2025 (9) TMI 392 - HC - GST

Bail granted in fake-invoice tax-evasion case for non-compliance with BNSS 2023 and Arnesh Kumar; Section 69/132 CGST noted

Gaurav Agarwal Versus The Union of India, The Additional Directorate General of Goods And Services Tax Guwahati Zonal, The Senior Intelligence Officer Directorate General of Goods And Services Tax Guwahati.

HC granted bail to the petitioner in a tax-evasion case involving fake invoices, holding that statutory pre-arrest requirements under BNSS, 2023 and ... Seeking grant of bail - tax evasion on supply of coke - petitioner provides fake invoices in the name of non-existing firms to these coal traders - petitioner has submitted that formal complaint is yet to be filed by the DGGI against the present petitioner, hence, the proceeding against him is pending at pre-accusation stage - HELD THAT:- There is no dispute at the bar that the punishment prescribed for the offence alleged in this case against the petitioner is imprisonment for 5(five) years only as well as with fine. Thus, as per the guidelines of the Apex Court, in the case of Arnesh Kumar Vs. State of Bihar [2014 (7) TMI 1143 - SUPREME COURT] the necessity of issuance of notice under Section 35 (3) BNSS, 2023 was there in this case. If the notices were to be dispensed with, it was incumbent on the part of the arresting authority to mention the reason for arriving at the satisfaction that there exists any of the conditions as mentioned in Clause (a) to Clause (e) of Section 35 (1) (b) (ii) of the BNSS, 2023 in this case - Though, in this case, in the memo of authorization for arrest of the petitioner issued by the Additional Director General of DGGI, it has been stated that the petitioner may influence witnesses and tamper with the evidence. However, on what basis such a conclusion has been drawn by the Additional Director General, DGGI has not been stated in writing as is the mandate of Section 35 (1) (b) (ii) of the BNSS, 2023. In the case of Arnesh Kumar Vs. State of Bihar, the Apex Court has while laying down guidelines which are required to be followed before a person may be arrested in case involving offence which entails punishment of imprisonment of less than 7(seven) years or up to 7(seven) years has observed that the directions issued would not only be applicable to the cases under Section 498A of IPC or Section 4 of the Dowry Prohibition Act, 1961 but would also cover such cases where offence is punishable with imprisonment for a term which may be less than 7 (seven) years or which may extend to 7(seven) years, whether with or without fine. Thus, the guidelines issued by the Apex Court in the case of Arnesh Kumar Vs. State of Bihar, are also applicable to this case - The Section 69 of the CGST Act, 2017 provides for the power to arrest however, before exercising such power, the Commissioner must have reason to believe that a person has committed an offence specified clause (a) to clause (d) of sub-section (1) of Section 132 of CGST Act, 2017. As regards the objection raised by the learned Standing Counsel, DGGI that the petitioner has approached this Court directly without approaching first to the Court of the learned Sessions Judge, as observed by the Division Bench of this Court in the case of Kwmta Gwra Brahma Vs. State of Assam [2015 (4) TMI 1303 - GAUHATI HIGH COURT] and therefore, this bail application is not maintainable, this Court is unable to pursue itself to the said legal proposition in view of the settled legal proposition laid by the Apex Court in this regard. The Apex Court has observed in the case of Sundeep Kumar Bafna Vs. State of Maharashtra [2015 (8) TMI 724 - SUPREME COURT] has clarified that the Sessions Court as well as the High Court exercises concurrent jurisdiction so far as Section 439 of Cr.P.C., 1973 (corresponding to Section 483 of BNSS, 2023) is concerned. If an application under Section 483 of BNSS, 2023 is filed before any of such Courts, it would have to venture the merits of the matter so as to decide whether the applicant has shown sufficient reasons or grounds for being enlarged on bail. The abovenamed petitioner is allowed to go on bail of Rs. 1,00,000/- with a suitable surety of like amount, subject to the satisfaction the learned Chief Judicial Magistrate, Kamrup (Metro) with fulfilment of conditions imposed - bail application allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an Advocate General, while holding office, may appear as private counsel in a criminal prosecution instituted by a central agency where the State is not a party and whether such appearance gives rise to conflict of interest. 2. Whether the arrest of an accused in an offence punishable with imprisonment up to five years under the Central GST statute was lawful where (a) no separate notice under Section 35(3) of the BNSS, 2023 was served prior to arrest, and (b) the arresting authority did not record in writing the reasons satisfying the conditions in Section 35(1)(b)(ii) of BNSS, 2023 (as required by the Arnesh Kumar guidelines). 3. Whether the High Court may entertain a direct bail application under the corresponding provision to Section 439 Cr.P.C. (Section 483 BNSS, 2023) without first seeking relief from the Sessions Court. