Vimal Yashwantgiri Goswami v. State of gujarat
[Citation -2020-LL-1020-50]

Citation 2020-LL-1020-50
Appellant Name Vimal Yashwantgiri Goswami
Respondent Name State of gujarat
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act CGST
Date of Order 20/10/2020
Judgment View Judgment
Keyword Tags territorial jurisdiction • satisfactory explanation • investigating authority • corroborative evidence • provisional assessment • assessment proceedings • power of commissioner • criminal proceedings • application of mind • search and seizure • credible material • sufficient cause • input tax credit • burden of proof • coercive steps • search warrant • tax due


C/SCA/13679/2019 CAV JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13679 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 3209 of 2020 With R/SPECIAL CIVIL APPLICATION NO. 4468 of 2020 With R/SPECIAL CIVIL APPLICATION NO. 4456 of 2020 With R/SPECIAL CIVIL APPLICATION NO. 13893 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 14141 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA 1 Whether Reporters of Local Papers may be allowed to YES see judgment ? 2 To be referred to Reporter or not ? YES 3 Whether their Lordships wish to see fair copy of NO judgment ? 4 Whether this case involves substantial question of law YES as to interpretation of Constitution of India or any order made thereunder ? VIMAL YASHWANTGIRI GOSWAMI Versus STATE OF GUJARAT Appearance: MR CHETAN K PANDYA, MR TUSHAR HEMANI- SENIOR ADVOCATE WITH MS VAIBHAVI PARIKH AND MR UCHIT SHETH for Petitioners. MR KAMAL TRIVEDI- ADVOCATE GENERAL, MR CHINTAN DAVE- Page 1 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT ASSITANT GOVERNMENT PLEADER, MR DEVANG VYAS- ADDITIONAL SOLICITOR GENERAL OF INDIA, MR NIRZAR DESAI AND MR ANKIT SHAH for Respondents. ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 20/10/2020 CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Rule. Mr. Devang Vyas, learned Additional Solicitor General of India waives service of notice of rule for and on behalf of Union of India and its respondents. Mr. Chintan Dave, learned Assistant Government Pleader waives service of notice of rule for and on behalf of State of Gujarat and its respondents. 2.Since issues raised in all captioned petitions are more or less same, those were heard analogously and are being disposed of by this common judgment and order. 3.For sake of convenience, Special Civil Application No.13679/2019 is treated as lead matter. 4.A coordinate Bench of this Court to which one Page 2 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of us (Coram : J.B. Pardiwala, J.) was party passed following order in Special Civil Application No.13679/2019 dated 7th August, 2019: 1. One of main reliefs prayed for by writ applicant in present writ application reads as follows : 16(A) To issue Writ of Mandamus and/or Writ of Prohibition and/or any other appropriate writ, order of direction, directing respondents not to take any actions against petitioner being proprietor of 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 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 Service Tax Rules, 2017 and Gujarat Goods and Service Tax Rules, 2017 in connection with File No. ACST/UNIT-9/2019-20/B registered with State Tax (2), Unit-9, Ahmedabad. 2. Mr. Chetan K. Pandya, learned counsel appearing for writ applicant has placed strong reliance on decision of Delhi High Court in case of MAKEMYTRIP (INDIA) PVT. LTD. vs. UNION OF INDIA, reported in 2016 (44) S.T.R. 481 (Del.) as well as on decision of Madras High Court in case of M/s. Jayachandran Alloys (P) Ltd. vs. Superintendent of GST and Central Excise and Others in Writ Petition No.5501 of 2019 decided on 4th April, 2019. 3. We take notice of fact that Delhi High Court decision referred to above has Page 3 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT been affirmed by Supreme Court. ratio as laid in Delhi High Court decision is as under : (i) scheme of provisions of Finance Act 1994 (FA), do not permit DGCEI or for that matter Service Tax Department (ST Department) to bypass procedure as set out in Section 73A (3) and (4) of FA before going ahead with arrest of person under Sections 90 and 91 of FA. power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by DGCEI, without following procedure under Section 73A (3) and (4) of FA, that person has collected service tax and retained such amount without depositing it to credit of Central Government. (vii) In terms of C.B.E. & C. s own procedures, for launch of prosecution there has to be determination that person is habitual offender. There is no such determination in any of these cases. There cannot be habitual offender if there is no discussion by DGCEI with ST Department regarding history of such Assessee. Assuming that, for whatever reasons, if DGCEI does not talk to ST Department, certainly it needs to access service tax record of such Assessee. Without even requisitioning that record, it could not have been possible for DGCEI to arrive at reasonable conclusion whether there was deliberate attempt of evading payment of service tax. In case of MMT, decision to go in for extreme step of arrest without issuing SCN under Section 73 or 73A (3) of FA, appears to be totally unwarranted. 3.1 To put it in other words, powers of arrest under Section 69 of Act, 2017 are to be exercised with lot of care and circumspection. Prosecution should normally be launched only after adjudication is Page 4 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT completed. To put it in other words, there must be in first place determination that person is liable to penalty . Till that point of time, entire case proceeds on basis that there must be apprehended evasion of tax by assessee. In two decisions referred to above, emphasis has been laid on safeguards as enshrined under 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 authority of law. two High Courts have extensively relied upon decision of Supreme Court in case of D.K. Basu vs. State of West Bengal reported in 1997 (1) SCC 416. 4. Let Notice be issued to respondents returnable on 18th September, 2019. 4.1 In meantime, no coercive steps of arrest shall be taken against writ applicant. Direct service is permitted. 4.2 On returnable date, notify this matter on top of Board. 4.3 We propose to take up this matter for final hearing as far as possible on returnable date. State is requested to be ready with matter having regard to important issues which have been raised in writ application. 5.Following above order, other allied petitions were tagged and protection was granted to respective petitioners against taking coercive steps of arrest. 6.As discussion is under various heads of Page 5 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT topics and judgment is running in more than 150 pages, for sake of convenience, we provide this index : Sr. No. Particulars Para Nos. 1. Facts 7 - 8 2. Submissions on behalf of petitioners 9 - 26 3. Submissions of Respondents 27 - 41 4. Rejoinder on behalf of petitioners 42 - 46 5. Analysis (a) Issues/questions 47 - 48 (b) Relevant provisions of CGST Act , 49 Code of Criminal Procedure Code,1973,Financ Act,1994 and Central Excise Act,1944 (c)Preliminary objection raised by 50 respondents (d) Reasons to believe by Commissioner to 51- 59 exercise power of arrest under Section 69 of CGST Act (e) Power to Arrest under Section 69 of CGST 60- 74 Act before adjudication (f) Power to Arrest under Section 69 of CGST 75- 76 Act vis- -vis provisions of Code of Criminal Procedure,1973 (g) Conclusion 77- 86 7.The facts giving rise to Special Civil Application No.13679/2019 may be summarised as under : 7.1) petitioner is proprietor of Proprietary concern viz. M/s Heugo Metal engaged in business of trading and/or supply of stainless steel and scrap thereof and was using godown on as is where is basis at Godown No. 503, Road No.13, Kathwada GIDC, Kathwada, Ahmedabad. Page 6 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 7.2) Respondent No.2 along with other officials of Government of Gujarat Goods and Service Tax Department (for short GGGST ) had come to visit residential premises of petitioner on 19th July, 2019 in connection with investigation of business transactions of M/s Heugo Metal. Respondent No.2 had sealed drawer in which files, diary, mobile and laptop of petitioner were stored and left premises asking petitioner to appear before respondent authority with provisional balance sheet of M/s Heugo Metal. 7.3) respondent no.2 along with other officials, on 23rd July, 2019 again visited and carried out search proceedings at residence of petitioner. It is case of petitioner that officials left premises without noting any reason in sealing memo and search was abandoned. 7.4) Respondent no.2 thereafter, in exercise of powers under section 70(1) of Central Goods and Service Tax Act, Page 7 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 2017 (for short CGST Act ) and Gujarat Goods and Service Tax Act, 2017 (for short GGST Act ) issued summons dated 23rd July, 2019 to petitioner to appear on 25th July, 2019 to give statement. It is case of petitioner that since petitioner was unable to remain present along with documents and provisional balance sheet, petitioner through his advocate addressed letter dated 25th July, 2019 to respondent no.2 and requested to give one week time to appear before respondent no.2 along with requisite documents. 7.5) Respondent no.2 again visited residential premises of petitioner on 26th July, 2019 and completed search and seized purchase and sales files along with mobile and laptop and removed seal applied on drawer. 7.6) It is case of petitioner that though petitioner had requested for one week time, respondent no.2 had issued summons dated 27th July, 2019 to appear on same day i.e. 27th July, 2019 to give statement. It is case of Page 8 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT petitioner that since petitioner was unable to remain present along with documents and provisional balance sheet, petitioner again through his advocate addressed letter dated 29th July, 2019 to respondent no.2 and requested to give time for one week to appear before respondent no.2 along with requisite documents. 7.7) It is case of petitioner that petitioner has filed GST Returns till May 2019 and returns for month of June and July 2019 were yet to be filed. However, petitioner did not receive any notice from respondents under relevant provisions of CGST Act or GGST Act. Thus being aggrieved by action of respondent authorities, petitioner has preferred this petition. 8. More or less, similar facts are present in other petitions with regard to issuance of summons to petitioners to give their statement before respondent no.2 and petitioners are apprehending that if they approach respondent no.2 authority, they would be arrested under section 69 of CGST Page 9 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Act. SUBMISSIONS ON BEHALF OF PETITIONERS: 9.The learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi K. Parikh appearing in Special Civil Applications No. 4456/2020 and 4468/2020 submitted on behalf of petitioners that petitioners strongly apprehend their arrest when petitioners would appear before respondent no.2 pursuant to summons issued under section 70 CGST Act. 10. learned Senior Advocate further submitted that against apprehension of arrest of petitioner, this petition is maintainable under Article 226 of Constitution of India, 1950 in view of decision of High Court of Telangana in case of P.V. Ramana Reddy v. Union of India reported in (2019) 104 taxmann.com 407 (Telangana) wherein High Court of Telangana after discussing issue in detail has held that petition is maintainable under Article 226 of Constitution of India. It was also pointed out by Mr. Hemani that SLP preferred against decision of High Court of Telangana has been dismissed by Supreme Page 10 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Court in case of P.V. Ramana Reddy v. Union of India reported in 106 taxmann.com 301(SC). 11. learned Senior Advocate Mr. Hemani thereafter submitted on merits of matter that in order to invoke provisions of section 69 read with section 132 of CGST Act, twin conditions need to be satisfied cumulatively i.e. (1) Commissioner has reasons to believe that person has committed specified offence and (2) It is determined that concerned person has committed offence which has to be necessarily post-determination of demand by following due process of law. 12. With respect to first condition that Commissioner must have reasons to believe' that person has committed any of specified offences, it was submitted by Mr. Hemani that in order to invoke power to arrest as envisaged under section 69 of CGST Act, Commissioner must have reasons to believe that concerned person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section(1) of section 132 which is punishable under clauses (i) or (ii) of Page 11 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT sub-section(1) or sub-section(2) of said section. Reliance was placed on decision of this Court in case of Desai Brothers v. DCIT reported in 204 ITR 121 (Gujarat) to submit that words reason to believe suggest that belief must be that of honest and reasonable person based upon reasonable ground; not mere ipse dixit, suspicion, guess work, conjecture or surmises, gossip or rumor and such belief must lead to conclusion that offence has been committed by concerned person. Reliance was also placed on decision of this Court in case of Sheth Brothers v JCIT reported in 251 ITR 270 (Guj), wherein settled legal position has been summarized what reasons to believe includes as under: (a) There must be material for belief. (b) circumstances must exist and cannot be deemed to exist for arriving at opinion. (c) Reason to believe must be honest and not based on suspicion, gossip, rumor or conjecture. (d) Reasons referred to must Page 12 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT disclose process of reasoning by which he holds reasons to believe and change of opinion does not confer jurisdiction to reassess. (e) There must be nexus between material and belief; and (f) reasons referred to must show application of mind by Assessing Officer. 13. Mr. Hemani referring to above decisions submitted that reason to believe is very much different from reason to suspect . Reliance was placed on provisions of section 132 of Income Tax Act, 1961 and further reference was made to decision of Apex Court in case of GKN Driveshafts (India) Ltd. v. ITO reported in 259 ITR 19 (SC) to canvas submission that it is very much essential that reason to believe as recorded by Commissioner prior to invoking provisions of section 69 of CGST Act is required to be provided to concerned person upon application by such person so as to enable such person to avail appropriate legal remedy. Page 13 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 14. Mr. Hemani further submitted that before exercising power to arrest under section 69 read with power to punish under section 132 of CGST Act, it has to be determined that concerned person has committed offence which necessarily can only be after post-determination of demand by following due process of assessment. Referring to provisions of sections 69 and 132 of CGST Act, it was pointed out that word used in said sections is commits , which makes it very much evident that act of committal of offence is to be fixed first by following due process of assessment as envisaged under Scheme of CGST Act prior to imposing punishment. 