TaxTMI 
TaxTMI 
2020 (11) TMI 40
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....the same, those were heard analogously and are being disposed of by this common judgment and order. 3.For the sake of convenience, Special Civil Application No.13679/2019 is treated as the lead matter. 4.A coordinate Bench of this Court to which one of us (Coram : J.B. Pardiwala, J.) was a party passed the following order in the Special Civil Application No.13679/2019 dated 7th August, 2019: "1. One of the main reliefs prayed for by the writ applicant in the present writ application reads as follows : "16(A) To issue a Writ of Mandamus and/or Writ of Prohibition and/or any other appropriate writ, order of direction, directing the respondents not to take any actions against the petitioner being proprietor of the Heugo Metal exercising powers under Section 69 read with Section 132 without following due procedure of law of assessment and adjudication of alleged evasion of GST as contemplated under Section 61, Section 73 of under Section 74 of the Central Goods and Service Tax Act, 2017 i.e. before following provisions of Chapter XII of Central Goods and Service Tax Act, 2017 and Gujarat Goods and Service Tax Act, 2017 and Chapter VIII of Central Goods and Servi....
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....the powers of arrest under Section 69 of the Act, 2017 are to be exercised with lot of care and circumspection. Prosecution should normally be launched only after the adjudication is completed. To put it in other words, there 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. 4. Let Notice be issued to the respondents returnable on 18th September, 2019. 4.1 In the meantime, no coercive steps of arrest shall be taken against the writ applicant. Direct service is permitted. 4.2 On the returnable date, notify this matter on top of the Board. 4.....
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....ent authority with the provisional balance sheet of M/s Heugo Metal. 7.3) The respondent no.2 along with the other officials, on 23rd July, 2019 again visited and carried out search proceedings at the residence of the petitioner. It is the case of the petitioner that the officials left the premises without noting any reason in the sealing memo and the search was abandoned. 7.4) The Respondent no.2 thereafter, in exercise of the powers under section 70(1) of the Central Goods and Service Tax Act, 2017 (for short the 'CGST Act') and Gujarat Goods and Service Tax Act, 2017 (for short 'GGST Act') issued the summons dated 23rd July, 2019 to the petitioner to appear on 25th July, 2019 to give the statement. It is the case of the petitioner that since the petitioner was unable to remain present along with the documents and the provisional balance sheet, the petitioner through his advocate addressed a letter dated 25th July, 2019 to the respondent no.2 and requested to give one week time to appear before the respondent no.2 along with the requisite documents. 7.5) The Respondent no.2 again visited the residential premises of the petitioner on 26th July, 2019 and ....
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....able under the Article 226 of the Constitution of India. It was also pointed out by Mr. Hemani that the SLP preferred against the decision of High Court of Telangana has been dismissed by the Supreme Court in case of P.V. Ramana Reddy v. Union of India reported in 106 taxmann.com 301(SC). 11. The learned Senior Advocate Mr. Hemani thereafter submitted on merits of the matter that in order to invoke the provisions of section 69 read with section 132 of the CGST Act, the "twin conditions" need to be satisfied "cumulatively" i.e. (1) the Commissioner has "reasons to believe" that a person has committed the specified offence and (2) It is determined that the concerned person has "committed" an offence which has to be necessarily the post-determination of the demand by following the due process of law. 12. With respect to the first condition that the Commissioner must have "reasons to believe' that a person has committed any of the specified offences, it was submitted by Mr. Hemani that in order to invoke the power to arrest as envisaged under the section 69 of the CGST Act, the Commissioner must have "reasons to believe" that the concerned person has committed any offence spe....
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....ed that the concerned person has "committed" an offence which necessarily can only be after the post-determination of the demand by following the due process of the assessment. Referring to the provisions of sections 69 and 132 of the CGST Act, it was pointed out that the word used in the said sections is "commits", which makes it very much evident that act of the "committal of offence" is to be fixed first by following the due process of the assessment as envisaged under the Scheme of the CGST Act prior to imposing the punishment. 15. The learned Senior Advocate thereafter referred to the Scheme of the CGST Act for due process of the assessment by referring to the sections 61, 65, 66, 73 and 74 of the CGST Act and submitted that the powers under the section 69 of the CGST Act can be invoked only on the completion of the assessment as envisaged in the said provision so as to form a reason to believe by the Commissioner that the person has committed the offences as specified in the clause (a) or clause (b) or clause (c) or clause (d) of the sub-section(1) of the section 132 of the CGST Act. 16. Mr. Hemani thereafter submitted that the parliament has not used the words "reasons....
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....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 recovery is made subject to 'determination' in an assessment, the argument of the department that punishment for the offence alleged can be imposed even prior to such assessment, is clearly inco....
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....ull opportunity to the petitioner to respond to the same and advance submissions in person, and pass a reasoned and speaking order, in accordance with law." 18. The learned Senior Advocate Mr. Hemani thereafter placed reliance upon the decision of Punjab and Haryana High Court in case of Akhil Krishan Magu v. Deputy Director, Directorate General of GST Intelligence reported in (2019) 111 taxmann.com 367(P&H), wherein the Punjab and Haryana High Court has held as under : "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 cr....
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...."prosecution proceedings" can be deemed to have been commenced is when a private complaint is filed by a competent officer before the Magistrate under section 200 of the Code of Criminal Procedure, 1973 (for short "the Code") and that too after obtaining the previous sanction of the Commissioner as envisaged under the provisions of section 132(6) of the CGST Act. It was therefore, canvassed that a person can be said to be prosecuted only when a private complaint under the section 200 of the Code is filed and hence the section 135 of the CGST Act cannot be pressed into service while invoking the power to arrest under the section 69 of the CGST Act. 20. Reliance was also placed on the decision of the Punjab and Haryana High Court in the case of Sukhdeep Singh Bhoday v. Joint Director General of Foreign Trade and others rendered on 8th August, 2007 in the C.W.P. No. 208/2007 to submit that the power to arrest cannot be invoked before filing of FIR and prosecution can be said have been launched when the magistrate cognizance of the report made by the police and not when the FIR is registered. It was therefore submitted that without intervention of the Magistrate, provision of sectio....