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Appearance of the Advocate General as private counsel for an accused when the State is not a party Legal framework: Article 165 of the Constitution defines the office, duties and tenure of the Advocate General; the Advocates Act, 1961 preserves the right to practice; institutional conflict of interest principles restrain public law officers from representing interests adverse to the appointing government where the government itself is a party. Precedent treatment: Authorities cited by the parties were considered; the Court examined precedent recognizing that an Advocate General may continue to practice but that the State may restrain appearance where there is a conflict of interest. Interpretation and reasoning: The Court construed Article 165 and relevant practice to distinguish appearances where the State is prosecuting or otherwise has a direct stake from cases prosecuted by a Central instrumentality. The prosecution was by the Directorate General of GST Intelligence (a Union instrumentality) under central GST law; the State of Assam was not the prosecuting party and had not objected. The Court accepted the submission that, subject to the State's consent or absence of conflict, the Advocate General may appear as Senior Counsel in such matters. Ratio vs. Obiter: Ratio - where the State is not a prosecuting party and no conflict is shown, an Advocate General holding office may appear as private counsel; the State may, however, restrain such appearance if a conflict of interest exists. Obiter - remarks on the general position that the Advocate General continues to enjoy the right to practice under the Advocates Act. Conclusion: No bar existed to the Advocate General's appearance as Senior Counsel in the instant prosecution because the prosecution was by a Union instrumentality, there was no demonstrated conflict of interest, and the Advocate General asserted having obtained State consent. Issue 2: Legality of arrest where Section 35 BNSS/Arnesh Kumar safeguards apply Legal framework: Section 69 of the CGST Act confers power to arrest; BNSS, 2023 (s.35(1)(b)(ii) and s.35(3)) and the Arnesh Kumar precepts require reasoned satisfaction and, where applicable, issuance of statutory notice before arrest for offences punishable by less than seven years; CBIC guidelines for arrest/bail (17.08.2022) further govern investigative practice. Precedent treatment: The Court applied the Arnesh Kumar guidelines (as extended to offences punishable up to seven years) and noted appellate and administrative guidance deprecating mechanical recitals of reasons for arrest; authorities relied on by each party were examined but not overruled. Interpretation and reasoning: The Court differentiated power to arrest from justification to arrest. It found that although an authorization to arrest cited risks of tampering and witness influence, the arresting authority failed to record the factual basis in writing as required by Section 35(1)(b)(ii) BNSS, 2023 and the Arnesh Kumar mandate. The record showed compliance with summons and cooperation by the accused; no Section 35(3) notice was issued. Mere formulaic reproduction of statutory conditions without material on which the satisfaction was based was held insufficient. The Court emphasized that for offences punishable with imprisonment less than seven years, the statutory and judicial safeguards must be observed; mechanical assertions that an accused may tamper with evidence do not discharge the statutory duty to state reasons in writing. Ratio vs. Obiter: Ratio - arrest was unlawful where the arresting authority did not record in writing the material basis for satisfaction as required by Section 35(1)(b)(ii) BNSS, 2023 and Arnesh Kumar; compliance with summons and cooperation are relevant considerations against custodial arrest. Obiter - observations on the sufficiency of departmental authorizations and on the CBIC guidelines' relevance; general comments on economic offences as a class when considering bail. Conclusion: The arrest was illegal for failure to comply with statutory and judicial safeguards; on that ground alone the accused was entitled to bail, subject to conditions tailored to investigative needs (cooperation, non-interference with witnesses, contact details and territorial restrictions). Issue 3: Maintainability of a direct High Court bail application under Section 483 BNSS, 2023 Legal framework: Section 483 BNSS, 2023 corresponds to Section 439 Cr.P.C.; both Sessions Courts and High Courts have concurrent jurisdiction to entertain bail applications under that provision. Precedent treatment: The Court relied on binding Supreme Court authority holding that concurrent jurisdiction exists and that either forum may entertain a bail application under the corresponding provision; a Division Bench decision of the State High Court asserting primacy of Sessions Court was distinguished in light of the higher authority. Interpretation and reasoning: The Court observed that in view of the apex authority, the High Court may entertain the direct bail petition and must consider merits when invoked; therefore, the objection on maintainability for not first approaching the Sessions Court was rejected. Ratio vs. Obiter: Ratio - High Court may entertain a direct bail application under the corresponding statute and must examine merits; Obiter - procedural preference for exhaustion of alternative remedies was noted but cannot override the apex ruling. Conclusion: The direct bail petition filed before the High Court was maintainable and required merit-based consideration; the maintainability objection was accordingly rejected. Final Disposition (as determined by the Court) Based on the unlawful nature of the arrest for non-compliance with Section 35 BNSS/Arnesh Kumar safeguards (and having rejected other contentions sufficient to deny bail), the accused was entitled to bail on furnishing bond and surety with specified conditions ensuring cooperation, non-tampering, provision of contact details and restriction on leaving the investigating officer's jurisdiction without permission.