15. learned Senior Advocate thereafter referred to Scheme of CGST Act for due process of assessment by referring to sections 61, 65, 66, 73 and 74 of CGST Act and submitted that powers under section 69 of CGST Act can be invoked only on completion of assessment as envisaged in said provision so as to form reason to believe by Commissioner that person has Page 14 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT committed offences as specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section(1) of section 132 of CGST Act. 16. Mr. Hemani thereafter submitted that parliament has not used words reasons to believe in section 132 of CGST Act which implies that provisions of section 132 can be invoked only when it is established that offence is committed. Therefore, analogy was drawn by learned Senior Advocate that section 132 cannot be invoked merely on basis of reason to believe that specified offence has been committed inasmuch as factum of person having committed any of specified offence needs to be established by following due process of law. It was therefore, submitted that conjoint reading of section 69 and section 132 of CGST Act would lead to conclusion that unless it is established that offence is committed , provisions of section 132 of CGST Act cannot be invoked and unless section 132 of CGST Act is invoked, provisions of section 69 of CGST Act cannot be invoked by respondent authority. Page 15 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 17. learned senior advocate thereafter, placed reliance upon decision of Madras High Court in case of Jaychandran Alloys Private Limited v. Superintended of GST and Central Excise reported in 105 taxman.com 245( Madras) wherein learned Single Judge of Madras High Court held as under : 9. following issues arise, in my view, for resolution:- 1. Whether petitioner is entitled to mandamus as prayed for in regard to supply of documents and statements sought for by it in light of provisions of Act? 2. Whether interim protection sought for to prevent respondents from invoking powers under Section 69 of Act read with Section 132 thereof in respect of petitioner is liable to be granted? 3. Whether petitioner's request for direction to respondents to complete adjudication and make assessment after following due process of law is liable to be accepted? xxx 37. use of words commits make it more than amply clear that act of Page 16 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT committal of offence is to be fixed first before punishment is imposed. allegation of revenue in present case is that petitioner has contravened provisions of Section 16(2) of Act and availed of excess ITC in so far as there has been no movement of goods in present case as against supplier and Petitioner and transactions are bogus and fictitious, created only on paper, solely to avail ITC. manner of recovery of credit in cases of excess distribution of same is set out in Section 21 of Act. This section provides that where Input Service Distributor distributes credit in contravention of provisions contained in Section 20 resulting in excess distribution of credit to one or more recipients, excess credit so distributed shall be recovered from such recipients along with interest, and provisions of Section 73 or Section 74, as case may be, shall, mutatis mutandis, apply for determination of amount to be recovered. 38. Thus, determination of excess credit by way of procedure set out in Section 73 or 74, as case may be is pre- requisite for 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 amount of excess credit has been quantified and determined in assessment. When recovery is made subject to determination in assessment, argument of department that punishment for offence alleged can be imposed even prior to such Page 17 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT assessment, is clearly incorrect and amounts to putting cart before horse. 39. exceptions to this rule of assessment are only those cases where assessee is habitual offender, that/who has been visited consistently and often with penalties and fines for contraventions of statutory provisions. It is only in such cases that authorities might be justified in proceedings to pre-empt assessment and initiate action against assessee in terms of section 132, for reasons to be recorded in writing. There is no allegation, either oral or in writing in this case that petitioner is offender, let alone habitual one. 40. In present case, Department does not dispute that action was intended or envisaged in light of Section 132 of CGST Act, counter fairly stating that provisions of Section 132 of CGST Act were shown to Assessee. There is thus no doubt in my mind that Department intended to intimidate petitioner with possibility of punishment under 132 and this action is contrary to scheme of Act. While activities of assessee contrary to scheme of Act are liable to be addressed swiftly and effectively by Department, (the statute in question being revenue statute where strict interpretation is norm), officials cannot be seen to be acting in excess of authority vested in them under statute. I am of considered view that power to punish set out in Section 132 of Act Page 18 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT would stand triggered only once it is established that assessee has committed offence that has to necessarily be post-determination of demand due from assessee, that itself has to necessarily follow process of assessment. 41. I draw support in this regard from decision of Division Bench of Delhi High Court in case of Make My Trip (India) (supra), as confirmed by Supreme Court reiterating that such action, as in present case, would amount to violation of Constitutional rights of petitioner that cannot be countenanced. xxxx 46. Issue (ii) is answered in favour of petitioner. Issue (iii) is allowed, directing respondents to conclude process of adjudication within period of twelve (12) weeks from today, after issuing show cause notice to petitioner setting out proposals for assessment, affording full opportunity to petitioner to respond to same and advance submissions in person, and pass reasoned and speaking order, in accordance with law. 18. learned Senior Advocate Mr. Hemani thereafter placed reliance upon 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 Punjab Page 19 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT and Haryana High Court has held as under : 10. Taking cue from judgment of Delhi High Court in case of Make My Trip (Supra) followed by Madras High Court in case of Jayachandran Alloys (P) Ltd (Supra), law laid down by Hon'ble Supreme Court in case of Siddharam Satlingappa Mhetre (supra) as well keeping in mind Section 69 and 132 of CGST Act which empower Proper Officer to arrest 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 opinion that power of arrest should not be exercised at whims and caprices of any officer or for sake of recovery or terrorising any businessman or create atmosphere of fear, whereas it should be exercised in exceptional circumstances during investigation, which illustratively may be: (i) person is involved in evasion of huge amount of tax and is having no permanent place of business, (ii) person is not appearing inspite of repeated summons and is involved in huge amount of evasion of tax, (iii) person is habitual offender and he has been prosecuted or convicted on earlier occasion, (iv) person is likely to flee from country, (v) person is originator of fake invoices i.e. invoices without payment of tax, Page 20 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (vi) when direct documentary or otherwise concrete evidence is available on file/record of active involvement of person in tax evasion. 10.1. persons who are having established manufacturing units and paying good amount of direct or indirect taxes; persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty. Similarly, arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud merely on basis of statement without any corroborative evidence linking professional with alleged offence should be avoided. It is well known that if top brass of running concern is arrested, there are all possibilities of closure of unit which results into unemployment and wastage of precious natural resources. 19. Mr. Hemani thereafter referred to section 135 of CGST Act which provides for presumption of culpable mental state and submitted that provisions of section 135 of CGST Act cannot be pressed into service at time of invoking provision of section 69 of CGST Act which provides for power to arrest because section 135 can be pressed into service only at Page 21 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT stage of prosecution for offence and only Court shall presume existence of culpable mental state. It was submitted that main object of section 135 of CGST Act is to raise presumption as to culpable mental state on part of accused when he is being prosecuted in Court of law . It was submitted that earliest point of time when prosecution proceedings can be deemed to have been commenced is when private complaint is filed by competent officer before Magistrate under section 200 of Code of Criminal Procedure, 1973 (for short Code ) and that too after obtaining previous sanction of Commissioner as envisaged under provisions of section 132(6) of CGST Act. It was therefore, canvassed that person can be said to be prosecuted only when private complaint under section 200 of Code is filed and hence section 135 of CGST Act cannot be pressed into service while invoking power to arrest under section 69 of CGST Act. 20. Reliance was also placed on decision of Punjab and Haryana High Court in case of Sukhdeep Singh Bhoday v. Joint Director General of Foreign Trade and others rendered on Page 22 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 8th August, 2007 in C.W.P. No. 208/2007 to submit that power to arrest cannot be invoked before filing of FIR and prosecution can be said have been launched when magistrate cognizance of report made by police and not when FIR is registered. It was therefore submitted that without intervention of Magistrate, provision of section 69 of CGST Act cannot be invoked. 21. It was therefore, submitted that since presumption under section 135 of CGST Act is not available at stage of arrest, respondent authorities must follow due process of adjudication and determination of demand prior to invoking power to arrest under section 69 of CGST Act. 22. Mr. Hemani thereafter submitted that decision of Delhi High Court in case of Make My Trip (India) Pvt. Ltd. v. Union of India reported in 73 taxmann.com 31, rendered under provisions of Service Tax still holds field. It was pointed out that appeal preferred by department against decision of Delhi High Court is dismissed by Supreme Court as per decision in case of Union of India v. Make My Trip reported Page 23 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT in 104 taxmann.com 245(SC). Mr. Hemani thereafter placed reliance upon decisions of Supreme Court in case of Kunhayammed versus State of Kerala reported in (2006) SCC 359, in case of Khoday Distilleries Ltd. (now known as Khoday India Limited) and others v. Sri Mahadeshwara Sahakarasakkare Karkhane Ltd., Kollegal (under liquidation) reported in 2019 4 SCC 376 and in case of V.M. Salgacoar & Bros.(P.) Ltd. v. CIT reported in (2000) 243 ITR 383 (SC) to submit that dismissal of appeal against order of judgment of lower forum is affirmation of same even if such order of Supreme Court is non speaking and it constitutes declaration of law under Article 141 of Constitution of India and attracts doctrine of merger and becomes binding precedent. 23. Thereafter, learned advocate Mr. Chetan Pandya appearing for petitioners in Special Civil Applications No.13679/2019, 13893/2019 and 3209/2020 adopted submissions advanced by learned Senior Advocate Mr. Hemani and referred to provisions of CGST Act which provides for on-line digital way of compliance of procedure and for assessment of goods and service tax. Mr. Page 24 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Pandya referred to provisions of section 13 of CGST Act which provides for time of supply of services, section 37 which provides for furnishing details of outward supplies, section 38 which provides for furnishing details of inward supplies and section 39 which provides for furnishing of returns. Referring to such provisions of CGST Act, it was submitted that compliance under CGST Act is to be done on-line electronically. He thereafter referred to provisions of assessment as contained in Chapter-XII comprising of provisions of section 59 to 64 of CGST Act. learned advocate Mr. Pandya thereafter, referred to Chapter XIV of CGST Act which provides for inspection, search, seizure and arrest. Reference was made to provisions of section 67 with regard to power of inspection, search and seizure and section 69 which provides for power to arrest with reference to section 132 prescribing punishment for certain offences. After referring to Scheme of CGST Act, learned advocate Mr. Pandya submitted that decision of Delhi High Court in case of Make My Trip (India) Pvt. Ltd (supra) is applicable to facts of case. He placed reliance upon Page 25 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT paragraph nos. 68 to 83 of said decision to submit that power to arrest under section 69 of CGST Act is required to be exercised with lot of care and circumspection and such powers can be exercised only after adjudication is completed by determining liability to pay tax and penalty and till such point of time, power of arrest cannot be invoked on basis of apprehension of evasion of tax by assessee. He referred to provisions of section 132 of CGST Act to submit that entire objective of CGST Act would be frustrated, if power to arrest can be permitted to be invoked prior to adjudication of liability of assessee. He also relied upon decision in case of Jaychandran Alloys Private Ltd. (supra) of Madras High Court to submit that if respondents are permitted to exercise power to arrest without there being any adjudication as provided under Scheme of CGST Act, safeguards as enshrined under Constitution of India and more particularly, as per Article 22 thereof which pertains to arrest and Article 21 which mandates that no person shall be deprived of his life and liberty before authority of law, would be violated. It was further submitted that if respondents are entitled Page 26 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to invoke power to arrest as per section 69 of CGST Act without there being any adjudication, same would also be contrary to decision of Supreme Court in case of D.K. Basu v. State of West Bengal reported in 1997 (1) SCC 416. 24. Mr. Pandya therefore, prayed that apprehension on part of petitioners is well founded that respondents would invoke power to arrest under section 69 read with section 132 of CGST Act without following due process of law of adjudication of alleged evasion of GST as contemplated under sections 61, 73 or 74 of CGST Act before following provisions of Chapter XII of CGST Act and Rules framed there under. 25. Thereafter, learned advocate Mr. Uchit N. Sheth appearing in Special Civil Application No.14141/2019 adopted arguments made by other advocates for petitioners and submitted that in view of preamble of CGST Act which provides for imposition, assessment and recovery of tax, powers of inspection, search, seizure and arrest are conferred upon respondents only with view Page 27 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to ensure that tax is not evaded. learned advocate Mr. Sheth relied upon provisions of sections 69 and 74 onwards of CGST Act to submit that there has to be notice for prima facie adjudication for initiation of assessment proceedings. He referred to section 64 of CGST Act which provides for summary assessment and submitted that ultimately, provisions of CGST Act determines civil liability of the assessee and fastening of criminal liability has to be in conjunction with that of civil liability. Mr. Sheth further referred to provisions of section 132 and submitted that no prosecution is prescribed if evasion of tax is below Rs. One Crore. It was therefore, submitted that when there is no prosecution permitted before adjudication under provisions of CGST Act, power to arrest conferred by section 69 read with section 132 of CGST Act has to be read as per Scheme of CGST Act and not otherwise. 