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....o such provisions of CGST Act, it was submitted that the compliance under the CGST Act is to be done on-line electronically. He thereafter referred to the provisions of the assessment as contained in the Chapter-XII comprising of the provisions of the section 59 to 64 of the CGST Act. The learned advocate Mr. Pandya thereafter, referred to the Chapter XIV of the CGST Act which provides for the inspection, search, seizure and arrest. Reference was made to the provisions of section 67 with regard to the power of inspection, search and seizure and the section 69 which provides for the power to arrest with reference to the section 132 prescribing the punishment for certain offences. After referring to the Scheme of the CGST Act, the learned advocate Mr. Pandya submitted that the decision of the Delhi High Court in the case of Make My Trip (India) Pvt. Ltd (supra) is applicable to the facts of the case. He placed reliance upon the paragraph nos. 68 to 83 of the said decision to submit that the power to arrest under the section 69 of the CGST Act is required to be exercised with lot of care and circumspection and such powers can be exercised only after the adjudication is completed by de....
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....adjudication for the initiation of the assessment proceedings. He referred to the section 64 of the CGST Act which provides for the summary assessment and submitted that ultimately, the provisions of the CGST Act determines the civil liability of the the assessee and fastening of the criminal liability has to be in the conjunction with that of the civil liability. Mr. Sheth further referred to the provisions of the section 132 and submitted that no prosecution is prescribed if the evasion of the tax is below Rs. One Crore. It was therefore, submitted that when there is no prosecution permitted before the adjudication under the provisions of the CGST Act, the power to arrest conferred by the section 69 read with the section 132 of the CGST Act has to be read as per the Scheme of the CGST Act and not otherwise. 26. The learned advocate Mr. Uchit Sheth relied upon the following decisions in support of his submissions: i) In the case of G.L. Didvania and another v. Income Tax Officer and another reported in 1995 Supplement 2 SCC 724 wherein the Supreme Court held that the whole question was whether the appellant made a false statement regarding the income which according to....
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.... the State of Gujarat, the provisions of the Section 438 of the Code are very much available with the petitioners and therefore, the aforesaid judgment would not be applicable to the present cases and the captioned writ petitions filed under the provisions of the Article 226 of the Constitution of India deserve to be dismissed. 28. It was submitted that the petitions are premature and not maintainable as the concerned respondent authority has merely exercised its statutory power conferred upon it under the provisions of Section 70 of the CGST/GGST Act, whereby the Petitioners have been called upon to give the evidence and their statements with respect to the on-going investigation. Hence, admittedly and undisputedly, as on date, the statutory powers conferred upon the concerned respondent authority under the provisions of the Section 69 of the CGST Act have not yet been exercised and therefore, the captioned petitions filed by the respective petitioners are pre-mature and hence, not maintainable, as no cause of any action of the respondent authorities has arisen so far. 29. It was further submitted that even otherwise, the captioned petitions are not maintainable as the same ....
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....the CGST Act can only be exercised after the adjudication/ assessment of the offences referred under the provisions of Section 132 of the CGST Act and not prior thereto by placing heavy reliance on the word 'commits' referred in Section 132 of the CGST Act, it was submitted that on the face of it is neither sustainable nor in consonance with the provisions of the CGST Act and on the contrary, the same is making the entire Section 69 of the CGST Act nugatory / otiose. 33. It was submitted that the provisions of the Section 69 of the CGST are neither connected nor dependent upon the provisions of the Section 132 of the CGST Act and hence, it is incorrect to state that the arrest under the Section 69 of the CGST Act cannot be undertaken before the adjudication of the offences referred to in the Section 132 of the CGST Act. In fact, the provisions of the Section 69(1) of the CGST Act can be read along with the Section 135 of the CGST Act, which is similar to the Section 138A of the Customs Act, 1962, which enables an authority to presume the culpable mental state on the part of the alleged offender. Reliance was placed on the decision of the Apex Court in the case of Devchand Kalyan....
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....ms of Section 132(1) of the CGST/GGST Act, the offenders would be punishable with imprisonment for a specific period and hence in there would not be any question of exercising the power of arrest by the concerned authority under the section 69 of the CGST Act. This is more particularly in view of the fact that after the said punishment, it is the concerned police officer who would give effect to such order to be passed under the provisions of the section 132 of CGST Act which would lead to a situation, where the provisions of the Section 69 of the CGST Act would get redundant / otiose. 37. It was submitted by the learned Advocate General that even otherwise, the steps undertaken under the provisions of the Section 69 of the CGST Act by the appropriate authority are only for the purpose of holding an enquiry under the provisions of the CGST/GGST Act for finding any evasion of the GST and ultimately adjudicating the assessment and to punish the assessee for the offences committed by imposing penalties and initiating the proceedings for the prosecution as per the provisions of the Section 132 of the CGST Act. The concerned authority at the stage of invoking the power to arrest unde....
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.... first issue a notice and then to determine the offences specified in Clauses (a), (b), (c) and (d) of Section 132(1) of the CGST Act. On the contrary, Section 135 of CGST Act raises presumption of culpable mental state, whereas, Service Tax Act does not have any such provision, which has been specifically taken note of by the Delhi Court in Para 74 of the aforesaid judgment. In view thereof, the judgment rendered by the Delhi High Court would not be applicable to the facts of the present case. (c) It is incorrect to submit that the provisions of Section 73A of the Service Tax Act is similar to the provisions of Section 73 / 74 of the CGST Act inasmuch as, firstly, the provisions of Section 73 / 74 of the CGST Act are similar to the provisions of Section 73 of the Service Tax Act and not 73A of the Service Tax Act and secondly, the assessment as envisaged under the provisions of Section 74 of the CGST Act would only be undertaken after getting the necessary information from the concerned person and after completion of the investigation. (d) In fact, the Division Bench of Telangana High Court in its aforesaid judgment dated 18.04.2019, has categorically held that t....
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....ocate General that on a combined reading of the Section 69(1) along with the clauses (a), (b), (c) and (d) of the Sections 132(1), 132(4) and 132(5) of the CGST Act, it is discernible that for effecting the arrest, the provisions of Code would not be applicable and more particularly, in view of the non-obstante clause used in Section 132(4)of the CGST Act, the provisions of the Code are not to be taken into account and that, even otherwise, the offences under the CGST Act cannot be equated with the offences under the Indian Penal Code which have been made cognizable or noncognizable under the Code. It was further submitted that for exercising the powers of arrest under Section the 69(1) of the CGST Act, the provision of the Sections 87, 88, 155, 204 and 436 of the Code will not be applicable. It was therefore, submitted that the captioned writ petitions may be dismissed with exemplary costs. REJOINDER ON BEHALF OF THE PETITIONERS : 42. In rejoinder, the learned Senior Advocate Mr. Tushar Hemani submitted that the contention made on behalf of the respondents that the decision in the case of Make My Trip India Pvt. Ltd.(supra) would not be applicable in relation to the proceedi....
