2026 (1) TMI 48 - HC - GST

GST fake-invoice ITC fraud probe: arrest made before s.35(3) BNSS notice appearance time, held illegal; bail granted

Arrest in a GST fake-invoice/ITC fraud investigation was challenged as illegal for non-compliance with notice under s. 35(3) BNSS. The HC found the ... Seeking grant of bail - obtaining GST registration of non-existing firms and acting as key persons for issuance of fake invoices to pass on fake Input Tax Credit (ITC) without any corresponding supply of goods and services - HELD THAT:- It is found that the notice under 35(3) B.N.S.S. given to the accused Sameer Malik, indicated his required appearance at 4.15 P.M on 13.11.2025, which is obviously a typing or writing error and the same has also been admitted by the Investigating Officer in his petition filed before the court. So, even, if the date of appearance is taken as 14.11.2025, the time indicated is 4.15 P.M. However, the arrest memo pertaining to Sameer Malik indicates his arrest on 14.11.2025 at 12.10 P.M. Thus, as rightly contended by the learned Senior Counsel, by the time the petitioner was directed to appear in compliance with under 35(3) B.N.S.S., he had already been arrested on the same day at 11.45 A.M. In such a situation, there is no option but to hold that there has been no effective compliance with the notice under 35(3) B.N.S.S., thereby, making the arrest infirm/defective in terms of the settled law - on these technical grounds, the subsequent bail petition has to be accepted and the petitioner Sameer Malik has to be granted bail. The bail application is allowed subject to fulfilment of conditions imposed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the arrest under the GST investigation was vitiated for non-effective compliance with the statutory notice requirement under Section 35(3) BNSS, in light of the admitted errors in the notice and the arrest having occurred before the time fixed for appearance. (ii) Whether such defective compliance with Section 35(3) BNSS, as applied to arrests by GST/revenue authorities, rendered the arrest infirm/defective so as to justify grant of bail on that technical ground. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity/effectiveness of compliance with Section 35(3) BNSS notice vis-à-vis timing of arrest Legal framework: The Court considered that summons under Section 70 of the CGST Act are issued in the manner applicable to a civil court procedure, but for arrest by GST/revenue authorities, procedural requirements corresponding to criminal procedure (including Section 35(3) BNSS) must be complied with. The Court applied the settled position that such procedural compliance at the time of arrest is mandatory and that violation may make the arrest infirm and support grant of bail. Interpretation and reasoning: The Court examined the case diary, the notice purportedly issued under Section 35(3) BNSS, and the arrest memo. The Investigating Officer conceded that the date in the notice mentioning appearance on 13.11.2025 was a typographical error. However, even treating the appearance date as 14.11.2025, the notice required appearance at 4:15 p.m., whereas the arrest memo recorded arrest on 14.11.2025 at 12:10 p.m. The Court found there was no explanation for arrest being earlier than the time fixed for appearance under the notice, meaning the accused was arrested before he could comply with the appearance requirement. Conclusion: Because the accused was arrested before the time fixed for appearance, the Court held there was no effective compliance with Section 35(3) BNSS. Issue (ii): Consequence of defective Section 35(3) BNSS compliance-whether arrest became infirm and bail should be granted Legal framework: The Court applied the settled law that when notice/appearance safeguards corresponding to Section 35 BNSS apply, their proper observance is necessary; failure can render the arrest defective/infirm, and the Court must scrutinize compliance while considering custody and remand. The Court also proceeded on the basis that these procedural safeguards apply to arrests effected by revenue authorities under GST. Interpretation and reasoning: Having found that the notice required appearance at a time later than the arrest, the Court held that the statutory safeguard was reduced to a faulty/mechanical formality and could not be treated as compliance. On that basis, the arrest was held to be infirm/defective 'in terms of the settled law.' The Court treated this defect as a sufficient technical ground to allow the subsequent bail application without entering into merits of the allegations. Conclusion: The Court granted bail on technical grounds due to the defective arrest, subject to conditions including non-absconding, cooperation with investigation, and non-tampering with evidence or influencing witnesses; breach would make bail liable to cancellation.