Rajesh Gandhi Vs Union of India (Telangana High Court)
Summary: Telangana High Court disposed of four connected criminal petitions filed by Rajesh Gandhi, Director of the petitioner companies, challenging proceedings arising from summons/notices issued under Section 70 of the CGST Act, 2017. The petitioners alleged that on 07.06.2024 the department visited their premises, seized records, computers and cash of Rs.83,85,860, and thereafter required production of invoices and appearance before the authorities. Their principal contention was that since offences under Section 132 of the CGST Act carry maximum imprisonment of five years, notice under Section 41A CrPC was mandatory before arrest under Section 69.
The Court, relying particularly on the Supreme Court decision in State of Gujarat v. Choodamani Parmeshwaran Iyer and the Kerala High Court ruling in Subair T.B. v. State of Kerala, rejected the contention that Section 41A notice itself must necessarily be issued to a person alleged to have committed a CGST offence. It held that the safeguards provided under Section 41A are nevertheless required to be kept in mind if a person is arrested under Section 69 of the CGST Act. The Court also held that the interim protection referred to in Radhika Agarwal v. Union of India applied to the persons protected in that proceeding and did not establish the proposition urged by the petitioners.
Considering the factual background, however, the Court granted the petitioners another opportunity to appear before the concerned authority for recording their statements. They were directed to appear on or before 04.07.2024, while the respondent was directed to provide the necessary material enabling them to submit their reply. All four criminal petitions were accordingly disposed of.
Cases Discussed
- P.V. Ramana Reddy vs. Union of India and others, 2019 (4) ALD 534 (TS) (Telangana High Court) — Relied upon by petitioners. The petitioners relied upon the decision concerning safeguards under Sections 41 and 41A CrPC in the context of cognizable and non-bailable offences under the CGST Act. The extracted decision also recorded that relief against arrest was not granted in the special circumstances of that case.
- State of Gujarat Vs Choodamani Parmeshwaran Iyer & Anr., 2023 SCC OnLine SC 1043 (Supreme Court) — The Court applied the distinction drawn by the Supreme Court between “reasons to believe” under Section 69(1) of the CGST Act and “reasons to be recorded” under Section 41A(3) CrPC.
- Subair T.B. vs. State of Kerala and others, 2023 SCC OnLine Ker 7888 (Kerala High Court) — The decision was cited for the proposition that Section 41A CrPC notice is not itself required for an alleged offence attracting Section 69(1) of the CGST Act, although the safeguards under Section 41A should be kept in mind if arrest is sought.
- Vemula Yougander vs. Union of India, Criminal Petition No. 10430 of 2023, decided on 14.11.2023 (Telangana High Court) — Cited for the observation that at the summons stage, the person summoned cannot invoke Section 438 CrPC.
- Radhika Agarwal vs. Union of India and Ors., Writ Petition (Criminal) No. 336 of 2018 (Supreme Court) — The Court held that the protection against arrest referred to by the petitioners was applicable to the persons who had received such protection in that proceeding and did not establish that Section 41A CrPC had to be complied with in every CGST case.
FULL TEXT OF THE TELANGANA HIGH COURT ORDER
Since the issue involved in all the criminal petitions is one and the same, they are being heard together and are being decided by way of this common order.
2. These criminal petitions are filed under Section 482 of Code of Criminal Procedure, 1973 (for short ‘Cr.P.C.’) to quash the proceedings dated 07.06.2024 in CBIC-DIN-20240656YP000000D8A6, CBIC-DIN-20240656YP000000ECF4, CBIC-DIN-20240656YN000021262C and CBIC-DIN-20240656YP0000111CF1, on the file of the Commissioner of Central Tax, Central Excise and Service Tax, Medchal GST Commissionerate, Hyderabad.
3. The brief facts of the cases are that petitioner No.2 is a company and petitioner No.1 is the Director of petitioner No.2-company in all the cases. On 07.06.2024, the respondent issued notices to petitioner No.1 under Section 70 of CGST Act directing him to appear before the respondent on 10.06.2024 to produce the details of invoices pertaining to inward and outward supplies of petitioner No.2 companies. But the notices were not handed over to petitioner No.1 as he was out of station. On the same day i.e., 07.06.2024, without any prior notice, the respondent and his staff visited petitioner No.2-Companies, seized the entire material. The same was informed to petitioner No.1 on 13.06.2024 and handed over the notices to him and directed to furnish the invoices of inward and outward supplies and receipt of payments pertaining to the supplies. Immediately on the very same day i.e., on 13.06.2024, petitioner No.1 sent an email to the respondent and requested to provide a backup of the documents and the computers seized from the companies to enable him and to give reply to the notices. Further, petitioner No.1 also requested for extension of time for his non-appearance on 10.06.2024 before the concerned authority.
