2020 (11) TMI 40 - HC - GST

Commissioner's Arrest Power under CGST Act: 'Reason to Believe' standard, no need for disclosure.

The court held that under Section 69 of the CGST Act, the Commissioner can arrest a person based on a 'reason to believe' that an offense under Section ... Power to arrest under Section 69 of the CGST Act - reason to believe - requirement of credible material to form belief - no requirement of prior adjudication/assessment before arrest - distinction between arrest (Chapter XIV) and punishment (Chapter XIX) - applicability of provisions of the Code of Criminal Procedure to arrests under Section 69 - status of authorised GST officers vis-a -vis police officers - default bail for non-cognizable and bailable offences under Section 69(3) - D.K. Basu safeguards (arrest memo, communication, medical check etc.) applicable - obligation to record and communicate reasons and to prepare a meaningful arrest memoPower to arrest under Section 69 of the CGST Act - no requirement of prior adjudication/assessment before arrest - distinction between arrest (Chapter XIV) and punishment (Chapter XIX) - Whether the Commissioner can invoke power to arrest under Section 69 of the CGST Act prior to completion of adjudication/assessment - HELD THAT: - The Court held that Section 69 (Chapter XIV) and Section 132 (Chapter XIX) operate in different fields and that reference to Section 132 in Section 69 is only to identify the nature of offences for which arrest may be authorised. The power to arrest may be exercised when the Commissioner has reason to believe that a person has committed offences specified in clauses (a)-(d) of Section 132 punishable under the clauses (i) or (ii) of Section 132(1) or Section 132(2), without waiting for the completion of adjudication/assessment under Chapter VIII. Arrest under Section 69 is a measure during inspection, search or investigation and does not itself impose the punishment prescribed in Section 132. The Court rejected the contention that adjudication must precede any arrest, stressing that adjudication and criminal processes are independent and may proceed simultaneously. [Paras 61, 62, 65, 71, 77]Power to arrest under Section 69 can be exercised on formation of reason to believe without prior completion of adjudication/assessment.Reason to believe - requirement of credible material to form belief - obligation to record and communicate reasons and to prepare a meaningful arrest memo - Nature and requisites of the 'reason to believe' and the recording/communication of reasons for arrest under Section 69 - HELD THAT: - The Court held that 'reason to believe' is a statutory requirement and, though the formation of opinion is subjective, it must be founded on credible material and a rational nexus between material and belief; it cannot be based on conjecture or extraneous considerations. While the statute does not mandate that the reasons be set out in the arrest order itself, reasons must be recorded in the file. The authorised officer must form a prima facie opinion based on cogent materials; the power is drastic and must be exercised sparingly. The Court emphasised the importance of a proper arrest memo containing the grounds and some prima facie material so that a Magistrate can satisfy himself about lawfulness of arrest on production. [Paras 59, 79, 81, 82, 83]The Commissioner must form a reasoned belief based on credible material; reasons should be recorded (in file) and a meaningful arrest memo prepared and communicated when arrest is effected.Applicability of provisions of the Code of Criminal Procedure to arrests under Section 69 - status of authorised GST officers vis-a -vis police officers - default bail for non-cognizable and bailable offences under Section 69(3) - Whether CrPC provisions (e.g., Sections 154-157) apply and whether GST officers are 'police officers' for purposes of arrest under Section 69 - HELD THAT: - Relying on precedents concerning Customs/Central Excise, the Court held that authorised officers under the CGST Act are not police officers in the conventional sense and therefore are not required to follow provisions such as Sections 154-157 of the CrPC when exercising Section 69 powers. Section 69 itself contemplates different consequences depending on whether the offence is cognizable/non-bailable (Section 132(5)) or non-cognizable/bailable (Section 132(4)). For non-cognizable bailable offences the authorised officers (Deputy/Assistant Commissioner) have powers akin to an officer in charge of a police station for the limited purpose of granting bail as provided in Section 69(3)(b). Arrest without a Magistrate's warrant in appropriate cases is permissible under Section 69; the authorised officer need not register FIR but may lodge complaint before the Magistrate as per statute. [Paras 69, 70, 74, 75, 76]CrPC investigatory provisions are not strictly applicable to arrests under Section 69; GST authorised officers are not police officers for all purposes, but Section 69 provides mechanisms (including bail powers) to deal with cognizable and non-cognizable offences.D.K. Basu safeguards (arrest memo, communication, medical check etc.) applicable - obligation to record and communicate reasons and to prepare a meaningful arrest memo - Applicability of constitutional safeguards (as in D.K. Basu) to arrests under the CGST Act and requirements as to arrest memo and related procedures - HELD THAT: - The Court held that the constitutional safeguards articulated in D.K. Basu apply to officers of the GST department exercising arrest powers. The judgment reiterated the need for transparency and accountability (identification of arresting officers, arrest memo attested by witness and counter signed by arrestee, informing a relative, diary entries, medical examination, periodic medical checks, and communication to magistrate/control room) and stressed that mere oral communication of grounds is insufficient. The arrest memo must contain prima facie material to enable the Magistrate to form subjective satisfaction about lawfulness of