services Tax Act, 2017 (CGST Act). The core questions include the maintainability of the petition under Section 528 of BNSS, 2023 (akin to Section 482 of the CrPC, 1973), the applicability of BNSS to proceedings under the CGST Act, the necessity of issuing a notice of appearance under Section 35 (3) of BNSS, and whether the petitioner's arrest without such notice is vitiated.

The relevant legal framework includes the CGST Act, 2017, and the Bharatiya Nyaya Sanhita, 2023 (BNSS), which incorporates provisions similar to the Criminal Procedure Code (CrPC), 1973. The court examines the applicability of BNSS to proceedings under the CGST Act, referencing Sections 4 and 5 of BNSS, which allow for the application of BNSS provisions to offences under other laws unless specifically excluded. The court relies on precedents such as Ashok Munilal Jain v. Assistant Director, Directorate of Enforcement and Radhika Agarwal v. Union of India, which affirm the applicability of CrPC (and by extension, BNSS) to proceedings under the CGST Act.

The court's interpretation emphasizes the necessity of a notice of appearance under Section 35 (3) of BNSS (similar to Section 41-A of CrPC) before arresting an individual for offences punishable with imprisonment of up to seven years. The court refers to the Apex Court's ruling in Arnesh Kumar v. State of Bihar, which mandates such notice to ensure compliance with procedural safeguards and protect individual liberty.

Key evidence includes the petitioner's compliance with a summons issued under Section 70 of the CGST Act, which the respondent argues satisfies the requirement for notice of appearance. However, the court distinguishes between summons for inquiry and notice for arrest, emphasizing that the latter is necessary when formal accusations exist, as per the guidelines in Arnesh Kumar and Satender Kumar Antil v. CBI.

The court addresses competing arguments regarding the self-contained nature of the CGST Act and the applicability of BNSS. It concludes that BNSS provisions apply unless explicitly excluded by the CGST Act, and the requirement for a notice of appearance is not negated by the issuance of a summons under Section 70 of the CGST Act.

The significant holdings include the court's determination that the petitioner's arrest is vitiated due to non-compliance with Section 35 (3) of BNSS. The court emphasizes the principle that arrests for economic offences punishable with imprisonment of less than seven years must be preceded by a notice of appearance, as reiterated in Make My Trip (India) Pvt. Ltd. v. State of Karnataka.

The court grants bail to the petitioner, emphasizing that the decision does not comment on the merits of the underlying charges. The conditions for bail include executing a personal bond, refraining from tampering with witnesses, appearing before investigating authorities, and avoiding similar offences in the future.

The judgment underscores the importance of procedural safeguards in arrests, particularly in economic offences, and reinforces the applicability of BNSS provisions to proceedings under the CGST Act, ensuring that individual rights are balanced against the state's interest in prosecuting offences.