ARREST - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

10. ARREST 10.1. The provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorization from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit. The salient features of these provisions are: (I) Provisions for arrests are used in exceptional circumstance and only with prior authorization from the Commissioner. (II) A person can be arrested only if the criteria stipulated under the law for this purpose is satisfied and the tax amount is exceeding rupees 2 Crore. However, if the offences are committed again even after being convicted earlier i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount involved in the case. (III) However, where the tax involved is less than Rs. 5 Crore, the offences are classified as non-cognizable and bailable and all such arrested persons shall be released on Bail by Deputy/Assistant Commissioner. But in case of arrests for specified offences where the tax amount involved is more than Rs. 5 Crore, the offence is classified as cognizable and non-bailable and in such cases the bail can be considered by a Judicial Magistrate only. 10.2. Section 132 of CGST Act, 2017 provides that the offences relating to taxable goods and /or services where the amount of tax evaded or the amount of input tax credit wrongly availed or the amount of refund wrongly taken exceeds Rs. 5 Crore, shall be cognizable and non- bailable. Other offences under the act are non-cognizable and bailable. 10.3. Offences listed under clauses (a), (b), (c) or (d) of Section 132(1) of the CGST Act, 2017 and punishable under sub-clause (i) or (ii) of Section 132(1) and offences punishable under Section 132(2) of the CGST Act, 2017, in respect of which powers for arrest are provided under Section 69(1) of the CGST Act, 2017, require Commissioner s warrant, commonly understood as arrest warrant , to be executed by any Authorized Officer. 10.4. Officer executing the warrant, is required to establish the identity of the person and place the said person under arrest. The Officer is then required to report execution of warrant back to Commissioner. The Officer is required to inform the detenue (or arrested person) about the grounds for arrest and then to produce before Magistrate within 24 hours to consider releasing him on bail or grant remand for further investigation. 10.5. Remand application is to be filed by the officer before Magistrate seeking custody for investigation. The Magistrate may grant remand for custodial interrogation or order judicial remand with visitation authorized to conduct interrogation of detenue. 10.6. All other cases which do not require Commissioner s warrant, are commonly understood as summons cases , that is, cases under other clauses of Section 132(1) of the CGST Act, 2017, which are stated in Section 132(4) of the CGST Act, 2017 to be non-cognizable and bailable offences. 10.7. Issuance of show cause notice under Section 74 of the CGST Act, 2017 for offence and detention under Section 69 of the CGST Act, 2017 for prosecution under Section 132 of the CGST Act, 2017 may be taken up in parallel proceedings independently. 10.8. Offences attracting punishment under section 132 of the CGST Act, 2017, lists 12 offences for which prosecution can be launched. The offences are given hereunder - (a) Supply of goods or services or both without the cover of invoice with an intent to evade tax; (b) If any person issues any invoice or bill without actual supply of goods or services or both leading to wrongful input tax credit or refund of tax; (c) Any person who avails input tax credit using invoice referred in point (b) above or fraudulently avails input tax credit without any invoice or bill; (d) Collection of taxes without payment to the Government for a period beyond 3 months of due date; (e) Evasion of tax, or obtaining refund with intent of fraud where such offence is not covered in clause (a) to (d) above; (f) Falsifying financial records or production of false records/ accounts/ documents/ information with an intent to evade tax; (g) Obstructs or prevents any officer from doing his duties under this Act; (h) Acquires or transports or in any other manner deals with any goods which he knows or has reasons to believe are liable for confiscation under this Act or rules made thereunder; (i) Receives or in any way, deals with any supply of services which he knows or has reason to believe are in contravention of any provisions of this law; (j) Tampers with or destroys any material evidence or documents; (k) Fails to supply any information which he is required to supply under this law or supply false information; (l) Attempts or abets the commission of any of the offences mentioned above. 10.9. Section 132 of the CGST Act, 2017 enables institution of prosecution proceedings both against the offenders and also against those persons who are instrumental in committing such offence. Such persons who are aiding the commission of the offence are punishable only if they retain the benefits arising from the offence. 