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.... applied in construing a penal Act is that if in construing the relevant provisions, there appears any reasonable doubt or ambiguity, it will be resolved in favour of the person who would be liable to the penalty." Mr. Hemani thereafter referred to the remarks of the Lord Esher M.R. in the case of Tuck & Sons v. Priester (1887) 19 OBD 629 at page 638 as below : "If there is a reasonable interpretation which will avoid the penalty in any particular case we must adopt that construction. If there are two reasonable constructions we must give the more lenient one. That is the settled rule for the construction of penal sections." Reliance was also placed on the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. reported in (1973) 88 ITR 192 (SC) in support of above submission. 45. The learned advocate Mr. Pandya submitted that the decision of Make My Trip India Pvt. Ltd (supra) is squarely applicable to the facts of the present case as the provisions of service tax are pari materia with that of the CGST Act. He relied upon the following paragraphs of the said judgment: "74. The Customs Act, 1962, has a different approach to the question o....
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....ion as provided under the Chapter XII of the CGST Act. He therefore, placed heavy reliance upon paragraph no. 52 of the judgment in the case of P.V.Ramana Reddy (supra) of the Telangana High Court. ANALYSIS : 47. Having heard the learned counsel appearing for the parties and having considered the materials on record, the pivotal question which falls for our consideration is whether the power to arrest as provided under section 69 read with section 132 of the CGST Act can be invoked by the Commissioner only upon completion of the adjudication process of finalising the assessment and determination of liability as per the provisions of the CGST Act? 48. The other ancillary questions which arise for our consideration are as under : (i) Whether the provisions of section 69 of the CGST Act envisages that the Commissioner is obliged to record his reasons to believe and furnish the same to the person who is sought to be arrested? (ii) Whether the provisions of sections 154, 155(1), 155(2), 155(3), 157, 172 of the Code of Criminal Procedure, 1973 are applicable or should be made applicable for the purpose of invoking the power to arrest under section 69 of the CGS....
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....n arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station. • Section 132 of the CGST Act reads thus : "Section 132: Punishment for certain offences:- (1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences" namely: (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax; (b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; (c) avails input tax credit using such invoice or bill referred to in clause (b); (d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under cl....
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....se (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both. (2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine. (3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be noncognizable and bailable. (5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable. (6) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Commissi....
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....Section 66 : Special Audit:- (1) If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner. (2) The chartered accountant or cost accountant so nominated shall, within the period of ninety days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified: Provided that the Assistant Commissioner may, on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of ninety days. ....
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....for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. (6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under subsection (5) falls short of the amount a....
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....me limit specified in sub-section (10) for issuance of order. (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of statement under subsection (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilfulmisstatement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such pay....
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....s or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made there under, or failure to furnish any information on being asked for, in writing, by the proper officer." Sections 41 , 41A 154, 155, 157, 172 of the Code reads thus : Section 41: When police may arrest without warrant. (1) Any police officer may without an order from a Magistrate and without a warrant, arrest any person- (a) who has been concerned in any cognizable offence, or against whom a reasonable complaint has been made, or credible information has been received, or a reasonable suspicion exists, of his having been so concerned; or (b) who has in his possession without lawful excuse, the burden of proving which excuse shall lie on such person, any implement of house- breaking; or (c) who has been proclaimed as an offender either under this Code or by order of the State Government; or (d) in whose possession anything is found which may reasonably be suspected to be stolen property and who may reasonably be suspected of having committed an offence with ref....
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.... to identify himself, the police officer may, subject to such orders as may have been passed by a competent Court in this behalf, arrest him for the offence mentioned in the notice." Section 154: Information in cognizable cases. (1) Every information relating to the commission of a cognizable offence, if given orally to an officer in charge of a police station, shall be reduced to writing by him or under his direction, and be read Over to the informant; and every such information, whether given in writing or reduced to writing as aforesaid, shall be signed by the person giving it, and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in this behalf. (2) A copy of the information as recorded under sub- section (1) shall be given forthwith, free of cost, to the informant. (3) Any person aggrieved by a refusal on the part of an officer in charge of a police station to record the information referred to in subsection (1) may send the substance of such information, in writing and by post, to the Superintendent of Police concerned who, if satisfied that such information disclo....
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....e a subordinate officer to make an investigation on the spot; (b) if it appears to the officer in charge of a police station that there is no sufficient ground for entering on an investigation, he shall not investigate the case. (2) In each of the cases mentioned in clauses (a) and (b) of the proviso to subsection (1), the officer in charge of the police station shall state in his report his reasons for not fully complying with the requirements of that sub- section, and, in the case mentioned in clause (b) of the said proviso, the officer shall also forthwith notify to the informant, if any, in such manner as may be prescribed by the State Government, the fact that he will not investigate the case or cause it to be investigated. Section 172: Diary of proceedings in investigation. (1) Every police officer making an investigation under this Chapter shall day by day enter his proceedings in the investigation in a diary, setting forth the time at which the information reached him, the time at which he began and closed his investigation, the place or places visited by him, and a statement of the circumstances ascertained through his investigation. ....
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....e mental state" includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact. (2) For the purposes of this section, a fact is said to be proved only when the Court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability." 50. From the above provisions of the law and considering the preliminary objections raised on behalf of the respondent that the petition is premature and not maintainable as the concerned respondent authority has merely exercised statutory power under the provisions of the section 70 of the CGST Act calling upon the petitioners to give evidence and to record their statement with respect to the ongoing investigation is concerned, it is true that the respondents have not exercised the powers conferred under section 69 of the CGST Act invoking the power to arrest. However, there is a strong apprehension on the part of the petitioners that the respondents would invoke the power to arrest as provided under section 69 of the CGST Act when the petitioners comply with the summons issued under section 70 of the CGST Act. On such facts emerging from the record....
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....examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court. The word "necessary" means indispensable; requisite; indispensably requisite; useful; incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. 52. In Barium Chemicals Ltd. vs. Company Law Board [AIR 1967 SC 295], the Supreme Court pointed out, on consideration of several English and Indian authorities that the expressions "is satisfied", "is of the opinion" and "has reason to believe" are indicative of subjective satisfaction, though it is true that the nature of the power has to be determined on a totality of consideration of all the relevant provisions. The Supreme Court while construing Section 237 of the Companies Act, 1956 held : "64. The object of S. 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does....
