In a recent order dated 15.02.2021, Hon’ble Bombay High Court, in the case of Daulat Samirmal Mehta v. Union of India, W.P. No. 471 of 2021 has passed an important order on power to make arrest under Section 69 of CGST Act, 2017.
As per the facts of the case, the Petitioner was accused of commission of offences under Section 132(1)(b) and 132(1)(c) of the CGST Act. Summons were issued to Petitioner under Section 70 of the CGST Act whereafter his statements were recorded on 05.12.2018, 12.12.2018, 04.01.2019, 15.02.2019 and 21.01.2021. On 21.01.2021 after tendering his statement, he was arrested and remanded to judicial custody.
The Petitioner moved the High Court in writ petition thereby:
- challenging the constitutional validity of Section 132(1)(b)
- seeking a declaration that the power under Section 69 of the Act can only be exercised upon determination of the liability.
- Restrain Respondent from filing any criminal complaint against the Petitioner for alleged violation of the provisions of Act
- Take a decision by passing a speaking order on compounding applications
- Also, an interim prayer was made for enlarging the petitioner on bail.
The primary contention of the Counsel appearing on behalf of the Petitioner was that the Petitioner has been fully cooperating with the Department, has responded to each summons and has appeared on five occasions. In such circumstances, there can be no justification or reasons to believe for arresting the Petitioner. Reliance was placed on the decision of Delhi High Court in Makemytrip, 2016 (44) STR 481.
- Under sub-section (3) of Section 69, arrest under sub-section (1) has been made subject to the provisions of Cr.P.C. which would include Section 41 and 41-A thereof.
- Power to arrest has to be exercised subject to meeting the necessary pre-conditions. In this regard, the Court relied upon decision in Arnesh Kumar, (2014) 8 SCC 273. Also, decision of Delhi High Court in the case of Makemytrip (India) Pvt. Ltd was referred to, while observing that reasons to believe must be based on ‘credible material’.
- Upon examination of Reasons to believe recorded in present case, the Court held that no concrete incident has been mentioned recording any act of tampering of evidence or threatening witness, etc.
High Court held that the expression ‘reasons to believe’ as appearing in sub-section (1) of Section 69 is of crucial importance because the same is the sine qua non for exercise of power of arrest by the Commissioner. The key findings of the Court are as under:
- The expression ‘reasons to believe’ contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief.
- On a bare perusal of the reasons recorded by Principal Additional Director General, the Court found that other than paraphrasing the requirement of Section 41 CrPC, no concrete incident has been mentioned therein recording any act of tampering of evidence by the Petitioner or threatening/ inducing any witness besides not co-operating with the investigation, not to speak of fleeing from investigation. In such circumstances, Pri ADG could not have formed a reason to believe that the Petitioner should be arrested.
- The Court also observed that the provision of compounding of offence highlights the fact that CGST Act is primarily an enactment for collection of revenue which is the primary objective of the said legislation. Arrest is only incidental to achieve the above objective. Therefore, the Court held that on payment of the compounding amount, no further proceeding shall be initiated against the accused person in respect of the same offence under CGST Act and any criminal proceedings if already initiated shall stand abated.
- The Court also held that statements made by accused in response to summons issued by CGST officers will not be admissible unless it receives the authoritative approval of the Court, in view of Section 136 of the CGST Act.
- An important aspect that found favour with the Court was that in the present case there was no formal accusation against the Petitioner prior to arrest. The Court observed that the case against the Petitioner is at a pre-trial stage, i.e. at a stage when even formal accusation in the form of First information or complaint has not been made. To quote:
38. Bail jurisprudence which has evolved over the years stands on a different footing altogether. This is more so in the present case when admittedly respondents have not lodged any first information before the police under section 154 Cr.P.C. Respondents have also not filed any complaint before the competent magistrate under section 200 Cr.P.C. In fact there was no formal accusation against the petitioner prior to arrest. The first time such accusation has been placed on record was after arrest that too in the form of remand application. A remand application by its very nature cannot be construed to be a first information or a complaint as is understood in law. If the remand application is excluded, then till today after 26 days of custody of the petitioner, there is still no formal accusation against the petitioner.
39. Reverting back to Arnab Manoranjan Goswami (supra), Supreme Court has once again reminded us that the basic rule of our criminal justice system is ‘bail not jail’. In cases at the under-trial stage not involving heinous offences like rape, murder, terrorism etc., it is bail and not jail which is the norm. In so far the present case is concerned, notwithstanding the allegation of serious financial impropriety against the petitioner, the case against him is not even at the under-trial stage; it is at the pre-trial stage i.e., at a stage where even formal accusation in the form of a first information or a complaint has not been made.
40. In such circumstances, we feel that continuing the detention of the petitioner may not at all be justified. In a case of this nature, it is the duty of the constitutional court to strike a fine balance between the need for custodial interrogation and the right of an accused to personal liberty.
PV Ramana Reddy distinguished
- The Court held that the facts in P.V. Ramana Reddy are distinguishable from the facts of the present case. The Court observed that while in PV Ramana Reddy, summons issued under Section 70 was challenged by Petitioner, in the present case, the Petitioner has co-operated with investigation.
Accordingly, the Court directed that the Petitioner be enlarged on bail subject to the conditions prescribed in Para 41 of the order. The matter was thereafter adjourned to 20.04.2021.
The power to arrest is being grossly abused by the Departmental officers. Despite the mandate of the Supreme Court in Arnesh Kumar that power to arrest has to be exercised in exceptional circumstances and only after arriving at an objective satisfaction that arrest is necessary, the competent Commissioner are authorizing arrest in routine manner. Even in cases where there is no material evidence available, accused persons are being arrested. The High Court, in the present case has dealt with all aspects at length and delivered a ruling that is a welcome contribution to bail jurisprudence in criminal offences under GST.
Gaurav is an advocate by profession and has done his B.Com(H) from Hansraj College and LL.B(H) from Faculty of Law, Banaras Hindu University. He has represented clients from Diverse sectors, providing services in Litigation involving Indirect Taxes, IBC, Commercial laws, Direct Taxes, RBI matters. He is active beforewrit Courts, Tribunals and Quasi-Judicial Authorities.