TaxTMI 
TaxTMI 
2021 (10) TMI 803
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....ement, Division-2, Ahmedabad. 3. Heard learned advocate, Mr. B.M. Mangukiya assisted by learned advocate, Mr. Chetan K. Pandya for the applicants and learned Public Prosecutor, Mr. Mitesh Amin assisted by learned advocate, Mr. Chintan Dave for the respondents. 4. Learned advocate for the applicants submitted that the applicant viz., Nileshbhai Natubhai Patel of Criminal Misc. Application No.17697/2021 is the Chairman and Whole-Time Director of M/s. Madhav Copper Limited (hereinafter referred to as "the Company" for short), whereas the applicant viz., Divya Arvindbhai Monpara of Criminal Misc. Application No.17700/2021 is the Director of the said Company and the applicant viz., Rohitbhai Bhikhabhai Chauhan of Criminal Misc. Application No.17702/2021 is the Chairman and Whole-Time Director of the Company. It is submitted that the Company is a Public Limited Company listed on the National Stock Exchange (NSE) and is governed by the strict Rules framed by the Securities and Exchange Board of India (SEBI) and audited accounts are required to be submitted to NSE periodically. It is submitted that the Company of the applicants is a producer Company which produces the finished goods ....
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....tted that as per the procedure prescribed under the GGST Act, monthly return is required to be filed under Section 39 of the GGST Act and, thereafter, normal process of scrutiny of returns is carried out under Section 61 of the GGST Act and in case, any discrepancy is found, an explanation could be called for and after the explanation is found satisfactory, no further action would be taken, however, where the explanation is not accepted, the concerned officer may proceed and take action under Sections 65, 66 and 67 of the GGST Act or to proceed to determine tax under Sections 73 and 74 of the GGST Act. It is contended that no explanation has been called for by the respondent - department from the Company except communication dated 18.07.2019 and in response thereto, the Company gave explanation on 12.08.2019. It is further submitted that in relation to the search conducted on 04.10.2019, a show cause notice was issued to the Company on 05.11.2020 in relation to the period from 01.07.2017 to 03.10.2019 raising total demand of Rs. 10,43,33,762/-, to which, the Company gave its reply. At this stage, it is also contended that the Company has deposited a sum of Rs. 7,71,22,360/- to avoi....
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....me of seven days to the applicants. It is, therefore, submitted that as the petition challenging the validity of Section 69 of the GGST Act is pending for consideration before the Hon'ble Supreme Court, if the applicants are arrested, the said petition would become infructuous and, therefore, this Court may release the applicants on anticipatory bail. 8. Learned advocate would at this stage contend that even bare reading of Section 69 of the GGST Act suggests that powers can be exercised only in relation to Section 132 of the GGST Act, where the Commissioner has "reasons to believe" that a person has committed any offence as specified in the said provision. It is also contended that Section 132 of the GGST Act requires prior adjudication and the said provision is required to be interpreted strictly. It is also pointed out at this stage that the Commissioner cannot delegate the powers to his subordinate, inspite of that, as per the affidavit filed by the concerned officer before the Hon'ble Supreme Court, power is delegated by the Commissioner to the Joint Commissioner, which is not permissible. 9. Learned advocate for the applicants further submits that the applicants have....
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....L. 721 (Karnataka); (5) the judgment in case of Sushila Aggarwal & Ors. Vs. State (NCT of Delhi) & Anr., reported in (2020) 5 SCC 1; (6) the judgment in case of Lalitakumari Vs. State of Uttar Pradesh, reported in (2014) 2 SCC 1. 13. On the other hand, learned Public Prosecutor, Mr. Amin, after referring to relevant documents, submitted that the prosecution has made out prima facie case against the applicants and, therefore interrogation of the applicants would be required and while considering the anticipatory bail application filed by the applicants, conduct/ behavior of the applicants is also required to be kept in view. Learned Public Prosecutor submitted that there are other operators i.e. the concerned persons of the fictitious firms and out of them, four persons have been arrested, whereas one person is not available for the purpose of interrogation. Learned Public Prosecutor has supplied separate confidential papers, from which, it is pointed out that the applicants used to raise false invoices and during the period between 2019 to 2021, there were 700 transactions and in fact, 36 dummy firms were created and false invoices and sales were raised and in ....