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....ose. It is equally unreasonable to think that the legislature could have abandoned even the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the English Act observes that "the Board of Trade will always exercise its discretionary power in the light of specified grounds for an appointment on their own motion" and that "they may be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality." There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in sub clauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non application o....
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....nment to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse of discretion' and under the general heading the principle of reasonableness' which read as under: "The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered discretion, the truth is that, in a system based on the rule of law, unfettered governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line is to be drawn. For....
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.... and rely upon a decision of the Supreme Court in the case of Smt. S.R. Venkatraman vs. Union of India reported in (1979) ILLJ 25(SC) where it had been held : "There will be an error of fact when a public body is prompted by a mistaken belief in the existence of a non existing fact or circumstances. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience and as things go, they may well be said to run into one another. The influence of extraneous matters will be undoubtedly there where the authority making the order has admitted their influence. An administrative order which is based on reasons of fact which do not exist must be held to be infected with an abuse of power." We may also refer to and rely upon a decision of the Supreme Court in the case of ITO Calcutta vs. Lakhmani Mewal Das reported in [(1976) 103 ITR 437 (SC)] wherein it had been held as under: "The reasons for the formation of the belief contemplated by Section 147(a) of the Incometax Act, 1961, for the reopening of an assessment must have a rational connection or relevant bearing on the formatio....
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....o believe that the person has committed offences as specified in the clauses (a), (b), (c) or (d) of subsection( 1) of section 132 of the CGST Act and depending upon the punishment prescribed in clause (i) and clause(ii) of sub-section(1) of section 132, provisions of sub-section (2) and sub-section(3) of section 69 would operate depending upon whether the offence is cognizable or non cognizable as per the provisions of sub-section(4) and sub-section(5) of section 132 of the CGST Act. 59. On the aforesaid issue, we summarise our conclusions : i) The order authorising any officer to arrest may be justified if the Commissioner or any other authority empowered in law has reasons to believe that the person concerned has committed the offence under section 132 of the Act. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. ii) The power conferred upon the authority under Section 69 of the Act for arrest could be termed as a ve....
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....icates that it starts with the phrase "Where the Commissioner has reasons to believe that a person has committed any offence....." which suggests that the power to arrest a person is conferred upon the Commissioner when he forms a reasonable belief that such person has committed any offence as specified in the four clauses i.e. the clauses (a), (b), (c) and (d) of the sub-section (1) of the section 132 of the CGST Act which is punishable under the clause(i) or (ii) of the sub-section(1) or the sub-section (2) of section 132 of the CGST Act. In other words, the reference to the section 132 in the section 69 of the CGST Act providing the power to arrest is only with regard to the nature of the offences specified in the clauses (a), (b), (c) and (d) of the sub-section (1) of the section 132 for which the punishment is provided in the clauses (i) and clause (ii) of the sub-section(1) and the sub-section (2) of section 132 of the CGST Act. Therefore, when a Commissioner forms an opinion and has reason to believe that a person has committed any offence as specified in the clauses (a), (b), (c) and (d) of the sub-section (1) which is punishable under the clauses(i) and (ii) of the subsect....
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....ontained in the Code, all the offences under the CGST Act, except the offences referred to in the subsection (5) shall be non-cognizable and bailable, then such person shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate. In other words, the sub-section(3)(a) of section 69 of the CGST Act provides that when the Commissioner has reason to believe that a person has committed offence under the clauses(a),(b),(c) and (d) of the sub-section(1) of the section 132 of the CGST Act which is punishable under the clause (ii) of the sub-section(1) and the Sub-section(2) of the Section 132 then such person is covered by the sub-section(4) of section 132 of the CGST Act and as such offence would be non cognizable and bailable and in such circumstances, the officer who is authorised to arrest shall grant bail or in default of bail, forward such person to the custody of the Magistrate. It appears that with a view to give effect to the power to grant bail by the authorised officer under the clause (a) of the sub-section (3) of the section 69, sub-clause(b) of subsection( 3)of the section 69 of the CGST Act provides for method, of course subject to the provisio....
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....s falling under Chapter XIX which provides for the offences and penalties. Thus, Section 132 of the CGST Act is enacted by the legislature prescribing punishment for the offences committed by an assessee either upon adjudication and assessment proceedings having been completed or otherwise as per the clauses (a) to (l) of the sub-section (1) of the section 132 of the CGST Act. Therefore, the section 69 and the section 132 of the CGST Act operates in totally different fields and the attempt on part of the petitioners to canvass that unless and until adjudication proceedings of the assessment determining the tax and penalty liability is completed by the department as provided under Chapter VIII of the CGST Act, the Commissioner cannot form at any opinion to reason to believe that the assessee has committed any offence, is contrary to the entire scheme of the CGST Act. 66. The Supreme Court in the case of Radheshyam Kejriwal v. State of West Bengal and another [(2011) 3 SCC 581] has culled out the various principles in the aforesaid context as under : "38. The ratio which can be culled out from these decisions can broadly be stated as follows: (i) Adjudication pro....
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....ction is concerned, it has to be proved as per the strict standards fixed for criminal cases before the criminal court by producing necessary evidence. 4) In case of converse situation namely where the accused persons are exonerated by the competent authorities/Tribunal in adjudication proceedings, one will have to see the reasons for such exoneration to determine whether these criminal proceedings could still continue. If the exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on merits or the adjudication proceedings were on different facts, it would have no bearing on criminal proceedings. If, on the other hand, the exoneration in the adjudication proceedings is on merits and it is found that allegations are not substantiated at all and the concerned person(s) is/are innocent, and the criminal prosecution is also on the same set of facts and circumstances, the criminal prosecution cannot be allowed to continue. The reason is obvious criminal complaint is filed by the departmental authorities alleging violation/contravention of the provisions of the Act on the part of the accused persons. However, if the departmental auth....
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.... 2017 is that when the very power to order arrest under Section 69(1) is confined only to congnizable and non-bailable offences, we do not know how an order for arrest can be passed under Section 69(1) in respect of offences which are declared non-cognizable and bailable under sub- Section (4) of Section 132 of CGST Act. xxx 34. If CGST Act, 2017 is a complete code in itself in respect of (1) the acts that constitute offences, (2) the procedure for prosecution and (3) the punishment upon conviction, then the power of Commissioner, who is not a Police Officer, to order the arrest of a person should also emanate from prescription contained in the Act itself. Section 69(1) of CGST Act, 2017 very clearly delineates the power of the Commissioner to order the arrest of a person whom he has reasons to believe, to have committed an offence which is cognizable and non-bailable. Therefore, we do not know how a person whom the Commissioner believes to have committed an offence specified in clauses (f) to (l) of sub-Section (1) of Section 132 of CGST Act, which are non-cognizable and bailable, could be arrested at all, since Section 69(1) of the CGST Act, 2017 does not confer....