26. learned advocate Mr. Uchit Sheth relied upon following decisions in support of his submissions: Page 28 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT i) In case of G.L. Didvania and another v. Income Tax Officer and another reported in 1995 Supplement 2 SCC 724 wherein Supreme Court held that whole question was whether appellant made false statement regarding income which according to Assessing Officer has escaped assessment and apropos same it was held that findings of appellate Tribunal was conclusive and therefore, prosecution cannot be sustained. Relying upon decision, it was pointed out that in order to invoke powers of arrest; adjudication is sine qua non. ii) Mr. Sheth further relied upon decision of this Court in case of Mahadev Enterprise v. State of Gujarat reported in 2016 SCC OnLine Gujarat 8893 to point out that as per scheme of CGST Act, this Court has held that even in order to exercise revisional jurisdiction, authority has to complete adjudication on basis of material on record to arrive at conclusion that there is evasion of tax. iii) Further reliance was also placed on decision in case of State of Punjab Page 29 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT v.Barkatram reported in (1962) 3 SCR 338, wherein similar issue arose in relation to provisions of Land Customs Act, 1924. SUBMISSIONS OF RESPONDENTS : 27. On other hand, learned Advocate General Mr. Kamal B. Trivedi assisted by learned Assistant Government Pleader Mr. Chintan K. Dave submitted that all captioned writ petitions are filed seeking directions against respondent authorities not to arrest petitioners in exercise of powers under Section 69 read with Section 132 of GGST Act by placing heavy reliance upon decision of Telangana High Court case of P. V. Ramana Reddy (supra), which is confirmed by Apex Court, however, for upholding maintainability of writ petition for pre-arrest protection under Article 226 of Constitution of India, Telangana High Court in aforesaid case, in Para nos. 22 to 24, has followed observations made by Apex Court in case of Km. Hema Mishra Vs. State of Uttar Pradesh reported in (2014) 4 SCC 453 , but said judgment rendered by Apex Court would not be applicable in present case as observations made by Apex Court in said Page 30 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT judgment is with respect to law prevailing in State of Uttar Pradesh where provisions of Section 438 of Code is not present in statute book and in such situation, Apex Court held that party aggrieved can invoke extraordinary jurisdiction under provisions of Article 226 of Constitution of India. It was submitted that in State of Gujarat, provisions of Section 438 of Code are very much available with petitioners and therefore, aforesaid judgment would not be applicable to present cases and captioned writ petitions filed under provisions of Article 226 of Constitution of India deserve to be dismissed. 28. It was submitted that petitions are pre- mature and not maintainable as concerned respondent authority has merely exercised its statutory power conferred upon it under provisions of Section 70 of CGST/GGST Act, whereby Petitioners have been called upon to give evidence and their statements with respect to on-going investigation. Hence, admittedly and undisputedly, as on date, statutory powers conferred upon concerned respondent authority under provisions of Section 69 of CGST Act have not yet Page 31 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT been exercised and therefore, captioned petitions filed by respective petitioners are pre-mature and hence, not maintainable, as no cause of any action of respondent authorities has arisen so far. 29. It was further submitted that even otherwise, captioned petitions are not maintainable as same are filed seeking writ in nature of prohibition from this Court against respondent authorities from arresting petitioners herein under powers conferred upon concerned respondent authority under Section 69 of CGST Act. Apropos this, it was submitted that it is nobody s case that respondent authorities have no jurisdiction to arrest person under CGST Act. In fact, provision of Section 69(1) of CGST Act categorically empowers concerned respondent authority to arrest any person if there is reason to believe that such person commits any offence specified under said section read with section 132 of CGST Act. 30. It was submitted that on bare reading of section 69 of CGST Act, it is clearly discernible that power to arrest vests with Page 32 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT respondent authorities and therefore, once power and jurisdiction of concerned authority is established, writ of prohibition ought not to be granted. It was further submitted that it is settled position of law that writ of prohibition is primarily supervisory in nature and object of same is to restrain courts or inferior tribunals from exercising jurisdiction which they do not possess at all or else to prevent them from exceeding limits of their jurisdiction. In other words, object is to confine courts or tribunals of inferior or limited jurisdiction within their bounds. It was submitted that it is also well-established that writ of prohibition cannot be issued to court or inferior tribunal for error of law unless by such error, it goes outside its jurisdiction. However, in facts of present case no allegation worth name has been raised with respect to jurisdiction of concerned respondent authority. 31. It was submitted that issue with respect to delegation of powers conferred upon Commissioner under Section 69 of CGST Act to lower authority is concerned, said aspect is no longer res integra, in Page 33 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT view of judgment of this Court dated 04.02.2020 passed in Special Civil Application No.513 of 2020 and therefore, captioned writ petitions may be dismissed along with exemplary costs. 32. With regard to contention of petitioners that powers conferred upon concerned authority under provisions of Section 69 of CGST Act can only be exercised after adjudication/ assessment of offences referred under provisions of Section 132 of CGST Act and not prior thereto by placing heavy reliance on word commits referred in Section 132 of CGST Act, it was submitted that on face of it is neither sustainable nor in consonance with provisions of CGST Act and on contrary, same is making entire Section 69 of CGST Act nugatory / otiose. 33. It was submitted that provisions of Section 69 of CGST are neither connected nor dependent upon provisions of Section 132 of CGST Act and hence, it is incorrect to state that arrest under Section 69 of CGST Act cannot be undertaken before adjudication of offences Page 34 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT referred to in Section 132 of CGST Act. In fact, provisions of Section 69(1) of CGST Act can be read along with Section 135 of CGST Act, which is similar to Section 138A of Customs Act, 1962, which enables authority to presume culpable mental state on part of alleged offender. Reliance was placed on decision of Apex Court in case of Devchand Kalyan Tandel v. State of Gujarat and another reported in (1996) 6 Supreme Court Cases 255 in support of above submissions. 34. It was further submitted that on careful reading of Section 69(1) of CGST Act, it is discernible that said sub-section merely refers offences specified in clauses (a), (b), (c) and (d) of Section 132(1) which are punishable under clauses (i) and (ii) of Section 132(1) or 132(2) of CGST Act, for which power to arrest can be exercised by concerned authority. However, Section 69(1) of CGST Act does not refer/acknowledge entire Section 132(1) including its opening line i.e. whoever commits any of following offences . Thus, it is submitted that for interpreting provisions of Section 69(1) of CGST Act, word commits referred in Section 132(1) Page 35 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of CGST Act has no role to play and hence same should not be taken into consideration. It was submitted that in other words, Section 69(1) of CGST Act merely borrows classification of offences made under some of clauses of Section 132(1) of CGST Act and that same would not mean that entire Section 132 of CGST Act including opening line of Section 132(1) of CGST Act is made applicable to provisions of Section 69 of CGST Act. 35. It was submitted that contention raised by petitioners also falls flat on ground as legislature has specifically used words reason to believe in Section 69 of GGST Act, which denotes that offences have not been adjudicated / finalized / proved and that there is only reason to believe on part of concerned authority to effect that offences referred in said section have been committed by any person. Thus, contention of petitioners to effect that there should first be adjudication / finalization of demand by following due procedure of assessment, then words reason to believe would become redundant, because once Page 36 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT adjudication is completed there is no question of still forming opinion to have reasons to believe on part of concerned respondent authority. 36. It was further submitted that if first adjudication is to be completed so as to ascertain committal of offences to invoke powers of arrest, then in that event, in terms of Section 132(1) of CGST/GGST Act, offenders would be punishable with imprisonment for specific period and hence in there would not be any question of exercising power of arrest by concerned authority under section 69 of CGST Act. This is more particularly in view of fact that after said punishment, it is concerned police officer who would give effect to such order to be passed under provisions of section 132 of CGST Act which would lead to situation, where provisions of Section 69 of CGST Act would get redundant / otiose. 37. It was submitted by learned Advocate General that even otherwise, steps undertaken under provisions of Section 69 of CGST Act by appropriate authority Page 37 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT are only for purpose of holding enquiry under provisions of CGST/GGST Act for finding any evasion of GST and ultimately adjudicating assessment and to punish assessee for offences committed by imposing penalties and initiating proceedings for prosecution as per provisions of Section 132 of CGST Act. concerned authority at stage of invoking power to arrest under section 69 of CGST Act, only forms opinion that concerned authority has reason to believe person has committed specific offence as per provisions of section 132 of CGST Act. It was further submitted that it may happen that after completion of adjudication process for assessment and adjudging penalty and / or confiscation of goods, as case may be, concerned authority may or may not proceed further with prosecution. Thus, provisions of Section 69 of CGST Act are independent and distinct of provisions of Section 132 of CGST Act. 38. It was lastly submitted by learned Advocate General that reliance placed by petitioners on judgments rendered by Madras High Court in cases of Jayachandran Alloys Pvt. Ltd (supra)and Punjab & Haryana Page 38 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT High Court, in cases of Akhil Krishan Maggu (supra) is totally misplaced. This is more particularly in view of fact that both said judgments without taking into consideration following distinguishing features, have followed view taken by Delhi High Court in case of Make My Trip (India) Limited (supra) and have not followed view taken by Telangana High Court in case of P. V. Ramanna Reddy (supra): (a) That Delhi High Court in aforesaid case of Make My Trip (supra), was dealing with provisions of Finance Act, 1994, ( Service Tax Act for short), where under, Section 73A(3) & (4) of Service Tax Act categorically provides that where any amount is required to be paid to Government and same has not been so paid, Central Excise Officer shall serve notice and thereafter determine same after considering representation made by person. In other words, in aforesaid case, there are specific sections which require authority to first issue notice and then determine same to effect that though amount was collected as service tax but not paid to Government. In view of such specific provisions under Service Tax Act it has been held that person cannot be arrested by-passing aforesaid procedure as contemplated under Sections 73A (3) and 73A(4) of Service Tax Act. Page 39 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (b) Whereas, under CGST Act, there is no such separate provision like Section 73A(3) & (4) of Service Tax Act, which requires authority to first issue notice and then to determine offences specified in Clauses (a), (b), (c) and (d) of Section 132(1) of CGST Act. On 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 Delhi Court in Para 74 of aforesaid judgment. In view thereof, judgment rendered by Delhi High Court would not be applicable to facts of present case. (c) It is incorrect to submit that provisions of Section 73A of Service Tax Act is similar to provisions of Section 73 / 74 of CGST Act inasmuch as, firstly, provisions of Section 73 / 74 of CGST Act are similar to provisions of Section 73 of Service Tax Act and not 73A of Service Tax Act and secondly, assessment as envisaged under provisions of Section 74 of CGST Act would only be undertaken after getting necessary information from concerned person and after completion of investigation. (d) In fact, Division Bench of Telangana High Court in its aforesaid judgment dated 18.04.2019, has categorically held that list of offences specified in Section 132(1) of CGST Act have no correlation with assessment, and that therefore, prosecution can be launched even before completion of assessment. Page 40 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (e) Against said case, Apex Court vide its order dated 27.05.2019, while dismissing Special Leave Petition, has confirmed aforesaid views of Telangana High Court and in addition thereto, Apex Court, in its order dated 29.05.2019 passed in case of Union of India v/s Sapna Jain has observed as under: However, we make it clear that High Courts while entertaining such request in future, will keep in mind that this Court by order dated 27.5.2019 passed in SLP(Crl.) No.4430/2019 had dismissed special leave petition filed against judgment and order of Telangana High Court in similar matter, wherein High Court of Telangana had taken view contrary to what has been held by High Court in present case. In view of above, it was submitted that contentions raised by petitioners deserves to be rejected and that captioned petitions may be dismissed. 39. It was submitted by learned Advocate General that Telangana High Court in case of P. V. Ramanna Reddy (supra) has grossly erred in Para no. 32 in holding that power to order arrest under Section 69(1) is Page 41 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT confined only to cognizable and non-bailable offences. This is more particularly in view of fact Section 69(1) of CGST Act deals with two types of punishment i.e. clauses(i) and (ii) of Section 132(1) of GGST Act. 40. It was submitted that in terms of Section 132(5) of CGST Act, offences specified in clauses (a), (b), (c) and (d) of Section 132(1) and punishable under clause (i) of that sub-section shall be cognizable and non-cognizable , whereas in terms of sub-section(4) of section 132 of CGST, notwithstanding anything contained in Code of Criminal procedure, 1973, all other offences shall be non-cognizable and bailable. Thus, by referring clauses (i) and (ii) of Section 132(1) of CGST Act, in Section 69(1) of CGST Act, it could be said that power to arrest deals with both types of offences i.e. cognizable and non-cognizable offences. 