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TMI Blog2019 (11) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... ealm 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Respondents : Mr. Satya Pal Jain, Additional Solicitor General of India (Senior Advocate) assisted by Sh. Sourabh Goel,Advocate Mr. Tajender K. Joshi, Advocate JUGDMENT JASWANT SINGH, J . 1 . Akhil Krishan Maggu (Petitioner No. 1) son of Sanjeev Maggu- Petitioner No. 2 is a practising lawyer in the field of taxation. The Petitioners through instant petition under article 226 of Constitution of India are seeking quashing of summons dated 28.8.2019 ( Annexure P-11 ) issued by Senior Intelligence Officer (for short SIO ), Directorate General of GST Intelligence (for short DGGI ). 2 . The 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. As per Respondent these four exporters had availed huge amount of refund of IGST and they are dummy owners. The DGGIRespondent on 15.8.2019 searched Gurugram residence of Ramesh Wadhera-alleged owner of dummy export firms who happens to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against Petitioners to connect them with fraud if any committed by alleged four dummy exporters or alleged owner Ramesh Wadhera. The Respondents did not record statement of Petitioners while they were in judicial custody for a week in the FIR lodged by them and at present Petitioner No. 2 is again in judicial custody since 13.9.2019, however till date no statement has been recorded. It shows that intention of Respondent is just to arrest Petitioners and tarnish their reputation. The Respondents just due to filing of writ petitions before Delhi High Court on behalf of four exporters and commotion at the residence of Ramesh Wadhera want to implicate Petitioner even though they have already remained in custody for altercation which took place at the Gurugram residence of Ramesh Wadhera. The Respondents during the course of investigation could not gather even a single piece of evidence against Petitioners still they are running after their blood. The Respondents want that Petitioner No. 1 should accept that he is involved in refund scam though even his father was not found involved and Respondents/DGGI got arrested him from DRI. Intention of Respondent is just to arrest Petitioner wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Make My Trip Vs. Union of India 2016 (44) STR 481 (Del.) has thoroughly examined scheme of the Act and concluded in Para 116 as below: 116. To summarise the conclusions in this judgment : ( i ) The scheme of the provisions of the Finance Act, 1994 (FA), do not permit the DGCEI or for that matter the Service Tax Department (ST Department) to by-pass the procedure as set out in Sections 73A(3) and (4) of the FA before going ahead with the arrest of a person under Sections 90 and 91 of the FA. The power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by the DGCEI, without following the procedure under Sections 73A(3) and (4) of the FA, that a person has collected service tax and retained such amount without depositing it to the credit of the Central Government. ( ii ) Where an assessee has been regularly filing service tax returns which have been accepted by the ST Department or which in any event have been examined by it, as in the case of the two petitioners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers under the Cr PC and of officers of Central Excise, Customs and enforcement directorates, are applicable to the exercise of powers under the FA in equal measure. An officer whether of the Central Excise department or another agency like the DGCEI , authorised to exercise powers under the CE Act and/or the FA will have to be conscious of the constitutional limitations on the exercise of such power . ( vi ) In the case of MMT, without even an SCN being issued and without there being any determination of the amount of service tax arrears, the resort to the extreme coercive measure of arrest followed by the detention of Mr. Pallai was impermissible in law . ( vii ) In terms of C.B.E. C. s own procedures, for the launch of prosecution there has to be a determination that a person is a habitual offender. There is no such determination in any of these cases. There cannot be a habitual offender if there is no discussion by the DGCEI with the ST Department regarding the history of such assessee. Assuming that, for whatever reasons, if the DGCEI does not talk to ST Department, ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon to defend those proceedings in accordance with law. ( xii ) The Court cannot decline to exercise its jurisdiction and clarify the legal position as regards the interpretation of the scope and ambit of the powers under Sections 89, 90 and 91 of the FA. This is clearly within the powers of this Court. That is why this Court has decided to proceed with these petitions notwithstanding that the criminal petitions may be pending in the criminal jurisdiction of this Court. ( xiii ) The Court is satisfied that in the present case the action of the DGCEI in proceeding to arrest Mr. Pallai, Vice-President of MMT, was contrary to law and that Mr. Pallai s Constitutional and Fundamental Rights under Article 21 of the Constitution have been violated. The Court is conscious that Mr. Pallai has instituted separate proceedings for quashing of the criminal case and, therefore, this Court does not propose to deal with that aspect of the matter. Delhi High Court in Para 80-82 has carved out exceptions where power of arrest may be resorted. Para 80-82 are extracted below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma facie there is evidence of mens rea) or where the evidence is enough to secure a conviction or where the person is likely to abscond, tamper with evidence or influence the witnesses if left at large. Arrest at the investigation stage should be resorted to only when it is unavoidable. ( Emphasis supplied ) Concededly, Hon ble Supreme Court vide order dated 23.01.2019 has upheld aforesaid decision of Delhi High Court. 