2026 (1) TMI 1005 - HC - GST

Large-scale GST evasion probe considered reason-to-believe standard and legality of arrest; petition dismissed after evidence sufficiency upheld

Large-scale GST evasion investigation examined legality of arrest, custody and non-production within 24 hours. Court applied the reason-to-believe ... Large-scale evasion of GST - offences punishable under Section 132(1)(a), 132(a)(f) and 132(1)(i) of the CGST Act, 2017 - illegality of arrest - illegality of custody - Non-production before the Magistrate within 24 hours. Ilegality of arrest - HELD THAT:- Arrest in any case is followed by police or judicial custody. Efficacious remedy against police or judicial custody is available in provisions of bail in relevant statutes. However, when the very arrest is illegal the same is amenable to challenge under extraordinary writ jurisdiction of the Court. In case of bail ordinarily it is not the mode of arrest, but the material on the basis of which such arrest is made that falls for judicial scrutiny, In Radhika Agarwal [2025 (2) TMI 1162 - SUPREME COURT (LB)], the Hon’ble Apex Court has held that to a large extent, the ratio on the applicability of the Code to the Customs Act would equally apply to the GST Acts in view of section 4 and 5 of the Code. However it has been held in no uncertain term in para-61 of this case that even without a formal order of assessment, the Department/Revenue is certain that it is a case of offence under clause (a) to (d) to sub-section (1) of Section 132 and the amount of tax evaded falls within clause (i) Sub-section (1) to section 132 of the CGST Act with sufficient degree of certainty. The reason to believe must be explicit and refer to material and evidence underlying such opinion. There has to be a degree of certainty that offence has been committed and that such offence is non-bailable. Thus, it is manifest that challenge to arrest by invoking writ jurisdiction cannot be made in a routine or casual manner. Only in cases where the arrest is made in flagrant breach of procedural safeguards with mala fide that may call for interference. Whether materials existed before the authorities concerned, for reasons to believe that Petitioner had been involved in tax evasion so as to make out an offence under Section 69 of the 2017 Act? - HELD THAT:- The materials prima facie disclose offence under Section 132 of the CGST Act. Therefore, it cannot be said that authorities had entered into a fishing inquiry and had apprehended the Petitioner merely on suspicion. Grounds were disclosed in the complaint as well as in the notice furnished to the Petitioner. Non-production before the Magistrate within 24 hours - HELD THAT:- The plea is not tenable, as the health condition of the Petitioner was such that he had to be moved to the higher centre for treatment. It does not appeal to reason that the accused even at the risk to his health and life should have been produced before the Magistrate. Such a course is not warranted either under statutory provision or under the guidelines of the circular Instruction No. 2/2022-23. Under the aforesaid facts and circumstance of the case, this Court is of the view that Petitioner has failed to make out any substantive ground for interference in exercise of writ jurisdiction under Article 226 of the Constitution of India - petition dismissed. Issues: (i) Whether the authorization for arrest and the arrest under Section 69 of the CGST Act, 2017 complied with the statutory requirement of 'reasons to believe' and other procedural safeguards so as to permit writ relief; (ii) Whether the custody and non-production before the Magistrate within 24 hours rendered the detention illegal despite the stated medical exigency.Issue (i): Whether the authorization for arrest and the arrest complied with the requirement of 'reasons to believe' and related procedural safeguards under the CGST Act, 2017 and applicable judicial guidelines.Analysis: The materials placed before the authority included statements under Section 70 identifying concealed electronic records and a pattern of maintaining parallel books evidencing tax evasion amounting to substantial sums. The complaint and the notice furnished to the arrested person set out specific grounds, including identification of electronic evidence and statements of staff, which prima facie disclosed an offence under Section 132. The court applied the principles from the governing precedents emphasizing that the 'reason to believe' must be explicit and refer to underlying material and that writ relief is exceptional and warranted only where there is flagrant breach or mala fides. On the facts, the record demonstrated material on which the authority formed its belief rather than a mere fishing inquiry.Conclusion: In favour of Revenue.Issue (ii): Whether custodial illegality arose from non-production before the Magistrate within 24 hours or from the manner of custody, notwithstanding the claimed medical exigency.Analysis: The medical condition of the arrested person necessitated transfer to a higher medical facility and contemporaneous communications were made to the Special Court about the transfer. The statutory duty to care for health of a person in custody and the CBIC circular obligations were considered; remand proceedings were later conducted and the order of remand was not challenged. Given the factual record of medical exigency and subsequent remand, the non-production within 24 hours did not constitute a breach warranting interference under extraordinary writ jurisdiction.Conclusion: In favour of Revenue.Final Conclusion: Both the challenge to the authorization and legality of the arrest and the challenge to custody/non-production fail on the facts; no exceptional circumstance for writ interference is made out and the petition is dismissed.Ratio Decidendi: Where specific material and statements disclose prima facie offences under Section 132 and the notice/grounds communicate the underlying material generating a 'reason to believe', the statutory and constitutional safeguards are satisfied and extraordinary writ relief against an arrest is not warranted absent clear mala fides or flagrant procedural breach.