arrest; the GST department should prescribe a standard arrest memo format. [Paras 79, 81, 82, 83]D.K. Basu safeguards apply; the authorised officer must ensure preparation, attestation and meaningful content of an arrest memo and follow the identified procedural safeguards.Maintainability of pre arrest writs under Article 226 - power to grant pre arrest protection (extraordinary jurisdiction) - Whether writ petitions seeking pre arrest protection are maintainable and whether relief should be granted in the facts of these petitions - HELD THAT: - The Court noted that petitions were not premature where petitioners showed a genuine apprehension of arrest upon compliance with summons under Section 70; Article 226 jurisdiction can be invoked for pre arrest protection. However, after examining the facts of these petitions, the Court found no case for grant of relief in these particular matters. The ad interim protection earlier granted was vacated and the writ petitions were dismissed on merits, with rule discharged. [Paras 50, 68, 78, 85]Pre arrest writs under Article 226 are maintainable in appropriate cases, but no relief was granted on the facts of these petitions; earlier interim protection is vacated.Final Conclusion: The Court held that Section 69 empowers arrest when the Commissioner has 'reason to believe' a person committed offences specified in Section 132 (clauses (a)-(d)) punishable under the identified heads, and such power may be exercised without awaiting completion of adjudication; the belief must be founded on credible material and recorded in the file, arrest memos must be meaningful and the constitutional safeguards in D.K. Basu apply to GST arrests. CrPC investigatory provisions are not strictly applicable and GST authorised officers are not classical police officers, though Section 69 prescribes procedures (including bail mechanisms) for cognizable and non cognizable offences. The writ petitions seeking pre arrest protection were held maintainable but, on the facts presented, no relief was granted and interim protection was vacated. Issues Involved:1. Power to Arrest under Section 69 of the CGST Act.2. Requirement of Adjudication before Arrest.3. Recording and Furnishing of Reasons for Arrest.4. Applicability of the Code of Criminal Procedure, 1973.5. Status of GST Officers as Police Officers.6. Constitutional Safeguards during Arrest.Detailed Analysis:1. Power to Arrest under Section 69 of the CGST Act:The court examined whether the Commissioner has the authority to arrest a person under Section 69 of the CGST Act without completing the adjudication process. The court concluded that the Commissioner can exercise the power to arrest if there is a 'reason to believe' that the person has committed any offense specified in clauses (a) to (d) of sub-section (1) of Section 132, which is punishable under clause (i) or (ii) of sub-section (1) or sub-section (2) of Section 132 of the CGST Act. This power is independent of the adjudication process.2. Requirement of Adjudication before Arrest:The court clarified that the power to arrest under Section 69 does not require the completion of the adjudication process. Section 69 falls under Chapter XIV, which deals with inspection, search, seizure, and arrest, whereas Section 132 falls under Chapter XIX, which deals with offenses and penalties. The court emphasized that these sections operate in different fields, and the Commissioner can form a 'reason to believe' without the need for prior adjudication.3. Recording and Furnishing of Reasons for Arrest:The court held that the Commissioner must record reasons for the belief that an offense has been committed. However, it is not necessary to provide these reasons to the person being arrested. The arresting officer must inform the person of the grounds of arrest if the offense is cognizable and non-bailable. For non-cognizable and bailable offenses, the Deputy Commissioner or Assistant Commissioner can grant bail, exercising powers similar to an officer-in-charge of a police station.4. Applicability of the Code of Criminal Procedure, 1973:The court determined that the provisions of Sections 154 to 157 of the Code of Criminal Procedure, 1973, do not apply to arrests under Section 69 of the CGST Act. The authorized officer is not required to register an FIR. The court also noted that the authorized officer is not a police officer under the Code, and the statements made to them are not inadmissible under Section 25 of the Evidence Act.5. Status of GST Officers as Police Officers:The court concluded that GST officers are not police officers and are not required to follow the procedures applicable to police officers under the Code of Criminal Procedure. The court referred to previous judgments, including those related to the Customs Act, to support this conclusion. The court emphasized that the power to arrest by GST officers is statutory and should not be interfered with unless there are compelling circumstances.6. Constitutional Safeguards during Arrest:The court reiterated the importance of constitutional safeguards during arrests, referring to the guidelines laid down by the Supreme Court in D.K. Basu's case. These safeguards include the preparation of an arrest memo, informing the arrested person of the grounds of arrest, and ensuring that the arrest is not made in a routine manner. The court emphasized that these safeguards apply to arrests under the CGST Act as well.Conclusion:The court concluded that the power to arrest under Section 69 of the CGST Act can be exercised without completing the adjudication process if the Commissioner has a 'reason to believe' that an offense specified in Section 132 has been committed. The Commissioner must record reasons for the belief, but it is not necessary to provide these reasons to the person being arrested. The provisions of the Code of Criminal Procedure, 1973, do not apply to arrests under the CGST Act, and GST officers are not considered police officers. Constitutional safeguards during arrests, as outlined in D.K. Basu's case, must be followed.