CGST arrest requires recorded necessity; prosecution for fake input tax credit can proceed without completed assessment.

Under the CGST Act, proceedings for alleged fraudulent input tax credit and fake invoicing may continue alongside assessment, and the absence of a completed assessment or notice under section 74 does not by itself bar prosecution. However, arrest under section 69 must still rest on recorded reasons to believe, supported by a rational need for custody. Where the accused has already joined inquiry, statements have been recorded, and the arrest record does not explain why detention is necessary, continued custody is unwarranted. The analysis also distinguishes summons-based inquiry from proof of guilt at the investigation stage.

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Issues: (i) Whether arrest and continued custody under the Central Goods and Services Tax Act, 2017 could be justified in the absence of completed assessment or notice under section 74; and (ii) whether the materials recorded by the revenue authorities disclosed the requisite reasons to believe and necessity for further detention so as to deny bail.

Issue (i): Whether arrest and continued custody under the Central Goods and Services Tax Act, 2017 could be justified in the absence of completed assessment or notice under section 74.

Analysis: The statutory scheme distinguishes assessment proceedings from prosecution for offences such as issuing fake invoices and availing input tax credit without supply of goods. The mechanism under sections 73 and 74 deals with determination of tax liability, while section 74(11) does not bar proceedings under section 132. Accordingly, prosecution and assessment may proceed simultaneously, and the absence of completed assessment by itself does not disable arrest or prosecution in a case of alleged fraudulent input tax credit.

Conclusion: The objection that arrest or prosecution was impermissible until assessment was completed was rejected.

Issue (ii): Whether the materials recorded by the revenue authorities disclosed the requisite reasons to believe and necessity for further detention so as to deny bail.

Analysis: Power of arrest under section 69 depends upon reasons to believe, and that belief must have a rational nexus with the need to arrest. The Court found that the applicant had already joined inquiry, statements had been recorded on multiple dates, custody remand had not been sought, and the arrest record did not explain why arrest was necessary after the statements were already on record. Section 70 supports summons-based inquiry, while section 136 shows that statements recorded in response to summons do not by themselves establish guilt at the investigation stage. Balancing the seriousness of the alleged economic offence with the absence of demonstrated custodial necessity, further detention was held unwarranted.

Conclusion: Bail was held to be justified and the applicant was directed to be released on conditions.

Final Conclusion: The Court granted bail in a tax-fraud prosecution, holding that simultaneous assessment and prosecution are permissible, but arrest and continued detention must still rest on recorded and relevant reasons showing necessity.

Ratio Decidendi: In proceedings under the CGST Act, prosecution for fraudulent input tax credit is not contingent on prior assessment, but arrest must be supported by reasons to believe that extend beyond the offence itself and demonstrate the necessity of custody.

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