10.10. If any person commits any offence specified in points (f), (g) or (j) in para 10.8 above, he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both. 10.11. Repetitive offences, without any specific/ special reasons recorded in the judgment of the Court, will entail an imprisonment term of not less than 6 months and can extend up to 5 years plus fine. All the offences covered in Section 132 of the CGST Act, 2017 are non-cognizable and bailable except the offences specified in points (a) to (d) as mentioned in para 10.8 above if the amount of tax evaded or input tax credit wrongly availed or utilized or refund wrongly taken exceeds Rs. 5 Crore. 10.12. Every prosecution proceeding initiated requires prior sanction of the Commissioner. Placing a person under arrest based on Commissioner s order under Section 69(1) of the CGST Act, 2017 is independent of the sanction by Commissioner to initiate prosecution proceedings (para 3 and 6 of Instruction No.4/2022-23 [GST-Inv.] dated 1 Sept 2022). 10.13. While arrest of persons is limited to cases covered by Section 69(1) of the CGST Act, 2017but prosecution of offences is independent and operates irrespective of whether those persons (accused) have been arrested under Section 69 of the CGST Act, 2017 or not. Omission to arrest does not bar persons (accused) from being prosecuted. 10.14. Section 132(1) of CGST Act, 2017 deals with punishment for offences specified therein. Section 69 of the CGST Act, 2017 grants the power to the Commissioner to arrest a person where he has reasons to believe that the alleged offender has committed an offence specified under Sections 132 (1) (a)/(b)/(c)/(d) of CGST Act, 2017, which is punishable under Clause (i) and (ii) of sub-section(1), or sub-section (2) of Section 132 of CGST Act, 2017. Thus, the pre-requisite to arrest a person is that he should be liable for punishment of offences under specific clauses in Section 132 of the CGST Act, 2017 which are referred to in Section 69 of the CGST Act, 2017. Therefore, before placing a person under arrest, the aforesaid legal requirements must be satisfied. 10.15. Power of arrest should be exercised in exceptional circumstances during investigation, which illustratively may be- (a) The person was concerned in the non-bailable offence or credible information has been received, or a reasonable suspicion exists, of his having been so concerned; (b) The arrest is necessary to ensure proper investigation of the offence; (c) The person, if not restricted, is likely to tamper the course of further investigation or is likely to tamper with evidence or intimidate or influence witnesses; (d) The person is mastermind or key operator effecting proxy/benami transaction in the name of dummy GSTIN or non-existent persons, etc. for passing fraudulent input tax credit etc; (e) As unless such person is arrested, his presence before investigating officer cannot be ensured. 10.16. Arrests in case of offences committed by companies or partnership firms: (I) In case the offence has been committed by a limited company or a partnership firm, then as per the provisions of Section 137 of CGST Act, 2017, the following persons are vicariously liable for the offence: (a) Person who, at the time of commission of the offence, was in charge of (i.e. in overall control of the day to day business of the company/ firm) and was responsible to the company/ firm/ association of persons for the conduct of the business of the company, unless he proves that the offence was committed without his knowledge and that he had exercised all due diligence to prevent the commission of the offence. (b) Director of the company, partner of a firm, manager, secretary or any other officer of the company/ firm, if it is proved that the offence has been committed with their consent or connivance or is attributable to their neglect. (II) In the case against companies and firms, therefore, the persons vicariously liable can be arrested provided that the ingredients as mentioned in Section 137 of the CGST Act, 2017 are fulfilled. Separate and independent allegations have to be made in such a case for offences committed under Section 137 of the CGST Act, 2017. The vital ingredient for arrest in offences under Section 137 of the CGST Act, 2017 is that an offence should have been committed and the person proposed to be arrested is in-charge of and responsible for running of business . 10.17. Procedures for Arrest: (I) Commissioner shall record on file that after considering the nature of offence, the role of person involved and evidence available, he has reason to believe that the person has committed an offence punishable under the CGST Act, 2017 as mentioned in Section 69 of the CGST Act, 2017 for which his immediate arrest is necessary. (II) Once a person is arrested in an offence, which is cognizable and non-bailable, the arrested person must be produced before the Magistrate having jurisdiction, within 24 hours of the arrest. The Magistrate may take him in judicial custody to further the interest of investigation. However, a person can be kept in judicial custody only for a maximum period of 60 days. If a complaint is not filed within 60 days, i.e. prosecution not initiated, the accused is granted bail as a matter of right under