TaxTMI 
TaxTMI 
2019 (11) TMI 942
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....orters who had retracted their statements made at the first instance filed Writ Petitions before Delhi High Court against DGGI. As per Respondent these four exporters had availed huge amount of refund of IGST and they are dummy owners. The DGGIRespondent on 15.8.2019 searched Gurugram residence of Ramesh Wadhera-alleged owner of dummy export firms who happens to be neighbour of Petitioners. On the request of Ramesh Wadhera, Petitioners came to his residence and some commotion took place between Petitioners and official of DGGI. At the behest of DGGI, Police registered FIR dated 15.8.2019 under Section 186, 353 IPC at DLF Police Station, Gurugram against both the Petitioners and arrested them on the same day. Both were released on bail on 22.8.2019 after a week incarceration. The DGGI on 27.8.2019 again recorded statements of said dummy exporters, who allegedly disclosed name of Petitioners apart from earlier names of Ramesh Wadhera and Mukesh Kumar as also being involved. The Respondent-DGGI on 28.8.2019 searched Gurugram residence of Petitioners who at that point of time were not at home. The Respondents after completing search took away younger brother of Petitioner No. 1 to t....
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....against Petitioners still they are running after their blood. The Respondents want that Petitioner No. 1 should accept that he is involved in refund scam though even his father was not found involved and Respondents/DGGI got arrested him from DRI. Intention of Respondent is just to arrest Petitioner which is evident from the fact that Respondent/DGGI remained silent when Petitioner No. 2 was in custody in FIR case and thereafter in DRI matter. 5. Counsel for the Respondent contended that Petitioner No. 1 is neither cooperating nor answering questions asked by SIO. He is involved in the fraud and deserves no sympathy of this court. The exporters are not real owners of exporting firm and it is Petitioners who in connivance with Ramesh Wadhera and one Mukesh Kumar had created bogus/dummy firms and availed refund of IGST. The Petitioner No. 1 who earlier was customs clearing agent is mis-using his professional position and needs to be interrogated without cover of protection of this court. 6. Counsel for the Respondents on 24.10.2019 submitted record of investigation in sealed cover. We have perused a number of documents submitted by counsel in sealed cover but we do not find in ....
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.... any event have been examined by it, as in the case of the two petitioners, without commencement of the process of adjudication of penalty under Section 83A of the FA, another agency like the DGCEI cannot without an SCN or enquiry straightway go ahead to make an arrest merely on the suspicion of evasion of service tax or failure to deposit service tax that has been collected. Section 83A of the FA which provides for adjudication of penalty provision mandates that there must be in the first place a determination that a person is "liable to a penalty", which cannot happen till there is in the first place a determination in terms of Section 72 or 73 or 73A of the FA. (iii) For a Central Excise officer or an officer of the DGCEI duly empowered and authorised in that behalf to be satisfied that a person has committed an offence under Section 89(1)(d) of the FA, it would require an enquiry to be conducted by giving an opportunity to the person sought to be arrested to explain the materials and circumstances gathered against such person, which according to the officer points to the commission of an offence. Specific to Section 89(1)(d) of the FA, it has to be determined with some....
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....rrive at a reasonable conclusion whether there was a deliberate attempt of evading payment of service tax. In the case of MMT, the decision to go in for the extreme step of arrest without issuing an SCN under Section 73 or 73A(3) of the FA, appears to be totally unwarranted. (viii) For the exercise of powers of search under Section 82 of the FA, (i) an opinion has to be formed by the Joint Commissioner or Additional Commissioner or other officers notified by the Board that "any documents or books or things" which are useful for or relevant for any proceedings under this Chapter are secreted in any place, and (ii) the note preceding the search of a premises has to specify the above requirement of the law. The search of the premises of the two petitioners is in clear violation of the mandate of Section 82 of the FA. It is unconstitutional and legally unsustainable. (ix) The Court is unable to accept that payment by the two petitioners of alleged service tax arrears was voluntary. Consequently, the amount that was paid by the petitioners as a result of the search of their premises by the DGCEI, without an adjudication much less an SCN, is required to be returned to t....
