In the provisions of the GST Act, the GST Officers are conferred with the extra-ordinary powers of arrest of Tax evaders. However, the said power of arrest has to be exercised with deliberation and discretions and not as a tool of oppression and harassment at the hands of GST Officers.
Recent trend in view of the judgment passed by the Hon’ble High Court of Telangana in the case of P.V. Ramana Reddy v. Union of India reported in [2019] 104 taxmann.com 407 (TELANGANA).
In the present case the Petitioners had challenged the summons under Section 70 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) and the invocation of the penal provisions under Section 69 of the Act under Article 226 of the Constitution of India, 1950 with a direction to the GST Commissionerate officials not to arrest them and set aside summons so issued.
1. One of the main issues involved was whether Article 226 can be used as a substitute to Section 438, Cr.P.C and whether the writ proceedings can be converted into proceedings for anticipatory bail a person apprehending arrest under Section 69 of the Act pursuant to the summons/enquiry under Section 70 of the Act?
It was contended by the Petitioners that since no first information report gets registered before the power of arrest under Section 69 of the Act is invoked, the Petitioners cannot invoke Section 438 of the Cr.P.C. for anticipatory bail, therefore, they can seek protection against pre-trial arrest by invoking the jurisdiction of High Court under Article 226 of the Constitution of India.
The court has held that enquiry under Section 70 of the Act is not a criminal proceedings but it is deemed to be a judicial proceedings to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code as a consequence, a person who is summoned under Section 70(1) of the CGST Act, 2017, to give evidence or to produce document becomes liable for punishment, if he intentionally gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant.
Further, a person who faces a threat or apprehend his arrest may be entitled to invoke anticipatory bail under Section 438 of Cr.P.C subject to two conditions, (i) that section 438, Cr.P.C., applies to the State in which the prosecution takes place and (ii) that the application of Section 438 Cr.P.C., is not ousted by the special enactment under which such a person is prosecuted.
Hence, where provisions of Section 438 of Cr.P.C with regard to anticipatory bail is not available, a person can claim relief under Article 226 of the Constitution, therefore, the Petition under Article 226 of the Constitution is maintainable where the provisions of Section 438 of Cr.P.C is not applicable or explicitly barred by any statute.
So considering the ratio laid down in the said judgment it could be concluded that despite no first information report gets registered before the power of arrest under Section 69 of the Act is invoked, a person apprehending arrest can invoke Section 438 of the Cr.P.C. for anticipatory bail and if Section 438 of Cr.P.C. is not applicable or specifically barred can seek protection against pre-trial arrest by invoking the jurisdiction of High Court under Article 226 of the Constitution of India.
Further, one of the most celebrated judgment of the Hon’ble Supreme Court in the case of Gurbaksh Singh Sibbia Etc vs State Of Punjab reported in 1980 AIR 1632 whereby principles laid down with regard to the bail which states as under:-
“The filing of a First Information Report is not a condition precedent to the exercise of the power under Section 438. The imminence of a likely arrest founded on a reasonable belief can be shown to exist even if an F.I.R. is not yet filed.”
Therefore, considering the ratio laid down by the Hon’ble Supreme Court it is crystal clear that registration of a First Information Report is not a condition precedent for making an application for Anticipatory Bail under Section 438 of Cr.P.C as any person apprehending arrest in case of a cognizable offence under Section 69(1) of the CGST Act, 2017 can approach for anticipatory bail.
2. Whether the safeguard against arrest available as per Section 41 and 41(A) of the Code of Criminal Procedure?
Section 41 and 41(A) of the Code of Criminal Procedure, 1973 (Cr.P.C.) deals with the provisions of arrest of a person by the Police without warrant in case of a cognizable offence. These sections were amended in the year 2010 to minimize the abuse of arrest by the Police.
Section 41 and 41(A) of Cr.P.C. is reproduced herewith:-
Section 41 in The Code Of Criminal Procedure, 1973
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 reference to such thing; or
(e) who obstructs a police officer while in the execution of his duty, or who has escaped, or attempts to escape, from lawful custody; or
(f) who is reasonably suspected of being a deserter from any of the Armed Forces of the Union; or
(g) who has been concerned in, or against whom a reasonable complaint has been made, or credible information has been received, or a reasonable suspicion exists, of his having been concerned in, any act committed at any place out of India which, if committed in India, would have been punishable as an offence, and for which he is, under any law relating to extradition, or otherwise, liable to be apprehended or detained in custody in India; or
(h) who, being a released convict, commits a breach of any rule made under sub- section (5) of section 356; or
(i) for whose arrest any requisition, whether written or oral, has been received from another police officer, provided that the requisition specifies the person to be arrested and the offence or other cause for which the arrest is to be made and it appears therefrom that the person might lawfully be arrested without a warrant by the officer who issued the requisition.