4. Subsequently, on 15.06.2024, the respondent issued notices directing petitioner No.1 to appear on 19.06.2024 and on the same day, petitioner No.1 sent email to the respondent requesting to provide the documents and the entire material and computers, which were seized on 07.06.2024. Challenging the said notices the petitioners filed the present criminal petitions.
5. Heard Sri K. S. Suneel, learned counsel appearing on behalf of the petitioners as well as Sri Dominic Fernandes, learned Senior Standing Counsel appearing on behalf of the respondent.
6. Learned counsel for the petitioners submitted that the notices issued under Section 70 of CGST Act, 2017 is vague, incomplete and lack of necessary particulars with regard to production of documents and evidence. Further, it is pertinent to note that on 07.06.2024, the respondent has inspected the premises of petitioner No.2-companies and seized the entire records, computer systems along with data and cash amounting to Rs.83,85,860/- (out of which it is alleged that Rs.77,44,000/- were banned Rs.2,000/- notes). As per the order of seizure in form GST-INS-02 exercising powers under Section 67(2) of CGST Act, 2017, read with Rule 139(2) is illegal and not in accordance with the provisions of the CGST Act, 2017. Further, the entire records including the computer systems of all the companies were seized under seizure panchanama and issued notices under Section 70 of the CGST Act, which is not in accordance with law.
7. Learned counsel for the petitioners further submitted that earlier in the year 2019, the same situation was faced by petitioner No.1 regarding the same companies, wherein in those matters, after receipt of the notices, petitioner No.1 sincerely appeared. Without looking into the provisions of Section 132 of CGST Act and without considering the applicability of 41-A Cr.P.C., petitioner No.1 was arrested and remanded to judicial custody. Later, petitioner No.1 was enlarged on bail in all those cases by way of common order in case No.F.No.INV/DGGI/HZU/GST/147/2018-19, PF-2 (Legal) (RSGB). Despite the fact of the said case, no further investigation has been done and no charge sheets are filed in the present cases.
8. Learned counsel for the petitioners further submitted that under Section 70(1) of CGST Act, 2017, a person is liable for punishment, if he/she gives or fabricates false evidence. Therefore, the proceedings once initiated give power to the officer for authorization of arrest under Section 69 of CGST Act, 2017. However, under Section 132 of CGST Act, 2017, the maximum punishment prescribed is imprisonment for five years. Hence, 41-A of Cr.P.C., notice is mandatory before arrest. The petitioners, as happened earlier, now are apprehending arrest by the respondent under the guise of issuance of notices under Section 70 of CGST Act, 2017 by invoking the powers under Section 69 of the CGST Act, without issuing the mandatory notices under Section 41-A Cr.P.C., which is contrary to law and violation of Article 20(3) of the Constitution of India.
9. Learned counsel for the petitioners further submitted that the offences specified in clauses (a) to (d) of Sub-Section (1) of Section 132 of CGST Act, 2017 are made cognizable and non-bailable under Section 132(5) of CGST Act, 2017. The notices are silent and not specific as to the offences though Section 132(1) of CGST Act, lists out 12 different types of offences from clauses (a) to (l). But however, in fact, the duty imposed upon a police officer under Section 41-A Cr.P.C is to summon a person for enquiry in relation to a cognizable offence, which is substantially ingrained in Section 70(1) of the CGST Act. Though Section 69(1) of the CGST Act, 2017 confers powers upon the commissioner to order the arrest of a person does not contain the safeguards that are incorporated in Section 41 and 41-A of Cr.P.C, Section 70(1) of CGST Act 2017 takes care of the contingency.
10. Learned counsel for the petitioners further submitted that petitioner No.2-companies were registered with State Goods and Service Tax Department and having the State GST number and the Central Goods and Service Tax has no jurisdiction to entertain any complaint against the petitioners. Therefore, prayed the Court to quash the proceedings against the petitioners.
11. In support of his submissions, learned counsel for the petitioners relied on the judgment of the Division Bench of this Court in P.V. Ramana Reddy vs. Union of India and others, wherein in paragraph No.61, it is held as under:
“61. In view of the above, despite our finding that the writ petitions are maintainable and despite our finding that the protection under Sections 41 and 41-a of Cr.P.C., may be available to persons said to have committed cognizable and non-bailable offences under this Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest, in view of the special circumstances which we have indicated above.”
12. On the other hand, learned Senior Standing Counsel appearing for the respondent submitted that Section 41-A of Cr.P.C is not applicable to the present batch of cases and the same was also observed by the Hon’ble Supreme Court and various High Courts. Therefore, prayed the Court to dismiss the petitions.