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....t and production before the Magistrate in the case of cognizable and non-bailable offences, do not use the phrase "subject to the provisions of Cr.P.C." This phrase is used only in sub-Section (3) of Section 69 in relation to the arrest and grant of bail for offences which are non-cognizable and bailable, though no power of arrest is expressly conferred in relation to non-cognizable and bailable offences. 39. It is important to note that under sub-Section (4) of Section 132 of the CGST Act, 2017, all offences under the Act except those under clauses (a) to (d) of Section 132 (1), are made noncognizable and bailable, notwithstanding anything contained in Cr.P.C. In addition, Section 67(10) of the CGST Act, 2017 makes the provisions of Cr.P.C. relating to search and seizure, apply to searches and seizures under this Act, subject to the modification that the word "Commissioner" shall substitute the word "Magistrate" appearing in Section 165 (5) of Cr.P.C., in its application to CGST Act, 2017. 40. Therefore, (1) in the light of the fact that Section 69(1) of the CGST Act, 2017 authorizes the arrest only of persons who are believed to have committed cognizable and non....
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....oes not contain the safeguards that are incorporated in Section 41 and 41A of Cr.P.C., we think Section 70(1) of the CGST Act takes care of the contingency. 42. In any case, the moment the Commissioner has reasons to believe that a person has committed a cognizable and non-bailable offence warranting his arrest, then we think that the safeguards before arresting a person, as provided in Sections 41 and 41A of Cr.P.C., may have to be kept in mind. 43. But, it may be remembered that Section 41A(3) of Cr.P.C., does not provide an absolute irrevocable guarantee against arrest. Despite the compliance with the notices of appearance, a Police Officer himself is entitled under Section 41A(3) Cr.P.C., for reasons to be recorded, arrest a person. At this stage, we may notice the difference in language between Section 41A(3) of Cr.P.C. and 69(1) of CGST Act, 2017. Under Section 41A(3) of Cr.P.C., "reasons are to be recorded", once the Police Officer is of the opinion that the persons concerned ought to be arrested. In contrast, Section 69(1) uses the phrase "reasons to believe". There is a vast difference between "reasons to be recorded" and "reasons to believe." 44....
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.... that the jurisdiction under Article 226 of the Constitution of India to grant protection against arrest, should be sparingly used. Therefore, let us see prima facie, the nature of the allegations against the petitioners and the circumstances prevailing in the case, for deciding whether the petitioners are entitled to protection against the arrest. We have already extracted in brief, the contents of the counter affidavits. We have summarized the contents of the counter affidavits very cautiously with a view to avoid the colouring of our vision. Therefore, what we will now take into account on the facts, will only be a superficial examination of facts. 49. In essence, the main allegation of the Department against the petitioners is that they are guilty of circular trading by claiming input tax credit on materials never purchased and passing on such input tax credit to companies to whom they never sold any goods. The Department has estimated that fake GST invoices were issued to the total value of about Rs. 1,289 crores and the benefit of wrongful ITC passed on by the petitioners is to the tune of about Rs. 225 crores. 50. The contention of the petitioners is that t....
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....titioners have not offered to compound the offence, though compounding is permissible even before the institution of prosecution. (2) Under the third proviso to sub- Section (1) of 138, compounding can be allowed only after making payment of tax, interest and penalty involved in such cases. Today, the wrongful ITC allegedly passed on by the petitioners, according to the Department is to the tune of Rs. 225 Crores. Therefore, we do not think that even if we allow the Batch petitioners to apply for compounding, they may have a meeting point with the Department as the liability arising out of the alleged actions on the part of the petitioners is so huge. Therefore, the argument that there cannot be any arrest as long as the offences are compoundable, is an argument of convenience and cannot be accepted in cases of this nature. 55. Another argument advanced by the learned Senior Counsel for the petitioners is that since the Proper Officer under the CGST Act, 2017, even according to the respondents is not a Police Officer, he cannot and he does not seek custody of the arrested person, for completing the investigation/enquiry. Section 69(2) obliges the Officer authorize....
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....examine whether, in the facts and circumstances of these cases, the petitioners are entitled to protection against arrest. It must be remembered that the petitioners cannot be placed in a higher pedestal than those seeking anticipatory bail. On the other hand, the jurisdiction under Article 226 has to be sparingly used, as cautioned by the Supreme Court in Km.Hema Misra (cited supra). 59. We have very broadly indicated, without going deep, that the petitioners have allegedly involved in circular trading with a turnover on paper to the tune of about Rs. 1,289.00 crores and a benefit of ITC to the tune of Rs. 225.00 crores. The GST regime is at its nascent stage. The law is yet to reach its second anniversary. There were lot of technical glitches in the matter of furnishing of returns, making ITC claims etc. Any number of circulars had to be issued by the Government of India for removing these technical glitches. 60. If, even before the GST regime is put on tracks, someone can exploit the law, without the actual purchase or sale of goods or hiring or rendering of services, projecting a huge turnover that remained only on paper, giving rise to a claim for input tax c....
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....32 shall be non cognizable and bailable offences which are not punishable under clause(i) of sub-section (1) of section 132 of the CGST Act. It is pertinent to observe that the Clause(i) of the sub-section (1) of the section 132 prescribes punishment in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds rupees five hundred lakh with imprisonment for a term which may extend to five years and with fine. Therefore, any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken does not exceed rupees five hundred lakh, such offence would be non cognizable and bailable. Hence, subsection( 3) of section 69 of the CGST Act which is subject to the provisions of the Code provides for conferring the powers upon the Deputy Commissioner and the Assistant Commissioner to grant bail to the person who is arrested for non-cognizable and bailable offence as punishable as per clause(ii) of subsection( 1) or sub-section(2) of section 132 read with sub-section(1) of section 69 and subsection (4) of the section 132 of the CGS....