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....ssible to justify resorting to the coercive provisions straightaway. But then the notes on file must offer a convincing justification for resorting to that extreme a measure. What, however, requires reiteration is that the potent power of arrest should not be lightly and casually exercised to induce fear into an assessee and the consequential submission to the unreasonable demands made by officers of the investigating agency during the interrogation and while in custody. To again quote the Bombay High Court in ICICI Bank Ltd. v. Union of India (supra) : "At the cost of repetition we may say that if a tax payer fraudulently or with the intention to deprive Revenue of its legitimate dues evades payment thereof not only that, if the Central Excise Officer is of the opinion that for the purpose of protecting the interest of the Revenue it is necessary provisionally to attach any property belonging to the person on whom the notice is served under Section 73 or Section 73 A of the Act, he is empowered to do so, however with the previous approval of the Commissioner of Central Excise. However, at the same time, law enforcers cannot be permitted to do something that is not permitt....
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....2) of the Act and availed of excess ITC in so far as there has been no movement of the goods in the present case as against the supplier and the Petitioner and the transactions are bogus and fictitious, created only on paper, solely to avail ITC. The manner of recovery of credit in cases of excess distribution of the same is set out in Section 21 of the Act. This section provides that where the Input Service Distributor distributes credit in contravention of the provisions contained in Section 20 resulting in excess distribution of credit to one or more recipients, the excess credit so distributed shall be recovered from such recipients along with interest, and the provisions of Section 73 or Section 74, as the case may be, shall, mutatis mutandis, apply for determination of amount to be recovered. 38. Thus, 'determination' of the excess credit by way of the procedure set out in Section 73 or 74, as the case may be is a pre-requisite for the recovery thereof. Sections 73 and 74 deal with assessments and as such it is clear and unambiguous that such recovery can only be initiated once the amount of excess credit has been quantified and determined in an assessment. When reco....
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....elied upon by the respondents. The Learned Single Judge states that 'in the light of the grave position put forth by the prosecution and also the fact that the investigation was at very early stages', the request for Anticipatory Bail should be rejected and proceeds to do so. This decision does not take into consideration the decision of the Delhi High Court in the case of Make My Trip (India) Pvt. Ltd., (supra), confirmed by the Supreme Court and also does not take into account the relevant statutory provisions of the Revenue enactment, that in my view are necessary to appreciate the lis in proper perspective. The decision is thus distinguishable on facts and in law. 43. As far as the decision rendered by the Rajasthan High Court is concerned, it is distinguishable on facts, as at Paragraph 20 thereof, the Learned Judge records that the petitioner therein did not controvert the claim that the claim of Input Tax Credit is made based on fake invoices. Thus, no defence was put forth by the petitioner to the allegation of Bill Trading in that case, which is not so in the case before me. This decision is also distinguishable on facts. 44. The Learned Single Judge of t....
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....re must be in the first place a determination that a person is "liable to a penalty". Till that point of time, the entire case proceeds on the basis that there must be an apprehended evasion of tax by the assessee. In the two decisions referred to above, emphasis has been laid on the safeguards as enshrined under the Constitution of India and in particular Article 22 which pertains to arrest and Article 21 which mandates that no person shall be deprived of his life and liberty for the authority of law. The two High Courts have extensively relied upon the decision of the Supreme Court in the case of D.K. Basu vs. State of West Bengal reported in 1997 (1) SCC 416 = 2002-TIOL-230-SC MISC." 7.3. Gujarat High Court in the case of CLEARTRIP PVT LTD MUMBAI & ORS Vs THE UNION OF INDIA 2016-TIOL-863-HCMUM- ST has concluded in relevant para as below: " 16. We are clear in our minds and from the scheme of the Act and the Law as a whole that coercive measures, including effecting any arrest, would arise only when investigation has been completed and on launching the prosecution. If the prosecution is a criminal prosecution, then, there is no question of deviating or defeating from ....
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....r submits that indisputably assessment for the relevant period has not been completed by the Department so far. In which case, invoking Section 132 of the Central Goods and Services Tax Act, 2017 does not arise. He further submits that, even if, the alleged liability of Rs. 19 crores as is assumed by the Department is accepted, it is open to the petitioner to file appeal after the assessment order is passed; and as per the statutory stipulation, such appeal could be filed upon deposit of only 10% of the disputed liability. In that event, the deposit amount may not exceed Rs. 2,00,00,000/- (Rupees Two Crores), which the petitioner is willing to deposit within one week from today without prejudice to his rights and contentions in the assessment proceedings and the appeal to be filed thereafter, if required. Issue notice on condition that the petitioner shall deposit Rs. 2,00,00,000/- (Rupees Two Crores) to the credit of C.No. IV/16/27/201HPU on the file of the Commissioner of GST & Central Excise, Salem, Tamil Nadu and produce receipt in that behalf in the Registry of this Court within ten days from today, failing which the special leave petition shall stand dismissed for no....