41. It was further submitted by learned Advocate General that on combined reading of Section 69(1) along with clauses (a), (b), (c) and (d) of Sections 132(1), 132(4) Page 42 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT and 132(5) of CGST Act, it is discernible that for effecting arrest, provisions of Code would not be applicable and more particularly, in view of non-obstante clause used in Section 132(4)of CGST Act, provisions of Code are not to be taken into account and that, even otherwise, offences under CGST Act cannot be equated with offences under Indian Penal Code which have been made cognizable or non- cognizable under Code. It was further submitted that for exercising powers of arrest under Section 69(1) of CGST Act, provision of Sections 87, 88, 155, 204 and 436 of Code will not be applicable. It was therefore, submitted that captioned writ petitions may be dismissed with exemplary costs. REJOINDER ON BEHALF OF PETITIONERS : 42. In rejoinder, learned Senior Advocate Mr. Tushar Hemani submitted that contention made on behalf of respondents that decision in case of Make My Trip India Pvt. Ltd.(supra) would not be applicable in relation to proceedings under CGST Act since said judgment was delivered in context of provisions of Service Tax which did not contain any clause as to presumption of Page 43 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT culpable mental state as provided under section 135 of CGST Act, is not correct. It was submitted that section 83 of Service Tax Act makes certain sections of Central Excise Act, 1944 applicable to Service Tax and one such section is section 9C of Central Excise Act, 1944 which provides for presumption of culpable mental state . It was therefore, submitted by Mr. Hemani that there was existence of similar provision even under service tax regime. Mr. Hemani further reiterated that provisions of section 135 of CGST Act cannot be pressed into service at time of invoking provisions of section 69 pertaining to power to arrest. 43. With regard to reliance placed on decision of Devchand Kalyan Tandel v. State of Gujarat and another reported in (1996) 6 Supreme Court Cases 255, it was submitted that said decision was rendered in relation to appeal preferred against judgment of Additional Chief Judicial Magistrate wherein appellants were charged for offence punishable under section 135(1)(a) of Customs Act, 1962 and it was not case where trial Court was concerned with power to arrest but Court was concerned with regard Page 44 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to dealing with punishment for prescribed offence and in such circumstances, reference to provisions pertaining to presumption of culpable mental state was made in said decision. It was therefore, submitted that controversy in said case and controversy in present petitions are totally different and ratio laid down in said decision would not be applicable in facts of present case. 44. learned Senior Advocate Mr. Hemani therefore, submitted that even if two interpretations are available, one which is more favourable to tax payer is required to be resorted to. Reliance was placed on decision of Supreme Court in case of CIT v. Vatika Township (P) Ltd. reported in (2014) 367 ITR 466 (SC)in support of such submission. learned Senior Advocate also relied upon treatise on Interpretation of Statutes by Maxwell (12th edition by P. St. J. Lagan) at page 239 wherein it is stated that The principle applied in construing penal Act is that if in construing relevant provisions, there appears any reasonable doubt or ambiguity, it will be resolved in favour of person who would be liable to penalty. Mr. Hemani thereafter referred to remarks Page 45 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of Lord Esher M.R. in case of Tuck & Sons v. Priester (1887) 19 OBD 629 at page 638 as below : If there is reasonable interpretation which will avoid penalty in any particular case we must adopt that construction. If there are two reasonable constructions we must give more lenient one. That is settled rule for construction of penal sections. Reliance was also placed on decision of Supreme Court in case of CIT v. Vegetable Products Ltd. reported in (1973) 88 ITR 192 (SC) in support of above submission. 45. learned advocate Mr. Pandya submitted that decision of Make My Trip India Pvt. Ltd (supra) is squarely applicable to facts of present case as provisions of service tax are pari materia with that of CGST Act. He relied upon following paragraphs of said judgment: 74. Customs Act, 1962, has different approach to question of offences. Chapter XVI thereof describes with specificity types of offences and procedure adopted in prosecuting such offences. Section 138A enables court to draw presumption, which is rebuttable, of culpable mental state Page 46 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of person charged with offence under Customs Act, 1962 which requires such culpable mental state. Even for purposes of confiscation of smuggled goods, Section 123 of Customs Act, 1962 shifts burden of proof in case of 'smuggling', to person from whom goods are seized to show that they are not smuggled goods. Powers are given to Customs Officer under Section 108 to record statements which are admissible in law. point to be noted is that coercive powers under taxing statutes are hedged in by limits W.P. (C) 525/2016 & 1283/2016 Page 48 of 77 on use of that power by in-built restrictions and limitations. 75. It is for this reason that powers of Central Excise Officer under FA cannot be compared with powers exercised by same officer either under Customs Act or Central Excise Act. Each of those statutes has different and distinct scheme which does not bear comparison with FA. For example, FA envisages filing of periodic returns which is comparable to Income Tax Act, whereas assessment under Customs Act is of individual bills of entry. AS noticed earlier, scheme of FA provisions points to assessment, followed by adjudication of penalty under Section 83 of FA. There are separate set of provisions for launching prosecution. 46. learned advocate Mr. Uchit Sheth in rejoinder submitted that section 132(1)(a) Page 47 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of CGST Act talks of only supply of goods or services or both without issuance of any invoice in violation of provisions of CGST Act and Rules with intention to evade tax whereas clauses (b), (c) and (d) of sub-section(1) of section 132 provides for issuance of invoice or bill without supply of goods for availing of input tax credits by collecting of amount and all of which has actual fiduciary liability fastened upon assessee. It was therefore, submitted that even for technical breach as per provisions of section 132(1)(a), power to arrest is provided and in such circumstances, such power can be invoked only if there is adjudication as provided under Chapter XII of CGST Act. He therefore, placed heavy reliance upon paragraph no. 52 of judgment in case of P.V.Ramana Reddy (supra) of Telangana High Court. ANALYSIS : 47. Having heard learned counsel appearing for parties and having considered materials on record, pivotal question which falls for our consideration is whether power to arrest as provided under section 69 read with section 132 of CGST Act can be Page 48 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT invoked by Commissioner only upon completion of adjudication process of finalising assessment and determination of liability as per provisions of CGST Act? 48. other ancillary questions which arise for our consideration are as under : (i) Whether provisions of section 69 of CGST Act envisages that Commissioner is obliged to record his reasons to believe and furnish same to person who is sought to be arrested? (ii) Whether provisions of sections 154, 155(1), 155(2), 155(3), 157, 172 of Code of Criminal Procedure, 1973 are applicable or should be made applicable for purpose of invoking power to arrest under section 69 of CGST Act? In other words, whether authorised officer can arrest person alleged to have committed non cognizable and bailable offences without warrant of arrest issued by Magistrate under provisions of Code of Criminal Procedure, 1973? Page 49 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (iii) For purpose of section 69(3) of CGST Act, whether officers of GST department could be said to be police officer in charge of police station as defined under section 2(o) of Code of Criminal Procedure, 1973? (iv) Whether constitutional safeguards laid out by Supreme Court in D.K. Basu's case [1997 (1) SCC 416] in context of powers of police officers under Code of Criminal Procedure, 1973 and of officers of Central Excise, Customs and Enforcement Directorate are applicable to exercise of powers under provisions of section 69 of GST Act in equal measure? 49. In order to answer above questions in light of submissions made by learned counsel of both sides, it would be germane to refer to relevant provisions of CGST Act, Code of Criminal Procedure, 1973, Finance Act 1994 and Central Excise Act, 1944. Section 69 of CGST Act Reads thus: Section 69: Power to arrest: Page 50 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (1) Where Commissioner has reasons to believe that person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of said section, he may, by order, authorise any officer of central tax to arrest such person. (2) Where person is arrested under sub- section (1) for offence specified under subsection(5) of section 132, officer authorised to arrest person shall inform such person of grounds of arrest and produce him before Magistrate within twenty-four hours. (3) Subject to provisions of Code of Criminal Procedure, 1973, (a) where person is arrested under sub- section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to custody of Magistrate; (b) in case of non-cognizable and bailable offence, Deputy Commissioner or Assistant Commissioner shall, for purpose of releasing arrested person on bail or otherwise, have same powers and be subject to same provisions as officer-in-charge of police station. Section 132 of CGST Act reads thus : Section 132: Punishment for certain offences:- (1) Whoever commits, or causes to commit and retain benefits arising out of, any of following offences" namely: Page 51 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (a) supplies any goods or services or both without issue of any invoice, in violation of provisions of this Act or rules made thereunder, with intention to evade tax; (b) issues any invoice or bill without supply of goods or services or both in violation of provisions of this Act, or 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 same to Government beyond period of three months from 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 clauses (a) to (d); (f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with intention to evade payment of tax due under this Act; (g) obstructs or prevents any officer in discharge of his duties under this Act; (h) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or rules made thereunder; Page 52 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (i) receives or is in any way concerned with supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or rules made thereunder; (j) tampers with or destroys any material evidence or documents; (k) fails to supply any information which he is required to supply under this Act or rules made thereunder or (unless with reasonable belief, burden of proving which shall be upon him, that information supplied by him is true) supplies false information; or (l) attempts to commit, or abets commission of any of offences mentioned in clauses (a) to (k) of this section, shall be punishable (i) in cases where amount of tax evaded or amount of input tax credit wrongly availed or utilised or amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for term which may extend to five years and with fine; (ii) in cases where amount of tax evaded or amount of input tax credit wrongly availed or utilised or amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for term which may extend to three years and with fine; (iii) in case of any other offence where amount of tax evaded or amount of input tax credit wrongly availed or utilised or amount of refund wrongly taken exceeds one hundred lakh rupees but does not Page 53 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT exceed two hundred lakh rupees, with imprisonment for term which may extend to one year and with fine; (iv) in cases where he commits or abets commission of offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for term which may extend to six months or with fine or with both. (2) Where any person convicted of offence under this section is again convicted of offence under this section, then, he shall be punishable for second and for every subsequent offence with imprisonment for term which may extend to five years and with fine. (3) imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall, in absence of special and adequate reasons to contrary to be recorded in judgment of Court, be for term not less than six months. (4) Notwithstanding anything contained in Code of Criminal Procedure, 1973, all offences under this Act, except offences referred to in sub-section (5) shall be noncognizable and bailable. (5) 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) person shall not be prosecuted for any offence under this section except with previous sanction of Commissioner. Page 54 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Explanation. For purposes of this section, term tax shall include amount of tax evaded or amount of input tax credit wrongly availed or utilised or refund wrongly taken under provisions of this Act, State Goods and Services Tax Act, Integrated Goods and Services Tax Act or Union Territory Goods and Services Tax Act and cess levied under Goods and Services Tax (Compensation to States) Act. Section 135 of CGST Act reads thus : Section 135. Presumption of culpable mental state- In any prosecution for offence under this Act which requires culpable mental state on part of accused, court shall presume existence of such mental state but it shall be defence for accused to prove fact that he had no such mental state with respect to act charged as offence in that prosecution. Explanation.