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.... of the CGST Act so as to confer the power of arrest only in certain cases. By invoking the power to arrest under section 69, no punishment prescribed under section 132 is inflicted upon the assessee. The power to arrest as provided under section 69 of the CGST Act is a measure taken during the course of inspection, investigation, search or seizure as explained in detail by the Telangana High Court and therefore, it cannot be said that by invoking the power under section 69 of the CGST Act punishment prescribed under the section 132 is inflicted. Therefore, there is a basic fallacy in the argument of the petitioners that unless and until there is completion of adjudication process by the determination of the demand, as per the provisions of the CGST Act, the power to arrest as provided under sub-section (1) of section 69 of the CGST Act cannot be invoked. We, therefore, reject such argument. 72. Similarly the reliance placed on the decision of Punjab and Haryana High Court in case of Akhil Krishan Maggu (supra) is also of no help to the petitioners as the same is also based upon the facts of its case. We do not subscribe to the view of the Punjab and Haryana High Court that the ....
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....ilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine. Bailable and noncognizable as per sub section (4)of section 132 74. Thus, a person can be arrested only in aforesaid two situations. The offence is cognizable and non bailable only in case of serial no. 1 of the aforesaid table and offence at serial no.2 of the aforesaid table is noncognizable and bailable and in that case person can be arrested but is entitled for default bail as mandated in section 69(3)(a) of the CGST Act. 75. Now, the questions with regard to exercise of the power of arrest as provided under section 69 of the CGST Act and applicability of the provisions of the Code of Criminal Procedure,1973 and whether the concerned respondent authority can be considered as the police officer as per the provision of the Code or not, are concerned, the same are not res integra in view of the recent pronouncement by the co-ordinate bench of this court where one of us (Coram : J.B. Pardiwala, J.) is the author of the decision in the case of Sundeep Mahendrakumar Sangahavi Ver....
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....lice station under Chapter XIV of the Code and therefore he must be considered to be a police officer within the meaning of those words in Sec. 25 of the Evidence Act was repelled for the reason that though such officer had the power of an officer-in-charge of a police station he did not have the power to submit a charge-sheet under Section 173 of the Code " 45. In Badaku Joti Savant v. State of Mysore, AIR 1966 SC 1746, a Constitution Bench of the Supreme Court held that a Central Excise Officer under the Central Excise and Salt Act, 1944, has no power to submit a charge sheet under Section 173 of the Code of Criminal Procedure. It was held that a police officer for the purposes of clause (b) of Section 190 of the Code can only be a police officer properly so-called. A Central Excise officer will have to make a complaint under clause (a) of Section 190 of the Code. 46. In Superintendent of Customs v. Ummerkutty & others, 1984 K.L.T. 1, it was held that an officer acting under the provisions of the Customs Act is not a police officer or an officer- incharge of a police station as contemplated in the Code of Criminal Procedure. Therefore, he cannot initiate action ....
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....cts files a complaint as a complainant i.e. under Section 61(ii) in the case of FERA and under Section 137 of the Customs Act. To say differently, the police officer after consummation of the investigation files a report under Section 173 of the Code upon which the Magistrate may take cognizance of any offence disclosed in the report under Section 190(1)(b) of the Code whereas the empowered or authorised officer of the special Acts has to file only a complaint of facts constituting any offence under the provisions of the Act on the receipt of which the Magistrate may take cognizance of the said offence under Section 190(1)(a) of the Code. After taking cognizance of the offence either upon a police report or upon receiving a complaint of facts, the Magistrate has to proceed with the case as per the procedure prescribed under the Code or under the special procedure, if any, prescribed under the special Acts. Therefore, the word 'investigation' cannot be limited only to police investigation but on the other hand, the said word is with wider connotation and flexible so as to include the investigation carried on by any agency whether he be a police officer or empowered or author....
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....different from the statements recorded by police officers during the course of investigation under the Code. The Supreme Court followed the decisions in Ramesh Chandra Mehta v, The State of West Bengal, AIR 1970 SC 940, and Assistant Collector of Central Excise, Rajamundry v. Duncan Agro Industries Ltd., (2000)7 SCC 53). 52. This Court, in Bhavin Impex Pvt. Ltd. v. State of Gujarat, 2010 (260) E.L.T. 526 (Guj.), considered the question whether the authorities under the Central Excise Act, 1944, have the power to arrest a person under Section 13 of the said Act without a warrant and without filing an FIR or lodging a complaint before a court of competent jurisdiction. This Court held that mere conferment of powers of investigation into criminal offences under the Central Excise Act does not make the Central Excise officer a police officer. It was further held: "26, From the decisions referred to hereinabove, the following principles emerge:- ....... (v) Where a Customs Officer arrests a person and informs that person of the grounds of his arrest (which he is bound to do under Article 22(1) of the Constitution) for the purposes of holding an enquiry into th....
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.... Section 108 of the Customs Act are distinct and different from the statements recorded by the police officers under Section 161 of the Code of Criminal Procedure during the course of investigation under the Code. xxxx 60. We are not satisfied that under the Act of 1962 such powers have been vested in the Customs officers that they must be regarded as police officers. A close reading of the provisions shows that the powers that are conferred upon them do not make them police officers or bring them to the level of police officers and are merely intended to avoid certain inconveniences in the discharge of their duties. When we say inconveniences; inconveniences both to the citizen and to the department. The powers of search, seizure and arrest are contained in Chapter 13 of the Act of 1962. 61. Much reliance is, however, placed by Mr. Pandya on the provisions of Section 104 of the Customs Act, 1962 which contains the power of arrest. Section 104 is equivalent to Sections 173 to 175 of the old Act. Under those sections if a reasonable suspicion existed against any person that he was guilty of an offence under that Act, he could be arrested in any place by an....
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.... should not do, the short and expedient way of referring to the powers of another officer when placed in somewhat similar circumstances has been adopted. By its language the sub-section does not equate the officers of the Customs with an officer-in-charge of a police station, nor does it make him one by implication. It only, therefore, means that he has got powers as defined in the Code of Criminal Procedure for the purpose of releasing such person on bail or otherwise. xxxx 67. From the above, the following is discernible: (i) The main purpose of the provisions of the Customs Act is levy and collection of duty on imports and exports, import export procedures, prohibitions on imports and exports of goods, penalties, offences, etc. and the customs officers have been appointed thereunder for this main purpose. In order that they may carry out their duties in this behalf, powers have been conferred on them to see that duty is not evaded and persons guilty of evasion of duty are brought to book. (ii) A Customs Officer is not a member of the police force. He is not entrusted with the duty of maintaining law and order. He is entrusted with powers that ....