Section 167 (2) of the Cr. PC, 1973. (III) Investigating officers may ensure that the following documents are kept handy at the time of arrest: (a) AE-I report where detection is based on a prior information/ intelligence. (b) Preliminary Investigation/Offence Report containing the name of the offender, names of the company/firms, approx. tax evasion detected or suspected, brief facts of the case, documents and statements relied upon, relevant sections of CGST Act, 2017 or other laws attracted to the case, facts giving rise to the reason to believe that the person has committed an offence punishable under the CGST Act, 2017. (IV) Copies of the documents relied upon have to be prepared as these documents might have to be produced before the Magistrate, if the same is asked, when the accused is produced before her/him. As the Courts, generally, insist of submission of relied upon documents like Panchanamas / Mahazars, Statements, etc., in original along with remand application, it is advisable to prepare one additional set of these documents in original, at the time of search proceedings / recording of statement, etc. for the purpose. (V) An Arrest Memo containing brief facts of cases, details of person arrested, gist of evidence, relevant sections under the CGST Act, 2017, the grounds of arrest, date and time of arrest etc., needs to be given to the arrestee under proper acknowledgement. The Arrest Memo should be made in triplicate and the original should be furnished to the accused. Dated signatures of the person arrested along with the time should be obtained on the other two copies as a token of having received the Arrest Memo. At least one independent witness needs to be present while furnishing arrest memo to the accused. A separate arrest memo has to be made and provided to each individual/ arrested person. This should be kept in mind in the event there are several arrests in a single case. Format of arrest memo prescribed under Circular No.128/47/2019-GST dated 23.12.2019 is a useful reference. Arrest Memo should be in a language which the accused can understand. In case of an illiterate person or when the Arrest Memo is in a language not understood by the person arrested, the Arrest Memo should be read out and explained in vernacular also to the accused and the fact should be recorded on the Arrest Memo. (VI) Further there are certain modalities that should be complied with at the time of arrest and pursuant to an arrest, which include the following: (a) A person who has been arrested or detained, is entitled to have one friend or relative or other person known to him or having interest in his welfare being informed, as soon as possible. Therefore, it is imperative to inform the relative or friend of arrestee. Telephonic information to the satisfaction of the arrestee is sufficient. The fact of intimation along with details of family members/well-wishers intimated may be recorded in the Arrest Memo. (b) Immediately after the arrest, the Arresting Officer should conduct a Jama Talashi of the accused and record a report on Jama Talashi on the body of all the three copies of the Arrest Memo along with his dated signatures in the presence of independent witnesses. Jama Talashi essentially means taking an inventory of the goods/valuables which the arrested person is carrying on his person. This includes clothes, ornaments, wallet, watches, shoes, socks, spectacles, pen etc. It is advisable that the valuables which the arrested person is carrying on his person are kept in a sealed cover in custody of the officer authorised to arrest. A precise inventory of such valuables should be made. These valuables should be released to the person on his release on bail. (c) A woman should be arrested by a lady officer. Where a woman is to be arrested, unless the police officer is a female, the police officer shall not touch the person of the woman for making an arrest and arrest would be presumed on her submission to custody on oral intimation. Save in exceptional circumstances, no woman shall be arrested after sunset and before sunrise, and where such exceptional circumstances exist, the same shall be by making a written report and obtaining prior permission of the Judicial Magistrate within whose jurisdiction the offence is committed or the arrest is to be made. (d) The arrested person should be medically examined by a medical officer in service of central or state government, or by registered medical practitioner, upon non-availability of such medical officer. If an arrested person is a female then such an examination shall be made only by, or under supervision of a female medical officer, and in case the female medical officer is not available, by a female registered medical practitioner. (e) In case of non-cooperation of the arrested person either during the arrest or post arrest formalities such as refusal to sign the arrest memo, obstruction of medical officer from performing examination, refusal to divulge contact details of family members, etc., while all means may be adopted to effect arrest, it is prudent to document the non-cooperation and obstruction of duty in the form of panchnama for