(2) Any officer in charge of a police station may, in like manner, arrest or cause to be arrested any person, belonging to one or more of the categories of persons specified in section 109 or section 110.
“41-A.Notice of appearance before police officer-
(1) The police officer may ,is all cases where the arrest of a person is not required under the provisions of sub-section (1) of section 41,issue a notice directing the person against whom a reasonable complaint has been made or credible information has been received or a reasonable suspicion exists that he has committed a cognizable offence to appear before him or at such other place as may be specified in the notice .
(2) Where such a notice is issued to any person, it shall be the duty of that person to comply with the terms of the notice .
(3) Where such person complies and continues to comply with the notice , he shall not be arrested in respect of the offence referred to in the notice unless, for reasons to be recorded ,the police officers is of the opinion that he ought to be arrested .
(4) Where such person,at any time ,fails to comply with the terms of the notice ,it shall be lawful for the police officer to arrest him for the offence mentioned in the notice ,subject to such orders as may have been passed in this behalf by a competent Court .
Further a co-joint reading of Section 69 of the Act clearly states that, “Subject to the provisions of the Cr.P.C”, therefore, if the officers exercise the power of arrest like Police Officers then it could be presumed that all the provisions pertaining to arrest as envisaged in Section 41 of Cr.P.C has to be followed.
Then S.41-A of Cr.P.C which govern arrest by police without warrant in view of the latest judgment by Hon’ble Supreme Court in the case of Arnesh Kumar versus State of Bihar & Anr. has issued guidelines to curb automatic arrests under Indian Penal Code(IPC) Section 498-A and other crimes for the offence punishable up to 7 years whereby Notice of appearance in terms of Section 41A of Cr.P.C. be served on the accused within two weeks from the date of institution of the case, which may be extended by the Superintendent of Police of the District for the reasons to be recorded in writing.
Failure to comply with the directions aforesaid shall apart from rendering the police officers concerned liable for departmental action, they shall also be liable to be punished for contempt of court to be instituted before High Court having territorial jurisdiction.
Hence, since the maximum punishment prescribed under Section 132 of the CGST Act, 2017 is imprisonment for five years, therefore, applying the guidelines issued by the Hon’ble Supreme Court and laid down in the present judgment it is clear that protection and safeguard available under Section 41 and 41-A of Cr.P.C. will be available to the person apprehending arrest and the authorized officers under the CGST Act prior to arrest is bound to follow the procedure and safeguard as mentioned in S.41 and 41-A of Cr.P.C. and if they do not comply whether they would be liable for department action and under the Contempt of Court Act has to be tested by the Courts in the coming time to come. The aforesaid judgment of the Hon’ble High Court of Telangana has been confirmed and upheld by the Hon’ble Supreme Court of India in the case of P.V. Ramana Reddy versus Union of India & Ors. in Special Leave to Appeal (Crl.) No. 4430/2019.
Recently the Hon’ble High Court of Bombay in many matters pertaining to arrest under GST has granted ad-interim relief/protection to the tax evaders from arrest under the GST on the pretext that mandatory procedure has to be followed by the officers while exercising powers of arrest as per the provisions of the Code of Criminal Procedure and the same has been confirmed by the Hon’ble Supreme Court in the challenge to the ad-interim relief given by the Hon’ble Bombay High Court.
Hence, since there are contradictory views adopted by the various high court, the Hon’ble Supreme Court will examine the issue with regard to arrest under GST Act but till date the issue is not finally decided by the Hon’ble Supreme Court the basic principles emerges from the aforesaid judgment that, the tax evaders apprehending arrest can approach for anticipatory bail without prior registration of FIR and the officers under GST has to follow the safeguard as per the provisions of the Section 41 and 41-A of Cr.P.C. because the High Court of Telangana has not granted protection in special circumstances of the facts of the said case to the Petitioners.
Further it could also be constructed that the authorized officers under the CGST Act while exercising the power of arrest is also bound to follow the mandatory guidelines with regard to the arrest issued by the Hon’ble Supreme Court in the case of Joginder Sharma versus State of U.P. and Shri D.K. Basu Vs State of West Bengal.
Latest judgment of the Hon’ble Supreme Court in the case of Lalita Kumari versus Govt. of U.P. wherein the guidelines have been issued regarding the registration of FIR which are as follows:-
(1) Registration of FIR is mandatory under Section 154 of the Code if the information discloses commission of a cognizable offence and no preliminary inquiry is permissible in such a situation
(2) If the information received does not disclose a cognizable offence but indicates the necessity for an inquiry, a preliminary inquiry may be conducted only to ascertain whether cognizable offence is disclosed or not
(3) If the inquiry discloses the commission of a cognizable offence, the FIR must be registered. In cases where preliminary inquiry ends in closing the complaint, a copy of the entry of such closure must be supplied to the first informant forthwith and not later than one week. It must disclose reasons in brief for closing the complaint and not proceeding further.
