ARRESTS UNDER GOODS AND SERVICES TAX (PART-3)

CBIC Guidelines on Arrest and Bail

CBIC (GST-Investigation Wing) has issued guidelines for arrest and bail in relation to offences punishable under CGST Act, 2017 vide CBIC Instruction No. 02/2022-23 (GST - Investigation) dated 17.08.2022:

• It may be noted that Supreme Court in criminal Appeal No. 838 of 2021 [SLP (Criminal) No. 5442/2021] in SIDDHARTH Versus THE STATE OF UTTAR PRADESH & ANR. - 2021 (8) TMI 977 - Supreme Court observed and held that:

1. Merely because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of the power to arrest and the justification for exercise of it.
2. If the Investigating Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused.

• CBIC has taken cognizance of same and issued guidelines on arrest and bail under CGST Act, 2017.
• Accordingly, following guidelines must be adhered to:

1. Before placing a person under arrest, the legal requirements must be fulfilled. Thereasons to believe to arrive at a decision to place an alleged offender under arrest must beunambiguous and amply clear. The reasons to believe must be based on credible material.
2. Since arrest impinges on the personal liberty of an individual, the power to arrest must be exercised carefully. The arrest should not be made in routine and mechanical manner.
3. Approval to arrest should be granted only where the intent to evade tax or commit acts leading to availment or utilization of wrongful Input Tax Credit or fraudulent refund of tax or failure to pay amount collected as tax as specified in sub-section (1) of Section 132 of the CGST Act 2017, is evident and element of mens rea/guilty mind is palpable.
4. The relevant factors before deciding to arrest a person, apart from fulfillment of the legal requirements, must be that the need to ensure proper investigation and prevent the possibility of tampering with evidence or intimidating or influencing witnesses exists.
5. Arrest should, however, not be resorted to in cases of technical nature.
6. Pr. Commissioner/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 as mentioned in Section 132 and may authorize an officer of central tax to arrest the concerned person(s).
7. The arrest memo must be in compliance with the directions of Hon'ble Supreme Court in the case of SHRI DK. BASU, ASHOK K. JOHRI Versus STATE OF WEST BENGAL, STATE OF UP. - 1996 (12) TMI 350 - Supreme Court.
8. The arrest memo should indicate relevant section (s) of the CGST Act, 2017 or other laws attracted to the case and to the arrested person and inapplicable provisions should be struck off.
9. The grounds of arrest must be explained to the arrested person and this fact must be noted in the arrest memo.
10. The date and time of arrest shall be mentioned in the arrest memo and the arrest memo should be given to the person arrested under proper acknowledgment.
11. A separate arrest memo has to be made and provided to each individual/arrested person.
12. A woman should be arrested only by a woman officer.
13. Medical examination of an arrested person should be conducted by a medical officer in the service of Central or State Government and in case the medical officer is not available, by a registered medical practitioner, soon after the arrest is made.
14. 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.
15. It shall be the duty of the person having the custody of an arrested person to take reasonable care of the health and safety of the arrested person.
16. Arrest should be made with minimal use of force and publicity, and without violence. The person arrested should be subjected to reasonable restraint to prevent escape.
17. In cases, where a person is arrested under sub-section (1) of Section 69 of the CGST Act, 2017, for an offence specified under sub-section (4) of Section 132 of the CGST Act, 2017, the Assistant Commissioner or Deputy Commissioner is bound to release a person on bail against a bail bond.
18. The bail conditions should be informed in writing to the arrested person and also on telephone to the nominated person of the person (s) arrested.
19. The amount to be indicated in the personal bail bond and surety will depend upon the facts and circumstances of each case, inter-alia, on the amount of tax involved. It has to be ensured that the amount of Bail bond/Surety should not be excessive and should be commensurate with the financial status of the arrested person.
20. If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail forthwith.
21. In cases, where a person is arrested under sub-section (1) of Section 69 of the CGST Act, 2017, for an offence specified under sub-section (5) of Section 132 of the CGST Act, 2017, the officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours.
22. It must be ensured that the arrested person should be produced before the appropriate Magistrate within twenty four hours of arrest, exclusive of the time necessary for the journey from the place of arrest to the Magistrate's Court.
23. After arrest of the accused, efforts should be made to file prosecution complaint under Section 132 of the Act, before the competent court at the earliest, preferably within sixty days of arrest, where no bail is granted. In all other cases of arrest also, prosecution complaint should be filed within a definite time frame.
24. Every Commissionerate/Directorate should maintain a Bail Register containing the details of the case, arrested person, bail amount, surety amount etc.
25. Pr. Director-General (DGGI)/Pr.Chief Commissioner(s)/Chief Commissioner(s) shall send a report on every arrest to Member (Compliance Management) as well as to the Zonal Member within 24 hours of the arrest

Amended Guidelines on Arrest & Bail in GST

CBIC has amended guidelines for arrest and bail in relation to offences punishable under CGST Act, 2017 issued vide Instruction No. 2/2022-23-GST (Investigation) dated 17.08.2022 vide Instruction No. 01/2025-GST dated 13.01.2025 issued by CBIC, GST-Investigation Wing, New Delhi

• • This amendment follows Delhi High Court Judgment dated 16.12.2024 in Kshitij Ghildiyal Versus Director General of GST Intelligence, Delhi - 2024 (12) TMI 1001 - DELHI HIGH COURT, wherein it has been held that the grounds of arrest have to be communicated in writing to the arrested person.
  • Accordingly, relevant guidelines in para 4.2.1 of Instruction dated 17.08.2022 is amended as follows:

The grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo. Acknowledgement of the same should be taken from the arrested person at the time of service of the Arrest Memo.

These amendments made have modified the arrest guidelines dated 17.08.2022 requiring the grounds of arrest to be explainedto the arrested person and also to be given in writing.

CBIC has issued Instructions for issuing of lookout Circulars (LOC) so as to streamline the process of issuing and implementing the lookout Circulars in case of persons who have evaded payment of tax and are absconding / non-traceable, vide Instruction No. 30/2025 dated 13.10.2025 (F.No. CBIC 21/35/2025-INV -Customs - CBEC).

• An Online LOC Portal has been operationalised with effect from 1st March 2024 and the LOC requests are now being processed only through the online portal.
• The earlier mechanism of routing the requests by letters or emails through DRI-Hqrs or DGGI-Hqrs is no more operational.
• For access to online LOC portal, login credentials for nodal officers in field formations need to be created, which should be designation based.
• Designated offices through their nodal officers, will be responsible for user creation, coordination and overall implementation of the online LOC portal for the field formations.

Possible measures to avoid arrest

Possible Measures to avoid Arrest can be one or more of the following:

• Suo moto compliance
• Independent due diligence
• Promptly attending to notices/summons
• Ensuring timely/full payment of GST - Taxes not to be used for working capital/funding other requirements
• Where delay is expected, to get in touch with Department.
• Taking aggressive tax positions with utmost care - Risk management
• Strengthen internal processes and controls to avoid unintended failures.

(Concluded...)

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