2022 (7) TMI 915 - HC - GST

Tax consultant detained in GST fraud case involving 131 bogus firms and Rs 291 crore input tax credit scam

The Gujarat HC dismissed a habeas corpus petition filed by a petitioner seeking release of his brother, a tax consultant detained by GST authorities. The ... Arrest of professional working as tax consultant - repeated summons - Seeking the directions of issuance of writ of habeas corpus for the respondent no.6 – brother of the present petitioner - valid grounds present for detention or not - illegal confinement or otherwise - infringement of fundamental rights guaranteed under Articles 21 and 22 of the Constitution of India - challenge to arrest on the ground of violation of Section 69 of the GST Act, 2017 - HELD THAT:- It is evincible that the arrest has taken place after this Court issued the notice in a habeas corpus petition preferred by the brother of the respondent no.6. The respondent no.6 is not disputed to have been called for inquiry since 18.03.2022 and at no point of time he was allowed to go to his residence even after the period of 24 hours. We also reiterate and appreciate the fairness on the part of learned Public Prosecutor and also the learned Assistant Public Prosecutor who have not attempted to shield the action of the officers when specifically a query was raised by this Court. It is also admitted that although in case of Vimal Yashwantgiri Goswami [2020 (11) TMI 40 - GUJARAT HIGH COURT] the Court had emphasized the need for the guidelines to be prepared in case of GST matters and the GST department is directed to prepare and prescribe the standardized guidelines and format for inquiry and arrest etc., nothing has been done so far. The family of the respondent no.6 also had not been intimated except as detailed in the affidavit-in-reply. The fact remains that neither the family member nor the lawyer has been permitted to meet him or to see him even after a period of 24 hours which is in a clear violation of the mandate provided under Article 22 of the Constitution of India. Article 21 of the Constitution of India mandates that no person shall be deprived of his life and liberty without the authority of law and Article 22 ensures that the procedure prescribed under the law shall need to be followed while the substantive law takes its course. It is noticed from the arrest memorandum that during the search proceedings conducted under Section 67(2) of the Gujarat Goods and Service Tax Act, 2017 and Central Goods and Service Tax Act, 2017 at the business place of M/s. J.K. Traders engaged in the business of trading of forest waste and scrap, remelting scrap, ingot of iron or steel. There were serious lapses noticed in relation to the input tax credit. The huge amount of incriminating documents, material, electronic device etc. had been seized. The statement recorded of Mr. Bharat Gordhan bhai Patel had revealed the name of Mr. Hitesh Mukeshbhai Patel. Therefore the search proceedings came to be also conducted at his residence from where the mobile phones, electronic devises etc. had been seized. This had revealed the goods and service tax evasion scam by the alleged syndicate firm by Mr. Hitesh Mukeshbhai Patel, Mr. Bharat Gordhanbhai Patel along with other co-conspirators and it is alleged that more than 131 bogus firms were created or operated in which input tax credit to the tune of Rs. 291 crores was claimed and availed and Rs. 340 crores was passed on. It is noticed that soon after this Court issued the notice with a lightning speed, the authority has acted. It is only to cover-up their action of continuously keeping him under their custody without allowing any outsider to meet him and even without observing the timeline which is also prescribed by the Cr.P.C. for the criminals involved in the heinous crime. This requires also a serious consideration at the hands of the Court because although this Court had not taken any view of the detention being illegal, the day on which he was produced before the Metropolitan Magistrate, the fact still remains that the issuance of notice itself is the reason for the Court to be convinced prima facie of a need to know the truth and therefore, this prompt action on the part of the authority, soon after the Court issued the notice, to ensure that no scrutiny of its action is undertaken by the Court also will need to be viewed seriously. We are conscious of the fact that the persons who are allegedly involved in such serious crimes need to be dealt with with all seriousness. Undoubtedly, the corpus accused was submitted to the competent and jurisdictional Court however, the timings cannot be missed by this Court. Being conscious that the dummy firms are around 131 presently, the figure has gone to 274 and involving in the scam of GST running into 5,122 crores as alleged by the officers that number by itself will not permit any authority to evade adopting to the required procedure prescribed under the law. It is a time-tested law where emphatically every Court has mandated the need for the same to be scrupulously followed, particularly when arrest is effected without warrant and period of interrogation exceed 24 hours - What is provided by way of the Constitutional mandate shall need to guide one and all. Rule of law prevails when emanating from those protective mandates, vital pronouncements made like in case of D.K. Basu [1996 (12) TMI 350 - SUPREME COURT] and other such are followed by the State and all State instrumentalities and the GST officials are no exceptions. Acknowledging the zeal to unearth the scam as pressingly urged before us, we cannot be persuaded to overlook the basics to shake the edifice. The petition is not entertained permitting the corpus to approach the appropriate and competent authority/Court for the purpose of agitating all his grievances. Issues Involved:1. Illegal detention and violation of fundamental rights.2. Compliance with procedural safeguards during arrest and detention.3. Validity of arrest under GST Act without following due process.4. Jurisdiction and appropriateness of habeas corpus petition.Detailed Analysis:1. Illegal Detention and Violation of Fundamental Rights:The petitioner alleged that respondent no.6 was detained illegally by GST officers from 18.03.2022 without being allowed to contact family or legal counsel, violating Articles 21 and 22 of the Constitution. The court noted that the respondent no.6 was not allowed to return home or meet anyone, which is a clear violation of the constitutional mandate and procedural safeguards.2. Compliance with Procedural Safeguards During Arrest and Detention:The court emphasized the importance of following procedural safeguards as outlined in landmark cases like D.K. Basu vs. State of West Bengal and Arnesh Kumar vs. State of Bihar. These include preparing an arrest memo, informing the detainee of their rights, and producing the detainee before a magistrate within 24 hours. The court found that these guidelines were not followed, leading to a breach of fundamental rights.3. Validity of Arrest Under GST Act Without Following Due Process:The court scrutinized whether the arrest under Section 69 of the GST Act was valid without following due process. It was noted that the arrest memo was prepared only after the court issued a notice, indicating an attempt to cover up procedural lapses. The court reiterated that even GST officers must adhere to procedural safeguards and cannot bypass constitutional mandates under the guise of conducting an investigation.4. Jurisdiction and Appropriateness of Habeas Corpus Petition:The court referred to the case of Serious Fraud Investigation Office vs. Rahul Modi, which held that habeas corpus is not the appropriate remedy when a person is in judicial custody by a competent court's order. The court acknowledged that while the initial detention might have been illegal, the subsequent judicial custody order by the Chief Judicial Magistrate rendered the habeas corpus petition inappropriate. However, the court allowed the petitioner to pursue other legal remedies to challenge the arrest and detention.Conclusion:The court concluded that the habeas corpus petition was not maintainable due to the subsequent judicial custody order but directed the GST authorities to formulate procedural guidelines within eight weeks to prevent future violations. The court also permitted the petitioner to challenge the arrest and subsequent actions before the appropriate forum.Supplementary Judgment:The supplementary judgment by Mrs. Mauna M. Bhatt, J., concurred with the primary judgment, emphasizing the need for procedural fairness and restraint by GST officers. It reiterated that illegal detention cannot be justified by the severity of the alleged crime and stressed the importance of adhering to constitutional safeguards to protect individual liberty.