(4) The police officer cannot avoid his duty of registering offence if the cognizable offence is disclosed. Action must be taken against erring officers who do not register the FIR if the information received by him discloses a cognizable offence.
(5) The scope of preliminary inquiry is not to verify the veracity or otherwise of the information received but only to ascertain whether the information reveals any cognizable offence.
(6) As to what type and in which cases preliminary inquiry is to be conducted will depend on the facts and circumstances of each case. The categories of cases in which preliminary inquiry may be made are as under:
1. Matrimonial disputes/ family disputes
2. Commercial offences
3. Medical negligence cases
4. Corruption cases
5. Cases where there is abnormal delay/laches in initiating criminal prosecution, for example, over 3 months delay in reporting the matter without satisfactorily explaining the reasons for the delay.
(7) While ensuring and protecting the rights of the accused and the complainant, a preliminary inquiry should be made time bound and in any case, it should not exceed 7 days. The fact of such delay and the causes of it must be reflected in the General Diary entry.
(8) Since the General Diary/Station Diary/Daily Diary is the record of all information received in a police station, we direct that all information relating to cognizable offences, whether resulting in registration of FIR or leading to an inquiry, must be mandatorily and meticulously reflected in the said Diary and the decision to conduct a preliminary inquiry must also be reflected, as mentioned above.
From the bare reading of the guidelines, it is crystal clear that the offence under CGST Act are commercial offences, therefore, the authorized officer under the CGST Act is bound to conduct preliminary inquiry before registering an offence under the Act. However, the concept of inquiry has been ingrained in Section 70(1) of the CGST Act as discussed above.
Concept of Bail under GST
If a person is in detune then the detune has to file regular bail application under Section 439 of the Code of Criminal Procedure and if a person is having apprehension then a person can go for Anticipatory Bail application under Section 438 of the Cr.P.C.
Grounds for grant of Bail as per judicial pronouncements
i) The nature of accusation and the nature of supporting evidence;
ii) Reasonable apprehension of tampering of the witness or apprehension of threat to the complainant;
iii) Prima facie satisfaction of the Court in support of the charge.
iv) Law of parity.
v) Severity of punishment in case of conviction i.e. Quantum of sentence means maximum punishment which could be imposed in the section in case of conviction.
vi) Misrepresentation of facts
vii) Improper exercise of discretion by Judges
viii) Bail rejected on the basis of irrelevant material
ix) Non Speaking order without assigning cogent reasons.
x) the likelihood of the applicant absconding, if released on bail.
xi) the character, means, standing and status of the applicant
xii) the likelihood of the offence being continued or repeated on the assumption that the accused is guilty of having committed that offence in the past i.e. antecedents
Can a bail once granted be cancelled?
Yes, the Cr PC under Section 439(2) provides for cancellation of bail by a High Court or a Court of Session. The provision empowers the High Court or Court of Session to direct that any person who has been released on bail be arrested and commit him to custody.
What are the grounds on which a bail can be cancelled?
The Criminal Law does not specifically enlists the circumstances or grounds on which a bail order can be cancelled. CrPC extends a discretionary power on the High Court or Court of Session to cancel a bail. However, precedents indicate circumstances under which a bail can be cancelled.
- Where the accused during the period of bail commits the same offence for which he is being tried;
- Hampers investigation;
- Tampers evidence, like intimidating prosecution witness;
- Runs away or goes beyond the control of sureties;
- Commits acts of violence against police or informant.
Default Bail
Default bail is a statutory right when the Investigating Agency does not file final report before the expiry of 60 or 90 days, as the case may be, from the date of first remand/arrest. The right of default bail is lost, once final report is filed. Therefore, even in the arrest under GST if the prosecution fails to file the final report within a period of 90 days from the date of arrest then the detune can filed application for default bail under Section 167 of the Code of Criminal Procedure.
Conclusion:
Thereby from the above discussions in the matter of arrest under the CGST Act has lead to legal anomalies rendering the trial if not illegal, irregular in nature, thus impacting the objects and reasons of bringing in this statute to control the tax evasion as the law is evolving jurisprudence and the courts have to looked into the above aspects,.
Thus, authorized officers exercising power of arrest under the CGST Act, in their zeal to show that they are vigilant and committed towards curbing tax evasion, are committing acts which one day can be declared illegal or irregular, and thereby do more harm to one personal life and liberty than service to the cause of justice. It will be interesting to see how the law is laid down by Hon’ble Supreme Court in Union of India Vs Sapna Jain & Ors. and whether the unbridled power shall be put to check and balance.
Authors
Adv.Vishal J Dave and Adv.(CA.) Nipun Singhvi are practicing advocate at various Tribunals, High Courts and Supreme Court. He can be reached at [email protected] , [email protected]