7.1 Relying upon decision of Delhi High Court, in the case of Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST C. Ex., Salem 2019 (25) G.S.T.L. 321 (Mad.) , Madras High Court has concluded, in the relevant Paras as below: 36. Though the discussions and conclusions therein have been rendered in the context of Chapter V of the Finance Act, 1994, levying service tax, I am of the view that they are equally applicable to the provisions of the CGST Act as well. Section 132 of the Act as extracted earlier, imposes a punishment upon the Assessee that commits an offence. There is no dispute whatsoever that the offences set out under [cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in such cases that the authorities might be justified in proceedings to pre-empt the assessment and initiate action against the assessee in terms of Section 132, for reasons to be recorded in writing. There is no allegation, either oral or in writing in this case that the petitioner is an offender, let alone a habitual one. 40. In the present case, the Department does not dispute that action was intended or envisaged in the light of Section 132 of the CGST Act, the counter fairly stating that the provisions of Section 132 of the CGST Act were shown to the Assessee. There is thus no doubt in my mind that the Department intended to intimidate the petitioner with the possibility of punishment under 132 and this action is contrary to the scheme of the Act. While the activities of an assessee contrary to the scheme of the Act are liable to be addressed swiftly and effectively by the Department, (the statute in question being a revenue statute where strict interpretation is the norm), officials cannot be seen to be acting in excess of the authority vested in them under the statute. I am of the considered view that the power to puni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avity of offence and the serious allegations made. This order has travelled to the Supreme Court in Petition for Special Leave to Appeal Crl. Nos. 244/2019, dated 9-1-2019 [2019 (24) G.S.T.L. J82 (S.C.)] by the petitioner therein, wherein the Bench has issued notice and granted interim protection in the following terms :- Issued notice. In the meantime, the petitioner shall not be arrested, provided he appears before the Directorate General of GST Intelligence and in the event of his arrest, he shall be released on bail on furnishing security to the satisfaction of the competent authority. Learned Counsel for the petitioner has submitted that the petitioner shall regularly appear, as and when he is called. 45. Moreover, the High Court of Karnataka at Bengaluru in Criminal Petition No. 979 of 2019 c/w Criminal Petition No. 980/2019, dated 19-2- 2019 [2019 (23) G.S.T.L. 449 (Kar.)] while considering the grant of Anticipatory Bail, in circumstances very similar to the matter before me, has allowed the petition and granted bail in favour of the Assessee with conditions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrest, as apprehended. In the scheme of the Criminal Law and particularly the Finance Act, 1994 as well, if it contains any penal provisions, it is not as merely because the investigations are underway that the arrest would be effected. Eventually, all that the Respondents are presently contemplating is to investigate the matter. The Petitioners do not dispute the right to investigate and in accordance with law. That they have already attended the offices of the concerned Respondents and once the statement of the Petitioners was recorded goes without saying that on further summons being issued and on called upon to attend the Officers of the Respondents, they will attend and co-operate in these investigations by producing all the documents and answering the requisite queries, subject, of-course, to their rights in law. It is only when these investigations conclude that the authorities would be in a position to take a decision whether to launch any prosecution. In such a prosecution as well, if the provisions of the Criminal Law, which enable arrest in cases of cognizable offences and nonbailable, that the Petitioners can have an apprehension and which also can be taken care of by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subject to the above, notice returnable within three weeks. Dasti, in addition, is permitted. For a period of one week, no coercive action be taken against the petitioner in connection with the alleged offence and the interim protection will continue upon production of receipt in the Registry about the deposit made with the Department within one week from today, until the disposal of this Special Leave Petition. 