-For purposes of this section,- (i) expression "culpable mental state" includes intention, motive, knowledge of fact, and belief in, or reason to believe, fact; ii) fact is said to be proved only when court believes it to exist beyond reasonable doubt and not merely when its existence is established by preponderance of probability. Sections 61, 66, 73 and 74 of CGST Act read thus : Page 55 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Section 61: - Scrutiny of Returns-(1) proper officer may scrutinize return and related particulars furnished by registered person to verify correctness of return and inform him of discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto. (2) In case explanation is found acceptable, registered person shall be informed accordingly and no further action shall be taken in this regard. (3) In case no satisfactory explanation is furnished within period of thirty days of being informed by proper officer or such further period as may be permitted by him or where registered person, after accepting discrepancies, fails to take corrective measure in his return for month in which discrepancy is accepted, proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine tax and other dues under section 73 or section 74. Section 66:Special Audit:- (1) If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below rank of Assistant Commissioner, having regard to nature and complexity of case and interest of revenue, is of opinion that value has not been correctly declared or credit availed is not within normal limits, he may, with prior approval of Commissioner, direct such registered person by communication in writing to get his records including books of account Page 56 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT examined and audited by chartered accountant or cost accountant as may be nominated by Commissioner. (2) chartered accountant or cost accountant so nominated shall, within period of ninety days, submit report of such audit duly signed and certified by him to said Assistant Commissioner mentioning therein such other particulars as may be specified: Provided that Assistant Commissioner may, on application made to him in this behalf by registered person or chartered accountant or cost accountant or for any material and sufficient reason, extend said period by further period of ninety days. (3) provisions of sub-section (1) shall have effect notwithstanding that accounts of registered person have been audited under any other provisions of this Act or any other law for time being in force. (4) registered person shall be given opportunity of being heard in respect of any material gathered on basis of special audit under sub-section (1) which is proposed to be used in any proceedings against him under this Act or rules made thereunder. (5) expenses of examination and audit of records under sub-section (1), including remuneration of such chartered accountant or cost accountant, shall be determined and paid by Commissioner and Page 57 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT such determination shall be final. (6) Where special audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, proper officer may initiate action under section 73 or section 74. Section 73- Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts-(1) Where it appears to proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on person chargeable with tax which has not been so paid or which has been so short paid or to whom refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay amount specified in notice along with interest payable thereon under section 50 and penalty leviable under provisions of this Act or rules made thereunder. (2) proper officer shall issue notice under sub-section (1) at least three months prior to time limit specified in sub-section (10) for issuance of order. (3) Where notice has been issued for any period under sub-section (1), proper officer may serve statement, containing Page 58 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 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 person chargeable with tax. (4) service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to condition that grounds relied upon for such tax periods other than those covered under sub-section (1) are same as are mentioned in earlier notice. (5) person chargeable with tax may, before service of notice under sub-section (1) or, as case may be, statement under sub-section (3), pay amount of tax along with interest payable thereon under section 50 on basis of his own ascertainment of such tax or tax as ascertained by proper officer and inform proper officer in writing of such payment. (6) proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as case may be, statement under sub-section (3), in respect of tax so paid or any penalty payable under provisions of this Act or rules made thereunder. (7) Where proper officer is of opinion that amount paid under sub- section (5) falls short of amount actually payable, he shall proceed to issue notice as provided for in sub-section (1) in respect of such amount which falls short of amount actually payable. (8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays said tax along with interest Page 59 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of said notice shall be deemed to be concluded. (9) proper officer shall, after considering representation, if any, made by person chargeable with tax, determine amount of tax, interest and penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue order. (10) proper officer shall issue order under sub-section (9) within three years from due date for furnishing of annual return for financial year to which tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from date of erroneous refund. (11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within period of thirty days from due date of payment of such tax. Section 74: - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts-(1) Where it appears to proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful- misstatement or suppression of facts to evade tax, he shall serve notice on Page 60 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT person chargeable with tax which has not been so paid or which has been so short paid or to whom refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay amount specified in notice along with interest payable thereon under section 50 and penalty equivalent to tax specified in notice. (2) proper officer shall issue notice under sub-section (1) at least six months prior to time limit specified in sub-section (10) for issuance of order. (3) Where notice has been issued for any period under sub-section (1), proper officer may serve statement, containing 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 person chargeable with tax. (4) service of statement under sub- section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to condition that grounds relied upon in said statement, except ground of fraud, or any wilful- misstatement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are same as are mentioned in earlier notice. (5) person chargeable with tax may, before service of notice under sub-section (1), pay amount of tax along with interest payable under section 50 and penalty equivalent to fifteen per cent. of such tax on basis of his own ascertainment of such tax or tax as ascertained by proper officer and inform Page 61 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT proper officer in writing of such payment. (6) proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of tax so paid or any penalty payable under provisions of this Act or rules made thereunder. (7) Where proper officer is of opinion that amount paid under sub- section (5) falls short of amount actually payable, he shall proceed to issue notice as provided for in sub-section (1) in respect of such amount which falls short of amount actually payable. (8) Where any person chargeable with tax under sub-section (1) pays said tax along with interest payable under section 50 and penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of notice, all proceedings in respect of said notice shall be deemed to be concluded. (9) proper officer shall, after considering representation, if any, made by person chargeable with tax, determine amount of tax, interest and penalty due from such person and issue order. (10) proper officer shall issue order under sub-section (9) within period of five years from due date for furnishing of annual return for financial year to which tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from date of erroneous refund. Page 62 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (11) Where any person served with order issued under sub-section (9) pays tax along with interest payable thereon under section 50 and penalty equivalent to fifty per cent. of such tax within thirty days of communication of order, all proceedings in respect of said notice shall be deemed to be concluded. Explanation 1.- For purposes of section 73 and this section,- (i) expression "all proceedings in respect of said notice" shall not include proceedings under section 132; (ii) where notice under same proceedings is issued to main person liable to pay tax and some other persons, and such proceedings against main person have been concluded under section 73 or section 74, proceedings against all persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. Explanation 2.- For purposes of this Act, expression "suppression" shall mean non-declaration of facts or information which taxable person is required to declare in return, statement, report or any other document furnished under this Act or rules made there under, or failure to furnish any information on being asked for, in writing, by proper officer. Sections 41 , 41A 154, 155, 157, 172 of Code reads thus : Section 41: When police may arrest without warrant. Page 63 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (1) Any police officer may without order from Magistrate and without warrant, arrest any person- (a) who has been concerned in any cognizable offence, or against whom reasonable complaint has been made, or credible information has been received, or reasonable suspicion exists, of his having been so concerned; or (b) who has in his possession without lawful excuse, burden of proving which excuse shall lie on such person, any implement of house- breaking; or (c) who has been proclaimed as offender either under this Code or by order of 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 offence with reference to such thing; or (e) who obstructs police officer while in execution of his duty, or who has escaped, or attempts to escape, from lawful custody; or (f) who is reasonably suspected of being deserter from any of Armed Forces of Union; or (g) who has been concerned in, or against whom reasonable complaint has been made, or credible information has been received, or 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 offence, and for which he is, under any law relating to extradition, Page 64 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT or otherwise, liable to be apprehended or detained in custody in India; or (h) who, being released convict, commits 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 requisition specifies person to be arrested and offence or other cause for which arrest is to be made and it appears therefrom that person might lawfully be arrested without warrant by officer who issued requisition. (2) Any officer in charge of police station may, in like manner, arrest or cause to be arrested any person, belonging to one or more of categories of persons specified in section 109 or section 110. Section 41A: (1) police officer shall, in all cases where arrest of person is not required under provisions of sub- section (1) of section 41, issue notice directing person against whom reasonable complaint has been made, or credible information has been received, or reasonable suspicion exists that he has committed cognizable offence, to appear before him or at such other place as may be specified in notice. (2) Where such notice is issued to any person, it shall be duty of that person to comply with terms of notice. (3) Where such person complies and continues to comply with notice, he shall not be arrested in respect of offence referred Page 65 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to in notice unless, for reasons to be recorded, police officer is of opinion that he ought to be arrested. (4) Where such person, at any time, fails to comply with terms of notice or is unwilling to identify himself, police officer may, subject to such orders as may have been passed by competent Court in this behalf, arrest him for offence mentioned in notice. Section 154: Information in cognizable cases. (1) Every information relating to commission of cognizable offence, if given orally to officer in charge of police station, shall be reduced to writing by him or under his direction, and be read Over to informant; and every such information, whether given in writing or reduced to writing as aforesaid, shall be signed by person giving it, and substance thereof shall be entered in book to be kept by such officer in such form as State Government may prescribe in this behalf. (2) copy of information as recorded under sub- section (1) shall be given forthwith, free of cost, to informant. (3) Any person aggrieved by refusal on part of officer in charge of police station to record information referred to in subsection (1) may send substance of such information, in writing and by post, to Superintendent of Police concerned who, if satisfied that such information discloses commission of cognizable offence, shall either investigate case himself or direct investigation to be Page 66 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT made by any police officer subordinate to him, in manner provided by this Code, and such officer shall have all powers of officer in charge of police station in relation to that offence. Section 155. Information as to non- cognizable cases and investigation of such cases. (1) When information is given to officer in charge of police station of commission within limits of such station of non- cognizable offence, he shall enter or cause to be entered substance of information in book to be kept by such officer in such form as State Government may prescribe in this behalf, and refer informant to Magistrate. (2) No police officer shall investigate non- cognizable case without order of Magistrate having power to try such case or commit case for trial. (3) Any police officer receiving such order may exercise same powers in respect of investigation (except power to arrest without warrant) as officer in charge of police station may exercise in cognizable case. (4) Where case relates to two or more offences of which at least one is cognizable, case shall be deemed to be cognizable case, notwithstanding that other offences are non- cognizable. Section 157. Procedure for investigation preliminary inquiry. (1) If, from information received or Page 67 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT otherwise, officer in charge of police station has reason to suspect commission of offence which he is empowered under section 156 to investigate, he shall forthwith send report of same to Magistrate empowered to take cognizance of such offence upon police report and shall proceed in person, or shall depute one of his subordinate officers not being below such rank as State Government may, by general or special order, prescribe in this behalf, to proceed, to spot, to investigate facts and circumstances of case, and, if necessary, to take measures for discovery and arrest of offender; Provided that- (a) when information as to commission of any such offence is given against any person by name and case is not of serious nature, officer in charge of police station need not proceed in person or depute subordinate officer to make investigation on spot; (b) if it appears to officer in charge of police station that there is no sufficient ground for entering on investigation, he shall not investigate case. (2) In each of cases mentioned in clauses (a) and (b) of proviso to sub- section (1), officer in charge of police station shall state in his report his reasons for not fully complying with requirements of that sub- section, and, in case mentioned in clause (b) of said proviso, officer shall also forthwith notify to informant, if any, in such manner as may be prescribed by State Government, fact that he will not investigate case or cause it to be investigated. Page 68 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Section 172: Diary of proceedings in investigation. (1) Every police officer making investigation under this Chapter shall day by day enter his proceedings in investigation in diary, setting forth time at which information reached him, time at which he began and closed his investigation, place or places visited by him, and