2021 (8) TMI 410 - HC - GST

Court Upholds Arrest Under Assam GST Act, Denies Bail Application

The court found the arrest under Section 69 of the Assam GST Act, 2017 lawful, as the Commissioner had reason to believe the petitioner committed offences ... Seeking grant of Bail - offence u/s Section 132(1) (i) of Assam GST Act, 2017 - HELD THAT:- This Court is of the view that Section 132 in the section 69 of the AGST Act providing the power to arrest is only with regard to the nature of the offences specified in the clauses (a), (b), (c) and (d) of the sub-section (1) of the section 132 for which the punishment is provided in the clauses (i) and clause (ii) of the sub-section(1) and the sub-section (2) of section 132 of the CGST Act. Therefore, when a Commissioner forms an opinion and has reason to believe that a person has committed any offence as specified in the clauses (a), (b), (c) and (d) of the sub-section (1) aforesaid, which is punishable under the clauses(i) and (ii) of the sub section(1) and the subsection (2) of section 132 of the AGST Act, he may by order authorize any officer of the central tax to arrest such person and accordingly, on authorization to arrest the accused person and on the strength of the said warrant the accused was arrested on 12.07.2021. This Court is of the view that the arresting authority falls under the term “proper officer”. When a person is arrested pursuant to the order passed by the Commissioner who has reason to believe that such person has committed any offence specified in the clauses (a), (b), (c) or (d) of sub-section(1) of section 132 of the AGST Act which is punishable under the clause(i) of that sub-section, then such offence being cognizable and non bailable as per sub-section (5) of Section 132 of the AGST Act, the officer authorized to arrest such person is duty bound to inform such person about the grounds of arrest and produce him before the Magistrate within twenty-four hours. Therefore, the reference to section 132(5) in sub-section (2) of section 69 of the ACGST Act is made so as to differentiate between the person for whom the Commissioner has reason to believe that such person has committed cognizable and non bailable offences or non-cognizable and bailable offences as provided in section 132 of the AGST Act. It appears that with a view to give effect to the power to grant bail by the authorized officer under the clause (a) of the sub-section (3) of the section 69, subclause(b) of sub-section(3)of the section 69 of the AGST Act provides for method, of course, subject to the provisions of the Code of Criminal Procedure, that in case of a non-cognizable and bailable offence, Deputy Commissioner or the Assistant Commissioner shall for the purpose of releasing an arrested person on bail or otherwise, has the same powers and be subjected to the same provisions as an officer-in-charge of a police station - the provisions of section 69 of the AGST Act are absolutely clear and unambiguous which provides that during the course of inspection, search and seizure when the Commissioner has reason to believe that the person has committed any offence as per the clauses (a), (b), (c) or (d) of the subsection (1) of section 132 of the AGST Act, which is punishable under the clause(i) or clause (ii) of the sub-section (1) or the sub-section (2) of the section 132 of the AGST Act, then he may pass an order authorizing an officer of the department to arrest such person. Taking into account, the fact that to carry out further investigation as per the observations made by this Court as regards requirement of further investigation, this Court is not inclined to grant bail to the Petitioner, at this stage - Petition dismissed. Issues Involved:1. Legality of the arrest under Section 69 of the Assam GST Act, 2017.2. Compliance with procedural safeguards during the arrest.3. Validity of the allegations of tax evasion and issuance of fake invoices.4. Applicability of bail provisions under the Assam GST Act, 2017.5. Impact of the COVID-19 pandemic on bail considerations.Detailed Analysis:1. Legality of the Arrest under Section 69 of the Assam GST Act, 2017:The Petitioner was arrested under Section 69 of the Assam GST Act, 2017, for offences punishable under Section 132(1)(i) of the same Act. The court noted that the arrest was made following a notice issued under Section 50 of the Cr.P.C. by the Superintendent of State Tax, Assam, alleging that the Petitioner was involved in evading taxes and cess amounting to more than Rs. 5 crores, a cognizable offence under the AGST Act. The court found that the Commissioner had reason to believe that the Petitioner had committed offences specified under Section 132(1)(a) to (d), which are punishable under Section 132(1)(i) and (ii) and Section 132(2) of the AGST Act. Therefore, the arrest was deemed lawful and within the powers conferred by the Act.2. Compliance with Procedural Safeguards During the Arrest:The Petitioner argued that the arresting authorities did not follow the guidelines laid down by the Supreme Court in Arnesh Kumar v. State of Bihar (2014) 8 SCC 273, which mandates compliance with Sections 41 and 41(A) of the Cr.P.C. during arrests. The court, however, found that the arresting authority, being a 'proper officer' under the AGST Act, had complied with the necessary legal formalities, including informing the Petitioner of the grounds of arrest and producing him before a Magistrate within twenty-four hours, as required under Section 69(2) of the AGST Act.3. Validity of the Allegations of Tax Evasion and Issuance of Fake Invoices:The investigation revealed that the Petitioner had evaded taxes and cess amounting to Rs. 22,77,13,211.04, including Rs. 10,22,31,514.18 in evaded tax and cess. The authorities found that the Petitioner had deliberately supplied goods without issuing invoices, violating the AGST Act. The court noted that the total evasion detected included applicable tax, cess, penalty, and interest. The Petitioner was found to have failed to pay GST in cash despite a high turnover, utilized 100% of Input Tax Credit (ITC) in violation of Rule 86B of the CGST Rules, and did not create any e-way bills. These findings were supported by incriminating documents and the Petitioner's own admissions during the investigation.4. Applicability of Bail Provisions under the Assam GST Act, 2017:The court examined the provisions of Sections 69 and 132 of the AGST Act and found that the power to arrest under Section 69 is independent of the adjudication/assessment process under Section 132. The court held that the Commissioner could form a 'reason to believe' that an offence had been committed based on the materials and documents available, without the need for prior assessment proceedings. The court also noted that the offences under Section 132(1)(i) are cognizable and non-bailable, and therefore, the Petitioner was not entitled to bail.5. Impact of the COVID-19 Pandemic on Bail Considerations:The Petitioner argued for bail citing the ongoing COVID-19 pandemic and the Supreme Court's directions in In Re: Contagion of Covid 19 virus In Prisons. However, the court found that the current situation had improved significantly, with a low positivity rate and high recovery rate in Assam. Therefore, the special considerations applicable during the peak of the pandemic were not relevant at this stage. The court also emphasized that economic offences like tax evasion have serious implications for the community and the economy, and public interest should take precedence over the private interest of the accused.Conclusion:The court concluded that the arrest of the Petitioner was lawful and in compliance with the procedural requirements under the AGST Act. The allegations of tax evasion and issuance of fake invoices were substantiated by the investigation. Given the serious nature of the offences and the ongoing investigation, the court rejected the Petitioner’s bail application. The petition was disposed of accordingly.