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....s conducted determining the liability, no offence can be made out under the Act. Therefore, it is their contention that even a prosecution cannot be launched without an assessment and that therefore, there is no question of any arrest. 51. It is true that CGST Act, 2017 provides for (i) self assessment, under Section 59, (ii) provisional assessment, under Section 60, (iii) scrutiny of returns, under Section 61, (iv) assessment of persons who do not file returns, under Section 62, (v) assessment of unregistered persons, under Section 63, (vi) summary assessment in special cases, under Section 64 and (vii) audit under Sections 65 and 66. 52. But, to say that a prosecution can be launched only after the completion of the assessment, goes contrary to Section 132 of the CGST Act, 2017. The list of offences included in sub-section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of subsection (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the com....
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.... person to bail, in accordance with the procedure prescribed under the Code of Criminal Procedure. There is no question of police custody or custody to the Proper Officer in cases of this nature. Therefore, it is contended by Mr. Raghunandan Rao, learned Senior Counsel for the petitioners that the arrest under Section 69, does not advance the cause of investigation/enquiry, but only provides a satisfaction to the respondents that they have punished the arrested person even before trial. According to the learned Senior Counsel, the arrest of a person which will not facilitate further investigation, has to be discouraged, since the same has the potential to punish a person before trial. 56. But, the aforesaid contention proceeds on the premise as though the only object of arresting a person pending investigation is just to facilitate further investigation. However, it is not so. The objects of pre-trial arrest and detention to custody pending trial, are manifold as indicated in Section 41 of the Code. They are: (a) to prevent such person from committing any further offence; (b) proper investigation of the offence; (c) to prevent such person from ca....
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....have traditionally known revolve around evasion of liability. In such cases, the Government is only deprived of what is due to them. But in fraudulent ITC claims, of the nature allegedly made by the petitioners, a huge liability is created for the Government. Therefore, the acts complained of against the petitioners constitute a threat to the very implementation of a law within a short duration of its inception. 61. In view of the above, despite our finding that the writ petitions are maintainable and despite our finding that the protection under Sections 41 and 41A of Cr.P.C., may be available to persons said to have committed cognizable and non-bailable offences under this Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest, in view of the special circumstances which we have indicated above. " (Emphasis supplied) From above quoted enunciation of law relating to arrest during investigation i.e. prior to determination of tax evaded under Finance Act, 1994 (service Tax) as well CGST Act, 2017 by different High Courts and ....
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....duct investigation. d) Conditions mentioned in section 437 cannot be read into section 438. e) Although the power to release on anticipatory bail can be described as of an "extraordinary" character this would "not justify the conclusion that the power must be exercised in exceptional cases only." Powers are discretionary to be exercised in light of the circumstances of each case. f) Initial order can be passed without notice to the Public Prosecutor. Thereafter, notice must be issued forthwith and question ought to be re-examined after hearing. Such ad interim order must conform to requirements of the section and suitable conditions should be imposed on the applicant. 120. The Law Commission in July 2002 has severely criticized the police of our country for the arbitrary use of power of arrest which, the Commission said, is the result of the vast discretionary powers conferred upon them by this Code. The Commission expressed concern that there is no internal mechanism within the police department to prevent misuse of law in this manner and the stark reality that complaint lodged in this regard does not bring any result. The Commission in....
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....s have been made only with the object of injuring or humiliating the applicant by arresting him or her. vi. Impact of grant of anticipatory bail particularly in cases of large magnitude affecting a very large number of people. vii. The courts must evaluate the entire available material against the accused very carefully. The court must also clearly comprehend the exact role of the accused in the case. The cases in which accused is implicated with the help of sections 34 and 149 of the Indian Penal Code, the court should consider with even greater care and caution because over implication in the cases is a matter of common knowledge and concern; viii. While considering the prayer for grant of anticipatory bail, a balance has to be struck between two factors namely, no prejudice should be caused to the free, fair and full investigation and there should be prevention of harassment, humiliation and unjustified detention of the accused; ix. The court to consider reasonable apprehension of tampering of the witness or apprehension of threat to the complainant; x. Frivolity in prosecution should always be considered and it is only the element of....