statement of circumstances ascertained through his investigation. (2) Any Criminal Court may send for police diaries of case under inquiry or trial in such Court, and may use such diaries, not as evidence in case, but to aid it in such inquiry or trial. (3) Neither accused nor his agents shall be entitled to call for such diaries, nor shall he or they be entitled to see them merely because they are referred to by Court; but, if they are used by police officer who made them to refresh his memory, or if Court uses them for purpose of contradicting such police officer, provisions of section 161 or section 145, as case may be, of Indian Evidence Act, 1872 (1 of 1872 ), shall apply, Section 83 of Finance Act 1994 reads thus: 83. Application of certain provisions of Act 1 of 1944. provisions of following sections of Central Excise and Salt Act, 1944, as in force from time to time. shall apply, so far as may be, in relation to service tax as Page 69 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT they apply in relation to duty of excise: M1 M1. In This Principal act, for figures and letters 9C, 9D,11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D, 12E, 14, 14AA, 15, 33A, 34A, 35F , figures and letters 9A, 9AA, 9B, 9C, 9D, 9E,11B,11C,12,12A,12B,12C,12D,12E,14,14AA,15 ,33A,34A,35F shall be substituted BY FINANC ACT, 1994, [Gaz. of India, Exty., Pt. II- Sec.1, No.10, dt.8.4.2011, p.1.] [9AA, 9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D, 12E, 14, 14AA, 15, 33AA, 34A, 35F] to 350 (both inclusive), 35Q,M2M2. In This Principal act, after figures and letter 35Q , figures and letter 35R shall be inserted and shall be deemed to have been inserted with effect from 20th day of October, 2010 BY FINANCE ACT, 1994, [Gaz. of India, Exty., Pt. II-Sec.1, No.10, dt. 8.4.2011, p.1.][35R]36, 36A, 37A, 37B, 37C,37D,DP265[38A], and 40. Section 9(c) of Central Excise Act, 1944 reads thus: Section 9(c) of Central Excise Act, 1944 (1) In any prosecution for offence under this Act which requires culpable mental state on part of accused, Court shall presume existence of such mental state but it shall be defence for accused to prove fact that he had no such mental state with respect to act charged as offence in that prosecution. Explanation. In this section, culpable mental state includes intention, motive, Page 70 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT knowledge of fact, and belief in, or reason to believe, fact. (2) For purposes of this section, fact is said to be proved only when Court believes it to exist beyond reasonable doubt and not merely when its existence is established by preponderance of probability. 50. From above provisions of law and considering preliminary objections raised on behalf of respondent that petition is premature and not maintainable as concerned respondent authority has merely exercised statutory power under provisions of section 70 of CGST Act calling upon petitioners to give evidence and to record their statement with respect to ongoing investigation is concerned, it is true that respondents have not exercised powers conferred under section 69 of CGST Act invoking power to arrest. However, there is strong apprehension on part of petitioners that respondents would invoke power to arrest as provided under section 69 of CGST Act when petitioners comply with summons issued under section 70 of CGST Act. On such facts emerging from record, it cannot be said that petitions are premature and not maintainable as held by Telangana High Court in case of P.V. Ramana Page 71 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Reddy (supra), more particularly, when Apex Court has not interfered with said decision. 51. We propose to first answer question with respect to reasonable belief of Commissioner for purpose of exercising power to arrest. Section 69 talks about opinion which is necessary to be formed for purpose of effecting arrest of person suspected of having committed any offence under section 132 of Act. Any opinion of authority to be formed is not subject to objective test. language leaves no room for relevance of official examination as to sufficiency of ground on which authority may act in forming its opinion. But at same time, there must be material based on which alone, authority could form its opinion that person has committed any offence as specified under clause (a) to (d) of section 132 of CGST Act and it is necessary to arrest such person for alleged offence. existence of relevant material is pre- condition to formation of opinion. use of word may indicates not only discretion, but obligation to consider that necessity has arisen to arrest person concerned alleged to have committed any offence Page 72 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT as specified under section 132 of Act. Therefore, opinion to be formed by Commissioner cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such course is impermissible in law. At cost of repetition, formation of opinion, though subjective, must be based on some credible material disclosing that is necessary to arrest person concerned alleged to have committed offence as specified under section 132 of Act. statutory requirement of reasonable belief is to safeguard citizen from vexatious proceedings. Belief is mental operation of accepting fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for authority under Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose materials upon which his belief was formed, as it has been held by Supreme Court in case of Sheonath Singh [AIR 1971 SC 2451] that Court can examine materials to find out whether honest and reasonable person can base his reasonable belief upon such materials although sufficiency of reasons for belief cannot be investigated by Court. word necessary means indispensable; Page 73 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 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], Supreme Court pointed out, on consideration of several English and Indian authorities that expressions "is satisfied", "is of opinion" and "has reason to believe" are indicative of subjective satisfaction, though it is true that nature of power has to be determined on totality of consideration of all relevant provisions. Supreme Court while construing Section 237 of Companies Act, 1956 held : "64. object of S. 237 is to safeguard interests of those dealing with company by providing for investigation where management is so conducted as to jeopardize those interests or where company is floated for fraudulent or unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at wishes of company itself expressed through special resolution or through order of court where judicial process intervenes. Clause (b), on other hand, leaves directing investigation to subjective opinion of government or Board. Since legislature enacted S. 637 (i) (a) it knew that government would entrust to Board its power under S. 237 (b). Could legislature have left without any restraints or Page 74 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT limitations entire power of ordering investigation to subjective decision of Government or Board? There is no doubt that formation of opinion by Central Government is purely subjective process. There can also be no doubt that since legislature has provided for opinion of government and not of court such opinion is not subject to challenge on ground of propriety, reasonableness or sufficiency. But Authority is required to arrive at such opinion from circumstances suggesting what is set out in sub clauses (i), (ii) or (iii). If these circumstances were not to exist, can government still say that in its opinion they exist or can Government say same thing where circumstances relevant to clause do not exist? legislature no doubt has used expression "circumstances suggesting". But that expression means that circumstances need not be such as would conclusively establish intent to defraud or fraudulent or illegal purpose. proof of such intent or purpose is still to be adduced through investigation. But expression "circumstances suggesting" cannot support construction that even existence of circumstances is matter of subjective opinion. That expression points out that there must exist circumstances from which Authority forms opinion that they are suggestive of crucial matters set out in three sub clauses. It is hard to contemplate that legislature could have left to subjective process both formation of opinion and also existence of circumstances on which it is to be founded. It is also not reasonable to say that clause permitted Authority to say that it has formed opinion on circumstances which in its opinion exist and which in its opinion suggest intent to defraud or fraudulent or unlawful purpose. It is equally Page 75 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT unreasonable to think that legislature could have abandoned even small safeguard of requiring opinion to be founded on existent circumstances which suggest things for which investigation can be ordered and left opinion and even existence of circumstances from which it is to be formed to subjective process. These analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where learned author, while dealing with S. 165(b) of English Act observes that "the Board of Trade will always exercise its discretionary power in light of specified grounds for appointment on their own motion" and that "they may be trusted not to appoint unless circumstances warrant it but they will test need on basis of public and commercial morality." There must therefore exist circumstances which in opinion of Authority suggest what has been set out in sub clauses (i), (ii) or (iii). If it is shown that circumstances do not exist or that they are such that it is impossible for any one to form opinion therefrom suggestive of aforesaid things, opinion is challengeable on ground of non application of mind or perversity or on ground that it was formed on collateral grounds and was beyond scope of statute. 53. Supreme Court while expressly referring to expressions such as "reason to believe", "in opinion of observed : "Therefore, words, "reason to believe" or "in opinion of do not always lead to construction that process of entertaining "reason to believe" or "the opinion" is altogether subjective to process not lending itself even to limited scrutiny by court that such "a reason to believe" or "opinion" Page 76 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT was not formed on relevant facts or within limits or as Lord Radcliffe and Lord Reid called restraints of statute as alternative safeguard to rules of natural justice where function is administrative." 54. In Income-tax Officer, Calcutta and Ors. vs. Lakhmani Mewal Das [AIR 1976 SC 1753], Supreme Court construed expression "reason to believe" employed in Section 147 of Income-Tax Act, 1961 and observed: reasons for formation of belief must have rational connection with or relevant bearing on formation of belief. Rational connection postulates that there must be direct nexus or live link between material coming to notice of Income-tax Officer and formation of his belief that there has been escapement of income of assessee from assessment in particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, howsoever vague and indefinite or distant which would warrant formation of belief relating to escapement of income of assessee from assessment. reason for formation of belief must be held in good faith and should not be mere pretence. Page 77 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 55. In Bhikhubhai Vithalabhai Patel (supra), Supreme Court observed in paras 32 and 33 as under: 32. We are of view that construction placed on expression "reason to believe" will equally be applicable to expression "is of opinion" employed in proviso to Section 17 (1) (a) (ii) of Act. expression "is of opinion", that substantial modifications in draft development plan and regulations, "are necessary", in our considered opinion, does not confer any unlimited discretion on Government. discretion, if any, conferred upon State Government to make substantial modifications in draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in case of statutory powers. basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in chapter entitled 'abuse of discretion' and under general heading principle of reasonableness' which read as under: "The common theme of all authorities so far mentioned is that 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 right and proper way which Parliament when conferring it is presumed to have intended. Although Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered discretion, truth is that, in system based on rule of law, unfettered governmental discretion is contradiction in terms. real question is whether discretion is wide or narrow, and where legal line is to be drawn. For this purpose everything depends upon true intent Page 78 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT and meaning of empowering Act. powers of public authorities are therefore essentially different from those of private persons. man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or spirit of revenge, but in law this does not affect his exercise of his power. In same way private person has absolute power to allow whom he likes to use his land, to release debtor, or, where law permits, to evict tenant, regardless of his motives. This is unfettered discretion. But public authority may do none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. whole conception of unfettered discretion is inappropriate to public authority, which possesses powers solely in order that it may use them for public good. There is nothing paradoxical in imposition of such legal limits. It would indeed be paradoxical if they were not imposed." Court is entitled to examine whether there has been any material available with State Government and reasons recorded, if any, in formation of opinion and whether they have any rational connection with or relevant bearing on formation of opinion. Court is entitled particularly, in event, when formation of opinion is challenged to determine whether formation of opinion is arbitrary, capricious or whimsical. It is always open to court to examine question whether reasons for formation of opinion have rational connection or relevant bearing to formation of such opinion and are not extraneous to purposes of statute. 56. In absence of any cogent or credible Page 79 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT material, if subjective satisfaction is arrived at by authority concerned for purpose of arrest under Section 69 of Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from doing of wrongful act intentionally but also without just cause or excuse or for want of reasonable or probable cause. Any use of discretionary power exercised for unauthorized purpose amounts to malice in law. It is immaterial whether authority acted in good faith or bad faith. In aforesaid context, we may refer to and rely upon decision of Supreme Court in case of Smt. S.R. Venkatraman vs. Union of India reported in (1979) ILLJ 25(SC) where it had been held : There will be error of fact when public body is prompted by mistaken belief in existence of non existing fact or circumstances. This is so clearly unreasonable that what is done under such 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. influence of extraneous matters will be undoubtedly there where authority making order has admitted their influence. administrative order which is based on reasons of fact which do not exist must be held to be infected with abuse of power." We may also refer to and rely upon decision of Supreme Court in case of ITO Calcutta Page 80 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT vs. Lakhmani Mewal Das reported in [(1976) 103 ITR 437 (SC)] wherein it had been held as under: "The reasons for formation of belief contemplated by Section 147(a) of Income- tax Act, 1961, for reopening of assessment must have rational connection or relevant bearing on formation of belief. Rational connection postulates that there must be direct nexus or live link between material coming to notice of I.T.O. and formation of his belief that there has been escapement of income of assessee from assessment in particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that Court cannot go into sufficiency or adequacy of material and substitute its own opinion for that of I.T.O. on point as to whether action should be initiated for reopening assessment. At same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant formation of belief relating to escapement of income of assessee from assessment. reason for formation of belief must be held in good faith and should not be mere pretence." 