7.5. Telangana High Court in the case of P.V. RAMANA REDDY Vs. UNION OF INDIA 2019 (25) G.S.T.L. 185 (Telangana ) relied upon by the Respondent has concluded in relevant Para as below: 48. That takes us to the next question as to whether the petitioners are entitled to protection against arrest, in the facts and circumstances of the case. We have already indicated on the basis of the ratio laid down by the Constitution Bench in Kartar Singh and the ratio laid down in Km. Hema Mishra that the jurisdiction under Article 226 of the Constitution of India to grant protection against arrest, should be sparingly used. Therefore, let us see prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offences under clauses (b) and (c) of subsection (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment. Therefore, the argument that there cannot be an arrest even before adjudication or assessment, does not appeal to us. 53. An argument was advanced by Mr. Raghunandan Rao, learned Senior Counsel for the petitioners that all the offences under the Act are compoundable under sub-section (1) of Section 138 of the CGST Act, 2017, subject to the restrictions contained in the proviso thereto and that therefore, there is no necessity to arrest a person for the alleged commission of an offence which is compoundable. 54. On the surface of it, the said argument of Mr. Raghunandan Rao, learned Senior Counsel for the petitioners is quite appealing. But, on a deeper scrutiny, it can be found that the argument is not sustainable for two reasons : ( 1) Any offence under CGST Act, 2017 is compoundable both before and after the institution of prosecution. This is in view of the substantial part of sub-section (1) of Section 138 of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-trial arrest and detention to custody pending trial, are manifold as indicated in Section 41 of the Code. They are: ( a) to prevent such person from committing any further offence; ( b) proper investigation of the offence; ( c) to prevent such person from causing the evidence of the offence to disappear or tampering with such evidence in any manner; ( d) to prevent such person from making any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to the police officer; Therefore, it is not correct to say that the object of arrest is only to proceed with further investigation with the arrested person. 57. It is true that in some cases arising out of similar provisions for arrest under the Customs Act and other fiscal laws, the Supreme Court indicated that the object of arrest is to further the process of enquiry. But, it does not mean that the furthering of enquiry/investigation is the only object of arrest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest, in view of the special circumstances which we have indicated above. ( Emphasis supplied) From above quoted enunciation of law relating to arrest during investigation i.e. prior to determination of tax evaded under Finance Act, 1994 (service Tax) as well CGST Act, 2017 by different High Courts and interim order passed by Hon ble Supreme Court, we find 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be issued forthwith and question ought to be re-examined after hearing. Such ad interim order must conform to requirements of the section and suitable conditions should be imposed on the applicant. 120. The Law Commission in July 2002 has severely criticized the police of our country for the arbitrary use of power of arrest which, the Commission said, is the result of the vast discretionary powers conferred upon them by this Code. The Commission expressed concern that there is no internal mechanism within the police department to prevent misuse of law in this manner and the stark reality that complaint lodged in this regard does not bring any result. The Commission intends to suggest amendments in the Criminal Procedure Code and has invited suggestions from various quarters. Reference is made in this Article to the 41st Report of the Law Commission wherein the Commission saw 'no justification' to require a person to submit to custody, remain in prison for some days and then apply for bail even when there are reasonable grounds for holding that the person accused of an offence is not likely to abscond or otherwise misuse his liberty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly comprehend the exact role of the accused in the case. The cases in which accused is implicated with the help of sections 34 and 149 of the Indian Penal Code, the court should consider with even greater care and caution because over implication in the cases is a matter of common knowledge and concern; viii. While considering the prayer for grant of anticipatory bail, a balance has to be struck between two factors namely, no prejudice should be caused to the free, fair and full investigation and there should be prevention of harassment, humiliation and unjustified detention of the accused; ix. The court to consider reasonable apprehension of tampering of the witness or apprehension of threat to the complainant; x. Frivolity in prosecution should always be considered and it is only the element of genuineness that shall have to be considered in the matter of grant of bail and in the event of there being some doubt as to the genuineness of the prosecution, in the normal course of events, the accused is entitled to an order of bail. 123. The arrest should be the last option and it should be restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cused to join investigation and only when the accused does not cooperate with the investigating agency, then only the accused be arrested. 