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....ate consider the following suggestions in proper perspective then perhaps it may not be necessary to curtail the personal liberty of the accused in a routine manner. These suggestions are only illustrative and not exhaustive. 1) Direct the accused to join investigation and only when the accused does not cooperate with the investigating agency, then only the accused be arrested. 2) Seize either the passport or such other related documents, such as, the title deeds of properties or the Fixed Deposit Receipts/Share Certificates of the accused. 3) Direct the accused to execute bonds; 4) The accused may be directed to furnish sureties of number of persons which according to the prosecution are necessary in view of the facts of the particular case. 5) The accused be directed to furnish undertaking that he would not visit the place where the witnesses reside so that the possibility of tampering of evidence or otherwise influencing the course of justice can be avoided. 6) Bank accounts be frozen for small duration during investigation. 129. In case the arrest is imperative, according to the facts of the case, in that event, the....
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....lice office is satisfied that such arrest is necessary- (a) to prevent such person from committing any further offence; or (b) for proper investigation of the offence or; (c) to prevent such person from causing the evidence of the offence to disappear or tampering with such evidence in any manner; or (d) to prevent such person from making any inducement, threat or promise to any person acquainted with the facts of the case so as to dissuade him from disclosing such facts to the Court or to the police officer; or (e) as unless such person is arrested, his presence in the Court whenever required cannot be ensured; And the police officer shall record while making such arrest, his reasons in writing: Provided that a police officer shall, in all cases where the arrest of a person is not required under the provisions of this sub-section, record the reasons in writing for not making the arrest; 41-A Notice of appearance before police officer- (1) The police officer shall, in all cases where the arrest of a person is not required under the provisions of sub-section (1) of section 41, issue a notice directing the person against ....
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....not considered a friend of public. The need for caution in exercising the drastic power of arrest has been emphasised time and again by the courts but has not yielded desired result. Power to arrest greatly contributes to its arrogance so also the failure of the Magistracy to check it. Not only this, the power of arrest is one of the lucrative sources of police corruption. The attitude to arrest first and then proceed with the rest is despicable. It has become a handy tool to the police officers who lack sensitivity or act with oblique motive." 20. Thereafter, the Court referred to Section 41 Cr.P.C. and analysing the said provision, opined that a person accused of an offence punishable with imprisonment for a term which may be less than seven years or which may extend to seven years with or without fine, cannot be arrested by the police officer only on his satisfaction that such person had committed the offence. It has been further held that a police officer before arrest, in such cases has to be further satisfied that such arrest is necessary to prevent such person from committing any further offence; or for proper investigation of the case; or to prevent the accused fro....
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....as not been followed. The report clearly shows there have been number of violations in the arrest, and seizure. Circumstances in no case justify the manner in which the petitioners were treated. " (Emphasis Supplied ) 10. Taking cue from judgment of Delhi High Court in the case of Make My Trip (Supra) followed by Madras High Court in the case of Jayachandran Alloys (P) Ltd (Supra), law laid down by Hon'ble Supreme Court in the case of Siddharam Satlingappa Mhetre (supra) as well keeping in mind Section 69 and 132 of CGST Act which empower Proper Officer to arrest a person who has committed any offence involving evasion of tax more than Rs. 5 Crore and prescribed maximum sentence of 5 years which falls within purview of Section 41A of Cr. P.C., we are of the opinion that power of arrest should not be exercised at the whims and caprices of any officer or for the sake of recovery or terrorising any businessman or create an atmosphere of fear, whereas it should be exercised in exceptional circumstances during investigation, which illustratively may be: (i) a person is involved in evasion of huge amount of tax and is having no permanent place of business, (....
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....wherein Petitioner No. 1 has represented Appellants as an Advocate which buttress the argument of Petitioner that he in practice and appeared as an Advocate on behalf of four exporters who availed alleged illegal refund of IGST. 12. We find that it is case of some mis-understanding between Petitioners and officers of Respondent/DGGI who now want to implicate Petitioner and his family members. The investigation is going on for last couple of months and Respondents are unable to produce any evidence showing direct involvement of Petitioners. The Respondent did not record statement while both the Petitioners were in judicial custody for a week in FIR dated 15.8.2019 lodged at the instance of DGGI, and till date no statement of Petitioner No. 2 has been recorded though he is in judicial custody since 13.9.2019. The Respondent-DGGI handed over Petitioner No. 2 to DRI after recording his statement and there is nothing on record to show that he made any confession. The Respondents are recording one after another statement of Petitioner No. 1 (Akhil Krishan Maggu) with perhaps to intimidate him in giving a self incriminating confession. They have not been able to arrest him because of t....