57. stipulation of Commissioner to have reason to believe is of utmost importance in section 69(1) of CGST Act. Section 26 of Indian Penal Code defines term reason to believe . It means person is said to have reason to believe thing, if he has Page 81 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT sufficient cause to believe that thing but not otherwise. Reason to believe is very subjective phrase and may vary in circumstances of each case. Section 147 of Income Tax Act, 1961 also provides that reassessment can be made, if there is reason to believe by Assessing Officer that there is escapement of income and failure on part of assessee of true and full disclosures. Reason to believe consists of two words reason and to believe . word reason means cause or justification and word believe means to accept as true or to have faith in it. Therefore, there must be justification for it and belief is result of mental exercise based on information received. words reason to believe' contemplate objective determination based on intelligence, care and deliberation involving judicial review as distinguished from purely subjective consideration. 58. Therefore, reason to believe must have rational connection or relevant bearing to formation of belief and not extraneous or irrelevant to purpose of section. Therefore, Commissioner has to form opinion and to have reason to believe that person has committed offences as specified in Page 82 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT clauses (a), (b), (c) or (d) of sub- section(1) of section 132 of CGST Act and depending upon 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 offence is cognizable or non cognizable as per provisions of sub-section(4) and sub-section(5) of section 132 of CGST Act. 59. On aforesaid issue, we summarise our conclusions : i) order authorising any officer to arrest may be justified if Commissioner or any other authority empowered in law has reasons to believe that person concerned has committed offence under section 132 of Act. However, 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 formation of belief. ii) power conferred upon authority under Section 69 of Act for arrest could be termed Page 83 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT as very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. iii) power under Section 69 of Act should neither be used as tool to harass assessee nor should it be used in manner which may have irreversible detrimental effect on business of assessee. iv) above are merely incidents of personal liberty guaranteed under Constitution of India. No arrest can be made because it is lawful for police officer to do so. existence of power to arrest is one thing. justification for exercise of it is quite another. Commissioner must be able to justify arrest apart from his power to do so. Arrest and detention in police lock-up of person can cause incalculable harm to reputation and self-esteem of person. No arrest can be made in routine manner on mere allegation of commission of offence made against person. It would be prudent for authority in interest of protection of constitutional rights of citizen and perhaps in his own interest that no arrest should be made without reasonable satisfaction reached after Page 84 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT some investigation as to genuineness and bona fides of complaint and reasonable belief both as to person's complicity and even so as to need to effect arrest. Denying person of his liberty is serious matter. person is not liable to arrest merely on suspicion of complicity in offence. There must be some reasonable justification in opinion of authority effecting arrest that such arrest is necessary and justified. (See Joginder Kumar v. State of U.P. [1994 AIR 1349] 60. We are not impressed by submission vociferously canvassed on behalf of petitioners that respondent authorities cannot invoke power to arrest under section 69 read with section 132 of CGST Act prior to completion of adjudication/assessment. It is required to be noted that section 69 falls under Chapter XIV of CGST Act which provides for inspection, search, seizure and arrest whereas section 132 which provides for punishment for certain offences falls under Chapter XIX for offences and penalties and both provisions operate in separate fields as explained hereunder. 61. bare perusal of sub-section (1) of Page 85 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT section 69 of CGST Act indicates that it starts with phrase Where Commissioner has reasons to believe that person has committed any offence .. which suggests that power to arrest person is conferred upon Commissioner when he forms reasonable belief that such person has committed any offence as specified in four clauses i.e. clauses (a), (b), (c) and (d) of sub-section (1) of section 132 of CGST Act which is punishable under clause(i) or (ii) of sub-section(1) or sub-section (2) of section 132 of CGST Act. In other words, reference to section 132 in section 69 of CGST Act providing power to arrest is only with regard to nature of offences specified in clauses (a), (b), (c) and (d) of sub-section (1) of section 132 for which punishment is provided in clauses (i) and clause (ii) of sub-section(1) and sub-section (2) of section 132 of CGST Act. Therefore, when Commissioner forms opinion and has reason to believe that person has committed any offence as specified in clauses (a), (b), (c) and (d) of sub-section (1) which is punishable under clauses(i) and (ii) of sub- section(1) and sub-section (2) of section 132 of CGST Act, he may by order authorise Page 86 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT any officer of central tax to arrest such person. 62. In aforesaid context, section 69 is independent of section 132 of CGST Act which falls under Chapter XIX which prescribes for offences and penalties. plain perusal of section 132 of CGST Act indicates that it only provides punishment for certain offences. In this context sub- section(2) of section 69 of CGST Act is also relevant as it provides that where person is arrested under sub-section (1) of section 69, for offence specified under sub-section(5) of section 132 of CGST Act which provides that offences specified in clauses (a), (b), (c) and (d) of sub-section(1)of section 132 and punishable under clause (i) of sub-section(1)of section 132, shall be cognizable and non bailable, then officer authorised to arrest person shall inform such person of grounds of arrest and produce him before Magistrate within twenty-four hours. In other words, when person is arrested pursuant to order passed by Commissioner who has reason to believe that such person has committed any offence specified in clauses (a), (b), (c) or (d) of sub-section(1) of Page 87 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT section 132 of CGST Act which is punishable under clause(i) of that sub-section, then such offence being cognizable and non bailable as per sub-section (5) of CGST Act, officer authorised to arrest such person is duty bound to inform such person about grounds of arrest and produce him before Magistrate within twenty-four hours. Therefore, reference to section 132(5) in sub- section(2) of section 69 of CGST Act is made so as to differentiate between person for whom Commissioner has reason to believe that such person has committed cognizable and non bailable offences or non cognizable and bailable offences as provided in section 132 of CGST Act. 63. At this juncture, it is relevant to refer to sub-section(3) of section 69 which in turn refers to Code of Criminal Procedure, 1973 and provides that subject to provisions of Code where person is arrested under sub- section(1) of section 69 of CGST Act for any offence specified under sub- section(4) of section 132 which provides that notwithstanding anything contained in Code, all offences under CGST Act, except offences referred to in sub- section (5) shall be non-cognizable and Page 88 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT bailable, then such person shall be admitted to bail or in default of bail, forwarded to custody of Magistrate. In other words, sub-section(3)(a) of section 69 of CGST Act provides that when Commissioner has reason to believe that person has committed offence under clauses(a),(b),(c) and (d) of sub-section(1) of section 132 of CGST Act which is punishable under clause (ii) of sub-section(1) and Sub-section(2) of Section 132 then such person is covered by sub-section(4) of section 132 of CGST Act and as such offence would be non cognizable and bailable and in such circumstances, officer who is authorised to arrest shall grant bail or in default of bail, forward such person to custody of Magistrate. It appears that with view to give effect to power to grant bail by authorised officer under clause (a) of sub-section (3) of section 69, sub-clause(b) of sub- section(3)of section 69 of CGST Act provides for method, of course subject to provisions of Code of Criminal Procedure that in case of non-cognizable and bailable offence, Deputy Commissioner or Assistant Commissioner shall for purpose of releasing arrested person on bail or otherwise, has same powers and be subjected to same Page 89 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT provisions as officer-in-charge of police station. 64. Thus provisions of section 69 of CGST Act are absolutely clear and unambiguous which provides that during course of inspection, search and seizure when Commissioner has reason to believe that person has committed any offence as per clauses (a), (b), (c) or (d) of sub-section(1) of section 132 of CGST Act, which is punishable under clause(i) or clause (ii) of sub-section (1) or sub-section (2) of section 132 of CGST Act, then he may pass order authorising officer of department to arrest such person. Thereafter, if offence falls under category of cognizable and non bailable offence as per sub-section (5) of section 132, then sub-section (2) of section 69 casts duty upon officer authorised to arrest such person to inform such person of grounds of arrest and produce him before Magistrate within twenty-four hours; whereas if offence is non-cognizable bailable as per sub-section(4) of section 132 then subject to provisions of Code, clauses (a) and (b) of sub- section (3) of section 69 provides for enlarging such person on bail by concerned Page 90 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT officer i.e. Deputy Commissioner or Assistant Commissioner exercising same powers and be subjected to same provisions as officer- in-charge of police station. 65. In view of above discussion, contention canvassed by petitioners that Commissioner would not be in position to form his reasonable belief that person has committed offence unless and until there is final adjudication of liability of assessee as prescribed under Chapter VIII of CGST Act, is without any basis. It is necessary to keep in mind that section 69 of CGST Act falls under Chapter XII which provides for inspection, search, seizure and arrest which are in nature of measures prescribed under provisions of CGST Act to find out evasion of tax, if any, by any person. On other hand, section 132 of CGST Act prescribes punishment for certain offences falling under Chapter XIX which provides for offences and penalties. Thus, Section 132 of CGST Act is enacted by legislature prescribing punishment for offences committed by assessee either upon adjudication and assessment proceedings having been completed or otherwise as per clauses (a) to (l) of sub-section (1) of Page 91 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT section 132 of CGST Act. Therefore, section 69 and section 132 of CGST Act operates in totally different fields and attempt on part of petitioners to canvass that unless and until adjudication proceedings of assessment determining tax and penalty liability is completed by department as provided under Chapter VIII of CGST Act, Commissioner cannot form at any opinion to reason to believe that assessee has committed any offence, is contrary to entire scheme of CGST Act. 66. Supreme Court in case of Radheshyam Kejriwal v. State of West Bengal and another [(2011) 3 SCC 581] has culled out various principles in aforesaid context as under : "38. ratio which can be culled out from these decisions can broadly be stated as follows: (i) Adjudication proceedings and criminal prosecution can be launched simultaneously; (ii) Decision in adjudication proceedings is not necessary before initiating criminal prosecution; (iii) Adjudication proceedings and criminal proceedings are independent in nature to each other; (iv) finding against person facing Page 92 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT prosecution in adjudication proceedings is not binding on proceeding for criminal prosecution; (v) Adjudication proceedings by Enforcement Directorate is not prosecution by competent court of law to attract provisions of Article 20(2) of Constitution or Section 300 of Code of Criminal Procedure; (vi) finding in adjudication proceedings in favour of person facing trial for identical violation will depend upon nature of finding. If exoneration in adjudication proceedings is on technical ground and not on merit, prosecution may continue; and (vii) In case of exoneration, however, on merits where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on same set of facts and circumstances cannot be allowed to continue, underlying principle being higher standard of proof in criminal cases. 67. Thus, what is discernible from above referred judgment of Supreme Court and also other precedence is as under: 1) On same violation alleged against person, if adjudication proceedings as well as criminal proceedings are permissible, both can be initiated simultaneously. For initiating criminal proceedings one does not Page 93 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT have to wait for outcome of adjudication proceedings as two proceedings are independent in nature. 2) findings in departmental proceedings would not amount to resjudicata and initiation of criminal proceedings in these circumstances can be treated as double jeopardy as they are not in nature of "prosecution". 3). In case adjudication proceedings are decided against person who is facing prosecution as well and Tribunal has also upheld findings of adjudicators/assessing authority, that would have no bearing on criminal proceedings and criminal proceedings are to be determined on its own merits in accordance with law, uninhibited by findings of Tribunal. It is because of reason that in so far as criminal action is concerned, it has to be proved as per strict standards fixed for criminal cases before criminal court by producing necessary evidence. 