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....Customs Act and punishable at the trial before a Magistrate there is an accusation when a complaint is lodged by an officer competent in that behalf before the Magistrate. (v)Arrest and detention are only for the purpose of holding effectively an inquiry under Sections 107 and 108 of the Customs Act with a view to adjudging confiscation of dutiable or prohibited goods and imposing penalty. At that stage there is no question of the offender against the Customs Act being charged before a Magistrate. Ordinarily, after adjudging penalty and confiscation of goods or without doing so, if the Customs Officer forms an opinion that offender should be prosecuted, he may prefer complaint in the manner provided under Section 137 with the sanction of the Collector of Customs and until a complaint is so filed, the person against whom an inquiry is commenced under the Customs Act does not stand in the character of a person accused of an offence under Section 135. (vi) The Customs Officer is a revenue officer primarily concerned with the detection of smuggling an enforcement and levy of proper duties and prevention of entry into India of dutiable goods without payment of duty and....
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....iew of Section 9-A, all offences under the Act have been made non-cognizable and having regard to the provisions of Section 155, neither could any investigation be commenced in such cases, nor could a person be arrested in respect of such offence, without a warrant for such arrest. 34. Mr. Parasaran's next submission was with regard to the provisions of Part II of the First Schedule to the Code of Criminal Procedure and it was submitted that the same has to be given a meaningful interpretation. It was urged that merely because a discretion had been given to the Magistrate to award punishment of less than three years, it must fall under the third head of the said Schedule and, therefore, be non-cognizable and bailable. On the other hand, as long as the Magistrate had the power to sentence a person for imprisonment of three years or more, notwithstanding the fact that he has discretion to provide a sentence of less than three years, the same will make the offence fall under the second head thereby making such offence nonbailable. It was submitted that in essence it is the maximum punishment which has to determine the head under which the offence falls in Part II of the F....
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.... be cognizable and non-bailable. If, however, all offences under Section 9 of the 1944 Act are deemed to be non-cognizable, then, in such event, even the second item of offences in Part II could be attracted for the purpose of granting bail since, as indicated above, all offences under Section 9 of the 1944 Act are deemed to be non-cognizable." 69. It is, thus, evident from the above that the main thrust of the Om Prakash decision to ascertain whether the offence was bailable or non-bailable, was on the point that the offence being non-cognizable, it had to be bailable. 70. In Om Prakash (supra), the question arose, with respect to the investigation in the cases relating to the Central Excise Act, 1944, and the Customs Act, 1962, as to whether the officers under the said Act could arrest without a warrant in connection with those offences which were non-cognizable and bailable. The powers of the officers of the Excise or the Customs to initiate investigation and to arrest without warrant has been discussed and whether the officers have the powers akin to that of a Police Officer was also looked into. It was held that an offence, in order to be cognizable and baila....
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....h of the Supreme Court would be deciding this issue. xxx 84. This Court had the occasion to deal with the term 'proper officer' in the case of Swati Menthol & Allied Chemicals Ltd. v. Joint Director - Directorate of Revenue Intelligence (Special Civil Application No.2894 of 2013, decided on 8th January 2014). The issue involved in the said matter pertained to the exercise of powers by the 'proper officers' vis-a-vis Sections 17, 18 and 28 of the Act. Reliance was placed on the case of Sayed Ali (supra)..... xxxx FINAL CONCLUSION : 92. We sum-up our final conclusions as under: (1) Any person can be arrested for any offence under the Customs Act, 1962, by the Customs Officer, if such officer has reasons to believe that such person has committed an offence punishable under Section 132 or Section 133 or Section 135 or Section 135A or Section 136 of the Customs Act, 1962, and in such circumstances, the Customs Officer is not obliged to follow the dictum of the Supreme Court as laid in the case of Lalitha Kumari (supra). (2) When any person is arrested by an officer of the Customs, in exercise of his powers un....
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.... arrest, for the purposes of holding an inquiry into the infringement of the provisions of the Customs Act which he has reason to believe has taken place, there is no formal accusation of an offence. The accusation could be said to have been made when a complaint is lodged by an officer competent in that behalf before the Magistrate. The arrest and detention are only for the purpose of holding effective inquiry under Sections 107 and 108 of the Customs Act with a view to adjudging confiscation of dutiable or prohibited goods and imposing penalty. (9)The main thrust of the decision in the case of Om Prakash (supra) to ascertain whether the offence was bailable or non-bailable, was on the point that the offence being noncognizable, it had to be bailable. In other words, Om Prakash (supra) deals with the question, "whether the offences under the Customs Act, 1962, and the Central Excise Act, 1944, are bailable or not ?" At the time when the decision in Om Prakash (supra) was rendered, an offence under the Customs Act was not cognizable. So also, the categorization of cases which are non-bailable and cases which are bailable was not there before the amendment of Section 104 by....
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....T Act without there being any adjudication for the assessment as provided under the provisions of the Chapter VIII of the CGST Act. The reference to section 132 in section 69 of the CGST Act is only for the purpose of indicating the nature of the offences on the basis of the same the reasonable belief is formed and recorded by the Commissioner for the purpose of passing an order of arrest. (2) Q. whether the provisions of section 69 of the CGST Act envisages that the Commissioner is obliged to record his reasons of belief and furnish the same to the person who is sought to be arrested? A. (i) The Commissioner is required to record reasons of belief to arrest a person as per sub-section (1) of Section 69 of the CGST Act. However sub-section (2) and sub-section (3) of section 69 with reference to the provisions of subsection( 4) and sub-section (5) of section 132 of the CGST Act, differentiates between the cognizable and non cognizable offences. The sub- section (2) of section 69 provides for informing such a person about grounds of arrest if he is alleged to have committed a cognizable and non bailable offence and sub-section (3) authorises the Deputy Commissioner ....
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....pose of holding effective inquiry under the provisions of the CGST Act with a view to adjudging the evasion of GST and availing illegal input tax credit and imposing penalty. (iii) The order authorising any officer to arrest may be justified if the Commissioner or any other authority empowered in law has reasons to believe that the person concerned has committed the offence under section 132 of the Act. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant the formation of the belief. (iv) The power conferred upon the authority under Section 69 of the Act for arrest could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (v) The power under Section 69 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (vi) The above a....