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.... Union of India by the Division Bench of this Court in Special Civil Application No.8669/202 0. Learned Public Prosecutor submitted that in the said order, the Division Bench has considered the provision contained in Section 104 read with Section 28 of the Customs Act. Learned Public Prosecutor has referred to Paragraph Nos.14, 17, 34, 38 and 92 of the said decision. 16. Learned Public Prosecutor would thereafter refer to and rely upon Section 5(3) of the GGST Act. It is contended that as per the said provision, power of the Commissioner can be delegated and there is no embargo as contended by learned advocate for the applicants. 17. Learned Public Prosecutor has placed reliance upon the judgment dated 04.02.2020 passed by the Division Bench of this Court in case of Nathalal Maganlal Chauhan Vs. State of Gujarat in Special Civil Application No.513/2020 with Special Civil Application No.2741/2020. 18. At this stage, learned Public Prosecutor submits that the contention raised by learned advocate for the applicants that in order to invoke the provision of Section 69 read with Section 132 of the GGST Act, two conditions need to be satisfied cumulatively i.e. first, the Commis....
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....e Writ, Order(s) or Direction(s) to the Respondent Nos. 1 to 4 to comply with the mandatory procedure under Chapter XII of the Code of Criminal Procedure, 1973 including Section 154, 157,167,172 etc. for valid commencement and continuation of the investigation into any offence qua the petitioners in respect of investigation arising out of File No.DCST/ENF-2/AC-6/CONFIDENTIAL/2021-22; (ii) Declare the process instituted, commenced and continued by the Respondents qua the petitioners vide File No.DCST/ENF-2/AC-6- CONFIDENTIAL/2021-22 as no nest, illegal, void ab initio for not following the mandatory procedure under Chapter XII of Code of Criminal Procedure, 1973 and therefore, violative of the 'procedure established by law': (iii) Issue an appropriate writ order or direction declaring that the provisions of section 69 of the Central Goods and Service Tax Act, 2017 to be ultra vires the constitution being arbitrary and in violation of Article 14, 19, 20 and 21 of the Constitution of India. (iv) And/or pass any other or further orders which Your Lordships may deem fit and proper in the interest of justice." 22. In the aforesaid Writ Petition, the Hon'ble ....
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.... powers under the Act 2017 in favour of the Special Commissioner of State Tax and the Additional Commissioners of State Tax by virtue of the power conferred under subsection (3) of Section 5 of the Act 2017. Mr.Pandya would submit that the plain language of Section 69 of the Act would indicate that the reasonable belief should be of the Commissioner and not of the delegated authority. The argument is that the Parliament has chosen and thought fit to repose confidence in the Commissioner and that is the reason why in Section 69 the phrase 'Commissioner has reasons to believe' has been stated. 12. Mr.Pandya would submit that the words 'reason to believe' contemplates an objective determination based on intelligent care and deliberation as distinguished from a purely subjective consideration. If such is the mandate of the Legislature, then such a power can never be delegated. Mr.Pandya would submit that the impugned Notification is contrary to the mandate of Section 6 of the Gujarat Goods and Services Tax Act, 2017. According to Mr.Pandya, while passing an order under Section 69 of the GGST Act, 2017, a simultaneous order under the CGST Act, 2017 shall also ha....
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....the observations made by the Division Bench of this Court, it is clear that the Commissioner can delegate his powers to his subordinate. A very same reasonable belief will be that of the authority upon whom the power is delegated. Thus, the power under Section 69 of the GGST Act can be exercised by the authority upon whom the power is delegated provided the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the GGST Act. Thus, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power under Section 69 of the Act remains the same. Thus, this Court is of the view that the submissions canvassed by learned advocate for the applicants on this aspect is misconceived because of the aforesaid decision rendered by the Division Bench is clear on this point. 27. In the judgment of the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra), it has been observed in Paragraph Nos.11, 48 and 77 as under, 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 "....
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....o arrest as provided under section 69 of the CGST Act can be invoked if the Commissioner has reason to believe that the person has committed offences as provided under the clauses (a), (b), (c) or (d) of subsection( 1) of section 132 of the CGST Act, which are punishable under the clause (i) or clause (ii) of subsection (1) or subsection (2) of the section 132 of the CGST 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....
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....t, for the purposes of holding an inquiry into the infringement of the provisions of the CGST 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 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 ver....
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....73? A. (i) Any person can be arrested for any offence under the section 69 of the CGST Act, 1962, by the authorised officer to whom authority to arrest is given by the Commissioner if the Commissioner has reasons to believe that such person has committed an offence punishable under the clauses (a) to (d) of the subsection (1) which is punishable under the clause(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....
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....d procedure in case of arrest for non-bailable offences and bailable offences. (4) Q. Whether the constitutional safeguards laid out by the Supreme Court in D.K. Basu's case [1997 (1) SCC 416] in the context of the powers of the police officers under the Code of Criminal Procedure, 1973 and of officers of the Central Excise, Customs and Enforcement Directorate 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 Exchang....
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.... The action of the State, however must be "right, just and fair". Using any form of torture for extracting any kind of information would neither be 'right nor just nor fair' and, therefore, would be impermissible, being offensive to Article 21. Such a crime-suspect must be interrogated - indeed subjected to sustained and scientific interrogation determined 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 ag....