2) Seize either the passport or such other related documents, such as, the title deeds of properties or the Fixed Deposit Receipts/Share Certificates of the accused. 3) Direct the accused to execute bonds; 4) The accused may be directed to furnish sureties of number of persons which according to the prosecution are necessary in view of the facts of the particular case. 5) The accused be directed to furnish undertaking that he would not visit the place where the witnesses reside so that the possibility of tampering of evidence or otherwise influencing the course of justice can be avoided. 6) Bank accounts be frozen for small duration during investigation. 129. In case the arrest is imperative, according to the facts of the case, in that event, the arresting officer must clearly record the reasons for the arrest of the accused before the arrest in the case diary, but in exceptional cases where it becomes imperative to arrest the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such arrest is necessary- ( a) to prevent such person from committing any further offence; or ( b) for proper investigation of the offence or; ( c) to prevent such person from causing the evidence of the offence to disappear or tampering with such evidence in any manner; or ( d) to prevent such person from making any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to the police officer; or ( e) as unless such person is arrested, his presence in the Court whenever required cannot be ensured; And the police officer shall record while making such arrest, his reasons in writing: Provided that a police officer shall, in all cases where the arrest of a person is not required under the provisions of this sub-section, record the reasons in writing for not making the arrest; 41-A Notice of appearance before police officer- ( 1) The police officer shall, in all cases where the arrest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the police and it seems that the police has not learnt its lesson: the lesson implicit and embodied in CrPC. It has not come out of its colonial image despite six decades of Independence, it is largely considered as a tool of harassment, oppression and surely not considered a friend of public. The need for caution in exercising the drastic power of arrest has been emphasised time and again by the courts but has not yielded desired result. Power to arrest greatly contributes to its arrogance so also the failure of the Magistracy to check it. Not only this, the power of arrest is one of the lucrative sources of police corruption. The attitude to arrest first and then proceed with the rest is despicable. It has become a handy tool to the police officers who lack sensitivity or act with oblique motive. 20. Thereafter, the Court referred to Section 41 Cr.P.C. and analysing the said provision, opined that a person accused of an offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without fine, cannot be arrested by the police officer only on his satisfaction that such person had committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid. 22. We have referred to the enquiry report and the legal position prevalent in the field. On a studied scrutiny of the report, it is quite vivid that the arrest of the petitioners was not made by following the procedure of arrest. Section 41A Cr.P.C. as has been interpreted by this Court has not been followed. The report clearly shows there have been number of violations in the arrest, and seizure. Circumstances in no case justify the manner in which the petitioners were treated. ( Emphasis Supplied ) 10 . Taking cue from judgment of Delhi High Court in the case of Make My Trip (S upra) followed by Madras High Court in the case of Jayachandran Alloys (P) Ltd ( Supra ), law laid down by Hon ble Supreme Court in the case of Siddharam Satlingappa Mhetre (supra) as well keeping in mind Section 69 and 132 of CGST Act which empower Proper Officer to arrest a person who has committed any offence involving evasion of tax more than ₹ 5 Crore and prescribed maximum sentence of 5 years which falls within purview of Section 41A of Cr. P.C., we are of the opinion that power of arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnected with alleged illegal refund sought by Exporters. Concededly, the Petitioner No. 1 is neither proprietor nor partner nor shareholder of any Exporter Concern/Firm/Company, who availed refund of IGST. There is no evidence of transfer of funds in the accounts of Petitioners or withdrawal of cash by any one of them. The Petitioner No. 1 is in legal profession since 2017 and after introduction of GST he had not dealt with directly or indirectly with export consignments. The Respondent has produced copy of an order dated 1.10.2019 (date of hearing 22.5.2019) passed by Tribunal wherein Petitioner No. 1 has represented Appellants as an Advocate which buttress the argument of Petitioner that he in practice and appeared as an Advocate on behalf of four exporters who availed alleged illegal refund of IGST. 12 . We find that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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