13. In support of his submissions, learned Senior Standing Counsel relied upon the judgment of the Hon’ble Supreme Court in State of Gujarat vs. Choodamani Parmeshwaran Iyer and another, wherein in paragraph Nos.43 and 44, it is held as under:
“43. But, it may be remembered that Section 41(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 41(3) of 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 Section 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. We are still inclined to give one more opportunity to both the respondents to appear before the authorities for the purpose of recording their statements. If the respondents fail to appear, then it shall be open for the authority concerned to proceed further in accordance with law.”
14. Learned Senior Standing Counsel further relied upon the judgment of the Hon’ble Supreme Court in Subair T.B. vs. State of Kerala and others, wherein in paragraph Nos.5 and 6, it is held as under:
“5. The Supreme Court itself has held that there is vast difference between the phrase “reasons to believe” when placing reliance under Section 69(1) of the CGST Act, 2017 and the phrase “reasons are to be recorded” under Section 41A(3) of Cr.P.C. The said judgment does not laid down that Section 41A notice has to be issued to an offender who has allegedly committed an offence under Section 69(1) of the CGST Act, 2017. From reading of the extracted paragraphs, it would be evident that only safeguards that are provided under Section 41A of the Cr.P.C. are to be kept in mind, if a person is sought to be arrested for offences under Section 69(1) of the CGST Act, 2017.
6. Therefore, I do not find any substance in the submission made by the learned counsel for the petitioner that the provisions of Section 41A of the Cr.P.C. are to be complied with in case of an offender for violation of Section 69(1) of the CGST Act, 2017. However, considering the facts and circumstances of the case, this Court finds that one opportunity to the petitioner to appear before the authorities for the purpose of recording his statement is to be given and, therefore, the petitioner is directed to appear before the authority concerned on 13.09.2023 (Wednesday). It is made clear that this Court has not prohibited for the exercise of discretion vested in the authority in respect of arrest of the petitioner. However, if the arrest is necessitated, the relevant parameters as per the judgment in P.P. Ramana Reddy (supra) may be kept in mind.”
15. Learned Senior Standing Counsel further relied upon the Judgment of this Court in Vemula Yougander vs. Union of India, wherein it is observed that the Hon’ble Supreme Court held that at the stage of summons the person summoned cannot invoke Section 438 of the Code of Criminal Procedure.
16. Having regard to the rival submissions made by both the learned counsel and perusal of the material available on record, the main contention of the learned counsel for the petitioners is that under Section 132 of the CGST Act, 2017, the maximum punishment prescribed is imprisonment for a period of five (5) years, therefore, Section 41-A of Cr.P.C notice is mandatory before arrest.
17. In view of the law laid down by the Hon’ble Supreme Court Choodamani Parmeshwaran Iyer (Supra), as mentioned above, it was clearly observed that while placing reliance under Section 69(1) of the CGST Act, 2017 there is vast difference between the phrases “reasons to believe” and the “reasons are to be recorded” under Section 41A(3) of Cr.P.C. It is nowhere held in the above said judgments that Section 41-A of Cr.P.C notice has to be issued to an offender who has allegedly committed an offence under Section 132 of the CGST Act, 2017. Therefore, the person is entitled for the safeguards that are provided under Section 41-A of Cr.P.C. are to be kept in mind if a person is arrested under Section 69 of the CGST Act, 2017.
18. Further, though the learned counsel for the petitioners relied upon the judgment of the Hon’ble Supreme Court in Radhika Agarwal vs. Union of India and Ors., wherein it is observed that while reserving the judgment on the question of validity and interpretation of the provisions of the Customs Act and Central Goods and Service Tax Act/State Goods and Service Tax Act, protected the petitioners therein from arrest whoever directed by the Court till the pronouncement of Judgment, as such, it is applicable to the persons who got protection in the said case. Therefore, this Court does not find any substance in the submission made by the learned counsel for the petitioners that the provisions of Section 41-A Cr.P.C are to be complied within the case of an offender in the CGST Act, 2017.
19. In the given factual backdrop of the cases and the judicial pronouncements referred to in the preceding paragraphs, this Court is inclined to give one more opportunity to the petitioners to appear before the concerned authority for the purpose of recording statements.
20. Accordingly, these Criminal Petitions are disposed of directing the petitioners to appear before the concerned authority on or before 04.07.2024 for the purpose of recording statements. Further, the respondent is directed to provide necessary material to the petitioners to enable them to submit reply.
Miscellaneous applications, if any pending, shall also stand closed.