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....vocate for the applicants that the provision of Sections 154, 155, 157 and 172 of the Code are applicable or should be made applicable for the purpose of invoking power to arrest under Section 69 of the GGST Act and, therefore, authorized officer cannot arrest the person alleged to have committed non-cognizable and bailable offence without a warrant of arrest issued by the Magistrate under the provisions of the Code of Criminal Procedure, 1973. However, the aforesaid contentions raised by learned advocate for the applicants are misconceived in view of the observation made by the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra). It is specifically held by the Division Bench of this Court in the aforesaid decision in Paragraph No.77 that any person can be arrested for any offence under Section 69 of the GGTS Act by the authorized officer to whom the authority to arrest is given by the Commissioner if the Commissioner has reasons to believe that such person has committed an offence punishable under Section 132 of the GGST Act. It is also held that when any person is arrested by the authorized officer in exercise of power under Section 69 of the GGST Act, t....
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....ng an investigation of an offence, representing the State, files a report under Section 173 of the Code, becomes the complainant, whereas, the prosecuting agency under the special Acts files a complaint as a complainant, i.e. under Section 137 of the Customs Act. (7) The power to arrest a person by a Customs Officer is statutory in character and should not be interfered with. Section 108 of the Act does not contemplate any Magisterial intervention. The statements recorded under Section 108 of the Customs Act are distinct and different from the statements recorded by the Police Officers during the course of investigation under the Code. (8) The expression 'any person' in Section 104 of the Customs Act includes a person who is suspected or believed to be concerned in the smuggling of goods. However, a person arrested by a Customs Officer because he is found to be in possession of smuggled goods or on suspicion that he is concerned in smuggling goods is not, when called upon by the Customs Officer to make a statement or to produce a document or thing, a person is accused of an offence within the meaning of Article 20(3) of the Constitution of India. Where a C....
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....nt case. It is alleged by the prosecution that the present applicants in connivance with other persons, entered into transaction with 36 dummy firms and false invoices and sales were raised and in pursuance thereto, the Company has issued cheques to 36 dummy firms including four person, who are now arrested by the respondent - department. There were receipts of more than Rs. 737.00 Crores and amount has been withdrawn by bearer cheque or transferred to other Company or by RTGS to dummy firms and during the course of investigation from one Mr. Afzal, certain material is collected. It is contended by learned Public Prosecutor that after the withdrawal of the amount by dummy firms, the said amount is transferred to the applicants through Angadia in cash. The respondent - department has collected certain material during the course of investigation with other accused, who have been arrested. It is the specific case of the department that the transaction worth of Rs. 737.00 Crores were entered into with 36 dummy firms and there would be liability of more than Rs. 137.00 Crores. Thus this Court is of the view that in the facts of the present case, the custodial interrogation of the applic....
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.... released on bail then, at this stage also, they are entitled to be released on anticipatory bail. However, the said submission is misconceived. As observed hereinabove, the custodial interrogation of the applicants would be required in the facts of the present case. There are more than 700 transactions between the applicants and other persons of dummy firms and transactions worth of Rs. 737.00 Crores were entered into between the parties. At this stage, this Court would like to refer to the order dated 17.04.2020 passed by the Hon'ble Supreme Court in Special Leave to Appeal (Crl) No.1803/2020, wherein the Hon'ble Supreme Court has passed following order, "The allegation against the petitioner is that he has created about 555 fake firms and has committed fraud to the tune of Rs. 74,00,00,000/- (Rupees seventy four crore only). Mr. K.M. Natraj, learned additional solicitor general, submits that the investigation is still pending and more number of fake firms created by the petitioner are being detected. It is not in dispute that the maximum punishment to be imposed on the petitioner, if convicted, is five years. It is also not in dispute that the petition....
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....ries/types of offence. It is pertinent to note that the present offfence can be categorized as "economic offence" where huge public money in the form of alleged tax liability of Rs. 137.00 Crores is involved. This Court has considered the seriousness of the charges and the fact that the applicants have not cooperated with the investigating agency though directed by the Hon'ble Supreme Court and, therefore in the fact of the present case, the aforesaid order passed by the Hon'ble Supreme Court would not be applicable. 37. Learned advocate has also placed reliance upon the decision in case of Lalitakumari (supra) in support of his submission that before taking preliminary inquiry, registration of FIR under Section 154 of the Code is mandatory. This Court is not disputing the proposition laid down by the Hon'ble Supreme Court in the said decision, however, the Division Bench of this Court in case of Vimal Yashwantgiri Goswami (supra) has considered the aspect as to whether the provision of Sections 154 to 157 and 172 of the Code are applicable for the purpose of invoking power to arrest under Section 69 of the GGST Act and after considering various provision of the Act has categori....