the purpose of record and also for undertaking further necessary legal action. (f) After the medical examination, the arrestee should be produced in the Court of Chief Judicial Magistrate with the least delay and within 24 hours of the arrest for seeking remand. In case, it is not possible to produce him before the CJM for reason that the court is situated at a distant place, then the arrested person should be produced before a local duty Magistrate for seeking transit remand. Further, in case the arrestee is declared as medically unfit and is prescribed further examination/observation by the medical officer, he/she may still be produced before the CJM who will issue necessary orders based on medical records and facts and circumstances of the case. The amount to be indicated in the personal bail bond and security will depend, inter- alia on the amount of tax involved. Attempts should be made to produce the arrested person before the Magistrate on the same day. Arrested person should generally not be retained in the office in night as it can often lead to allegations of physical injury. In the eventuality that it is not possible to produce the arrested person before the Magistrate on the same day and there are no facilities to keep him in custody for the night, he can be handed over to the jurisdictional police station. However, it may be mentioned here that in such circumstances the officer in-charge of the police station has the power to admit the person to bail with the condition that he will appear before the Magistrate on the next day. Generally, the arresting officer should take back the person arrested from custody of police and then the department should produce the arrestee before the Magistrate. (g) The officer authorized under Section 69 of the CGST Act, 2017 to arrest and produce the arrested person before a Magistrate can either request for Judicial Remand or Custodial Remand. Custodial Remand is normally not granted unless special reasons for the same are given like requirement of presence of the accused for recovery of documents etc. In case the Magistrate remands the accused to judicial custody and the preventive officers want to record a statement at the place of the accused i.e., Judicial Custody (Jail), then they should apply to the Magistrate for the same. A statement in the judicial custody can only be recorded with the permission of the Magistrate. Magistrate, on being satisfied about the urgency and importance of the statement of the accused, grants permission to officers to visit the place where the accused has been kept under Judicial Custody and accordingly directs the Jail Superintendent to facilitate the access of officers to visit the accused for the purpose of investigation. 10.18. Precautions to be taken during arrest: (I) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to arrest and the procedure thereof must be adhered to. It is therefore necessary that all field officers of CGST/SGST be fully familiar with the provisions of the Code of Criminal Procedure, 1973. (II) One important provision to be taken note of is Section 57 of Cr.P.C., 1973, which provides that a person arrested without warrant shall not be detained for a longer period than, under the circumstances of the case, is reasonable but this shall not exceed twenty-four hours (excluding the journey time from place of arrest to the Magistrate s court). Within this period, as provided under Section 56 of Cr.P.C., 1973 the person making the arrest shall send the person arrested without warrant before a Magistrate having jurisdiction in the case. 10.19. There are certain safeguards provided under Section 69 of the CGST Act, 2017 for a person who is placed under arrest. These are: (i) If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest; (ii) If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner of CGST/SGST can release him on bail and he will be subject to the same provisions as an officer in-charge of a police station under Section 436 of the Code of Criminal Procedure, 1973; (iii) All arrest must be in accordance with the provisions of the Code of Criminal Procedure,1973 relating to arrest. 10.20. Commissioner s warrant must be executed by the Proper Officer speedily and unexecuted warrants will expire within the time specified therein unless extended. Warrants cannot remain outstanding indefinitely. Executed and lapsed warrants must be returned to the Commissioner for noting or declaration of the absconder or for further directions. Refer para 5 in Instruction No.2/2022- 23 [GST-Inv.] dated 17 Aug 2022 regarding post arrest formalities. 10.21. Bail and Bond Bail: (I) Bail and bond Bail is an acceptance by way of undertaking to comply with the orders of the Magistrate (or Proper Officer) releasing the detenue or arrested person to enter appearance when required in investigation or trial. 10.22. Anticipatory bail: (I) Non-bailable cases entitle persons to seek anticipatory bail where there is a reasonable apprehension that the Proper Officer may issue a warrant to arrest; in such cases anticipatory bail under Section 438 of Cr. P.C, 1973 may be sought from Magistrate or Appellate Court.