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....e(i) or Clause (ii) of the subsection (1) or sub-section(2) of the Section 132 of CGST Act and in such circumstances, the authorised Officer is not obliged to follow the dictum of the Supreme Court as laid in the case of Lalitha Kumari (supra). (ii)When any person is arrested by the authorised officer, in exercise of his powers under Section 69 of the CGST Act, the authorised officer effecting the arrest is not obliged in law to comply with the provisions of Sections 154 to 157 of the Code of Criminal Procedure, 1973. The authorised officer, after arresting such person, has to inform that person of the grounds for such arrest, and the person arrested will have to be taken to a Magistrate without unnecessary delay, if the offences are cognizable and non bailable. However, the provisions of Sections 154 to 157 of the Code will have no application at that point of time. Otherwise, sub-section (3) of section 69 provides for granting bail as the provision does not confer upon the GST officers, the powers of the officer in charge of a police station in respect of the investigation and report. Instead of defining the power to grant bail in detail, saying as to what they should do....
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....te are applicable to the exercise of powers under the provisions of section 69 of the GST Act in equal measure? A. We may now address ourselves on the last question as regards the applicability of the safeguards pertaining to arrest as explained by the Supreme Court in case of D.K. Basu (supra), referred to above. It is significant to note that in D.K. Basu (supra), the Supreme Court did not confine itself to the actions of police officers taken in terms of powers vested in them under the Code but also of the officers of the Enforcement Directorate including the Directorate of Revenue Intelligence ('DRI'). This also included officers exercising powers under the Customs Act, 1962 the Central Excise Act, 1944 and the Foreign Exchange Regulation Act, 1973 (FERA') now replaced by the Foreign Exchange Management Act, 1999 ('FEMA') as well. It observed: "30. Apart from the police, there are several other governmental authorities also like Directorate of Revenue Intelligence, Directorate of Enforcement, Costal Guard, Central Reserve Police Force (CRPF), Border Security Force (BSF), the Central Industrial Security Force (CISF), the State Armed Police, ....
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....ed in accordance with the provisions of law. He cannot, however, be tortured or subjected to third degree methods or eliminated with a view to elicit information, extract confession or drive knowledge about his accomplices, weapons etc. His Constitutional right cannot be abridged except in the manner permitted by law, though in the very nature of things there would be qualitative difference in the methods of interrogation of such a person as compared to an ordinary criminal...." These constitutional safeguards emphasised in the context of the powers of police officers under the Code of Criminal Procedure and of officers of central excise, customs and enforcement directorates, are applicable to the exercise of powers under the GST Act in equal measure. An officer whether of the Central Excise department or another agency like the DGCEI, authorised to exercise powers under the Central Excise Act and/or the FA will have to be conscious of the constitutional limitations on the exercise of such power. However, in context of D.K.Basu(supra), we would like to clarify that the law laid down by the Supreme Court in case of Poolpandi and others v. Superintendent, Central Excise and oth....
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....so in this context emphasise the mode of exercise powers of arrest under the GST Law as the power of arrest specified in Section 69 of the CGST Act undoubtedly displeases the corresponding powers of arrest vested in a police officer under the Code of Criminal Procedure. Section 69 of the CGST Act requires certain preconditions to be fulfilled prior to the arrest. In particular, the reasons to believe have to be recorded in writing in the file. The second aspect of Section 69 of the GST Act is the communication of the grounds of arrest. Although, Section 69 uses the word "inform" in the context in which it appears, yet a mere communication of the grounds would not be sufficient. Merely reading out the grounds of arrest to the detenu would defeat the very object of requiring the reasons to believe to be recorded in writing and communicated to the detenu. 80. In the aforesaid context, we may refer to and rely upon the Constitution Bench decision of the Supreme Court in the case of C.B.Gautam v. Union of India & ors. reported in 1993 (1) SCC 78. The said decision is in the context of the Income Tax Act. The judgment explains the importance and the obligation to record reasons and co....
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....nd detention. As one of these guidelines, the requirement to draw up an arrest memo was first articulated as: "36 (2) That the police officer carrying out the arrest of the arrestee shall prepare a memo of arrest at the time of arrest and such memo shall be attested by at least one witness, who may be either a member of the family of the arrestee or a respectable person of the locality from where the arrest is made. It shall also be countersigned by the arrestee and shall contain the time and date of arrest." While producing the person arrested under Section 69 of the CGST Act, the importance of valid, proper and exhaustive arrest memo should not be undermined. Every authorized officer under the Act, 2017 carrying out arrest must be clear that the preparation of an arrest memo is mandatory. At this stage, we may state the guidelines issued by the Supreme Court in D.K. Basu (supra): "(1) The police personnel carrying out the arrest and handling the interrogation of the arrestee should bear accurate, visible and clear identification and name tags with their designations. The particulars of all such police personnel who handle interrogation of the arrestee must be....
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....s and Districts as well. (9) Copies of all the documents including the memo of arrest, referred to above, should be sent to the Illaqa Magistrate for his record. (10) The arrestee may be permitted to meet his lawyer during interrogation, though not throughout the interrogation. (11) A police control room should be provided at all district and State headquarters, where information regarding the arrest and the place of custody of the arrestee shall be communicated by the officer causing the arrest, within 12 hours of effecting the arrest and at the police control room it should be displayed on a conspicuous notice board." The safeguards mandated through the abovereferred guidelines, particularly the requirement to prepare an arrest memo, are directed towards "transparency and accountability" in the powers to arrest and detain. These safeguards flow from the fundamental rights guaranteed in Articles 21 and 22 respectively of the Constitution of India. The life and liberty of a person is secured under Article 21 and supplemented by Article 22 that provides key protection against the arbitrary arrest or detention to every arrested person. 82. Unlike the ....
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.... In a given case, if the Magistrate finds that the arrest memo is absent or improperly filled or bereft of necessary particulars, then the Magistrate should decline the production of the arrested person. At this stage, we may refer to a very recent pronouncement of the Supreme Court in the case of Union of India v. Ashok Kumar Sharma & Ors. reported in 2020 SCC OnLine SC 683. The issue in the said judgment was as under: "What is the interplay between the provisions of the Code of Criminal Procedure (hereinafter referred to as "CrPC" for short) and the Drugs and Cosmetics Act, 1940 (hereinafter referred to as "the Act" for short)? Whether in respect of offences falling under chapter IV of the Act,a FIR can be registered under Section 154 of the CrPC and the case investigated or whether Section 32 of the Act supplants the procedure for investigation of offences under CrPC and the taking of cognizance of an offence under Section 190 of the CrPC? Still further, can the Inspector under the Act, arrest a person in connection with an offence under Chapter IV of the Act." What is important to note are the observations made by the Supreme Court in para-92 which reads thus: ....