4) In case of converse situation namely where accused persons are exonerated by Page 94 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT competent authorities/Tribunal in adjudication proceedings, one will have to see reasons for such exoneration to determine whether these criminal proceedings could still continue. If exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on merits or adjudication proceedings were on different facts, it would have no bearing on criminal proceedings. If, on other hand, exoneration in adjudication proceedings is on merits and it is found that allegations are not substantiated at all and concerned person(s) is/are innocent, and criminal prosecution is also on same set of facts and circumstances, criminal prosecution cannot be allowed to continue. reason is obvious criminal complaint is filed by departmental authorities alleging violation/contravention of provisions of Act on part of accused persons. However, if departmental authorities themselves, in adjudication proceedings, record categorical and unambiguous finding that there is no such contravention of provisions of Act, it would be unjust for such departmental authorities to continue with criminal complaint and say that Page 95 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT there is sufficient evidence to foist accused persons with criminal liability when it is stated in departmental proceedings that ex-facie there is no such violation. yardstick would, therefore, be to see as to whether charges in departmental proceedings as well as criminal complaint are identical and exoneration of concerned person in departmental proceedings is on merits holding that there is no contravention of provisions of any Act. 68. We may now refer to and rely upon decision of Telangana High Court in case of P.V. Ramana Reddy (supra) wherein elaborate discussion of this issue is made as under : 30. It can be seen from language employed in sub-Sections (1), (2) and (3) of Section 69, that there are some incongruities. Under sub-Section (1) of Section 69, power to order arrest is available only in cases where Commissioner has reasons to believe that person has committed any offence specified in clauses (a) to (d) of sub- Section (1) of Section 132 CGST Act, 2017. offences specified in clauses (a) to (d) of sub-Section (1) of Section 132 CGST Act, 2017 are made cognizable and non- bailable under Section 132(5) of CGST Act, 2017. Page 96 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 31. Therefore, it is clear from sub- Section (1) of Section 69 of CGST Act that power of Commissioner to order arrest of person, can be exercised only in cases where such person is believed to have committed cognizable and non- bailable offence. As we have pointed out elsewhere, Section 132(1) of CGST Act, 2017 lists out 12 different types of offences from clauses (a) to (l). offences specified in clauses (a) to (d) of sub- Section (1) of Section 132 are declared cognizable and non-bailable under sub-Section (5) of Section 132 CGST Act, 2017. All other offences specified in clauses (f) to (l) of sub-Section (1) of Section 132 of CGST, 2017 Act are declared as non-cognizable and bailable under sub- Section (4) of Section 132 of CGST Act, 2017. 32. But incongruity between Section 69(1) and sub-Sections (4) and (5) of Section 132 of CGST Act, 2017 is that when very power to order arrest under Section 69(1) is confined only to congnizable and non-bailable offences, we do not know how 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 complete code in itself in respect of (1) acts that constitute offences, (2) procedure for prosecution and (3) punishment upon conviction, then power of Commissioner, who is not Police Officer, to order arrest of person should also emanate from Page 97 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT prescription contained in Act itself. Section 69(1) of CGST Act, 2017 very clearly delineates power of Commissioner to order arrest of person whom he has reasons to believe, to have committed offence which is cognizable and non-bailable. Therefore, we do not know how person whom Commissioner believes to have committed 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 CGST Act, 2017 does not confer power of arrest in such cases. 35. fact that power of arrest under Section 69(1) of CGST Act, 2017 is confined only to cognizable and non-bailable offences, is also fortified by sub-Section (2) of Section 69 which obliges Officer, who carries out arrest to inform arrested person of grounds of arrest and to produce him before Magistrate within 24 hours. duty enjoined upon Officer carrying out arrest, to inform arrested person of grounds of arrest and to produce him before Magistrate within 24 hours, is co-relatable under sub- Section (2) of Section 69 of CGST Act, 2017 to Section 132(5) of CGST Act, 2017 that deals only with cognizable and non-bailable offences. 36. But, interestingly, clauses (a) and (b) of sub-Section (3) of Section 69 of CGST Act, 2017 deal in entirety only with cases of persons arrested for offences which are indicated as non- cognizable and bailable. phrase Page 98 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT "subject to provisions of Code of Criminal Procedure" is used only in sub-Section (3), which deals in entirety only with procedure to be followed after arrest of person who is believed to have committed non- cognizable and bailable offence. While clause (a) of sub-Section (3) gives two options to Officer carrying out arrest, namely, to grant bail by himself or to forward arrested person to custody of Magistrate, clause (b) confers powers of Officer in charge of police station, upon Deputy Commissioner or Assistant Commissioner (GST), for purpose of releasing arrested person on bail, in case of non-cognizable and bailable offences. 37. In other words, even though Section 69(1) of CGST Act, 2017 does not confer any power upon Commissioner to order arrest of person, who has committed offence which is non- cognizable and bailable, sub-Section (3) of Section 69 of CGST Act, 2017 deals with grant of bail, remand to custody and procedure for grant of bail to person accused of commission of non-cognizable and bailable offences. Thus, there is some incongruity between sub-Sections (1) and (3) of Section 69 read with section 132 of CGST Act, 2017. 38. Another difficulty with Section 69 of CGST Act, 2017 is that sub- Sections (1) and (2) of Section 69 which deal with power of arrest and production before Magistrate in case of cognizable and non-bailable Page 99 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT offences, do not use phrase "subject to provisions of Cr.P.C." This phrase is used only in sub-Section (3) of Section 69 in relation to 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 CGST Act, 2017, all offences under Act except those under clauses (a) to (d) of Section 132 (1), are made non- cognizable and bailable, notwithstanding anything contained in Cr.P.C. In addition, Section 67(10) of CGST Act, 2017 makes provisions of Cr.P.C. relating to search and seizure, apply to searches and seizures under this Act, subject to modification that word "Commissioner" shall substitute word "Magistrate" appearing in Section 165 (5) of Cr.P.C., in its application to CGST Act, 2017. 40. Therefore, (1) in light of fact that Section 69(1) of CGST Act, 2017 authorizes arrest only of persons who are believed to have committed cognizable and non-bailable offences, but Section 69(3) of CGST Act, 2017 deals with grant of bail and procedure for grant of bail even to persons who are arrested in connection with non-cognizable and bailable offences and (2) in light of fact that Commissioner of GST is conferred with powers of search and seizure under Section 67(10) of CGST Act, 2017, in same manner as Page 100 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT provided in Section 165 of Cr.P.C., 1973, contention of Additional Solicitor General that petitioners cannot take umbrage under Sections41 and 41A of Cr.P.C. may not be correct. 41. Though for purpose of summoning of witnesses and for summoning production of documents, Proper Officer holding enquiry under CGST Act, 2017 is treated like Civil Court, there are four other places in Act, where reference is made, directly or indirectly, to Cr.P.C. They are (1) reference to Cr.P.C. in relation to search and seizure under Section 67(10) of CGST Act, 2017, (2) reference to Cr.P.C. under sub- Section (3) of Section 69 in relation to grant of bail for person arrested in connection to non-cognizable and bailable offence, (3) reference to Cr.P.C. in Section 132 (4) while making all offences under CGST Act, 2017 except those specified in clauses (a) to (d) of Section 132 (1) of CGST Act, 2017 as non-cognizable and bailable and (4) reference to Sections 193 and 228 of IPC in Section 70(2) of CGST Act, 2017. Therefore, contention of learned Additional Solicitor General that in view of Section 69(3) of CGST Act, 2017, petitioners cannot fall back upon limited protection against arrest, found in Sections 41 and 41A of Cr.P.C., may not be correct. As pointed out earlier, Section 41-A was inserted in Cr.P.C. by Section 6 of Code of Criminal Procedure (Amendment) Act, 2008. Under sub-Section (3) of Section 41A Cr.P.C., person who complies with notice for appearance and who continues to comply with Page 101 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT notice for appearance before Summoning Officer, shall not be arrested. In fact, duty imposed upon Police Officer under Section 41A(1) Cr.P.C., to summon person for enquiry in relation to cognizable offence, is what is substantially ingrained in Section 70(1) of CGST Act. Though Section 69(1) which confers powers upon Commissioner to order arrest of person does not contain safeguards that are incorporated in Section 41 and 41A of Cr.P.C., we think Section 70(1) of CGST Act takes care of contingency. 42. In any case, moment Commissioner has reasons to believe that person has committed cognizable and non-bailable offence warranting his arrest, then we think that safeguards before arresting 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 absolute irrevocable guarantee against arrest. Despite compliance with notices of appearance, Police Officer himself is entitled under Section 41A(3) Cr.P.C., for reasons to be recorded, arrest person. At this stage, we may notice 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 Police Officer is of opinion that persons concerned ought to be arrested. In contrast, Section 69(1) uses phrase "reasons to believe". Page 102 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT There is vast difference between "reasons to be recorded" and "reasons to believe." 44. It was contended by Mr. Niranjan Reddy, learned Senior Counsel for petitioners that under Section 26 IPC, person is said to have "reason to believe", if he has sufficient cause to believe. Therefore, he contended that authorization for arrest issued under Section 69(1) of CGST Act, 2017 should contain reasons in writing. But in one of cases on hand, authorization for arrest does not contain reasons. Therefore, it was contended that authorization was bad. 45. But, as we have pointed, requirement under Section 41A(3) of Cr.P.C. is "recording of reason", while requirement under Section 69(1) of CGST Act, 2017 is "reason to believe". In fact, on question as to whether or not, reasons to believe should be recorded in authorization for arrest, learned Additional Solicitor General submitted that reasons are recorded in files. learned Additional Solicitor General also produced files. 46. If reasons to believe are recorded in files, we do not think it is necessary to record those reasons in authorization for arrest under Section 69(1) of CGST Act. Since Section 69(1) of CGST Act, 2017 specifically uses words "reasons to believe", in contrast to words "reasons to be recorded" appearing in Section 41A(3) of Page 103 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Cr.P.C., we think that it is enough if reasons are found in file, though not disclosed in order authorizing arrest. 47. Once it is found that Article 226 of Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under SC/ST Act where it stands expressly excluded) and once it is found that limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to person sought to be arrested under Section 69(1) of CGST Act, 2017 (though necessity to record reasons in authorization for arrest may not be there), it should follow as corollary that writ petitions cannot be said to be not maintainable. 48. That takes us to next question as to whether petitioners are entitled to protection against arrest, in facts and circumstances of case. We have already indicated on basis of ratio laid down by Constitution Bench in Kartar Singh and ratio laid down in Km. Hema Mishra that jurisdiction under Article 226 of Constitution of India to grant protection against arrest, should be sparingly used. Therefore, let us see prima facie, nature of allegations against petitioners and circumstances prevailing in case, for deciding whether petitioners are entitled to protection against arrest. We have already extracted in brief, contents of counter affidavits. We have summarized Page 104 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT contents of counter affidavits very cautiously with view to avoid colouring of our vision. Therefore, what we will now take into account on facts, will only be superficial examination of facts. 49. In essence, main allegation of Department against 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. Department has estimated that fake GST invoices were issued to total value of about Rs.1,289 crores and benefit of wrongful ITC passed on by petitioners is to tune of about Rs.225 crores. 50. contention of petitioners is that CGST Act, 2017 prescribes procedure for assessment even in cases where information furnished in returns is found to have discrepancies and that unless summary assessment or special audit is conducted determining liability, no offence can be made out under Act. Therefore, it is their contention that even prosecution cannot be launched without assessment and that therefore, there is no question of any arrest. 51. It is true that CGST Act, 2017 provides for (i) self assessment, under Section 59, (ii) provisional assessment, under Section 60, (iii) scrutiny of returns, under Section 61, (iv) assessment of persons who do not file Page 105 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT returns, under Section 62, (v) assessment of unregistered persons, under Section 63, (vi) summary assessment in special cases, under Section 64 and (vii) audit under Sections 65 and 66. 52. But, to say that prosecution can be launched only after completion of assessment, goes contrary to Section 132 of CGST Act, 2017. list of offences included in sub-Section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of sub-Section (1) of Section 132 of CGST Act. prosecutions for these offences do not depend upon completion of assessment. Therefore, argument that there cannot be arrest even before adjudication or assessment, does not appeal to us. 53. argument was advanced by Mr. Raghunandan Rao, learned Senior Counsel for petitioners that all offences under Act are compoundable under sub-Section (1) of Section 138 of CGST Act, 2017, subject to restrictions contained in proviso thereto and that therefore, there is no necessity to arrest person for alleged commission of offence which is compoundable. 54. On surface of it, said argument of Mr. Raghunandan Rao, learned Senior Counsel for petitioners is Page 106 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT quite appealing. But, on deeper scrutiny, it can be found that argument is not sustainable for two reasons: (1) Any offence under CGST Act, 2017 is compoundable both before and after institution of prosecution. This is in view of substantial part of sub- section (1) of Section 138 of CGST Act, 2017. But, petitioners have not offered to compound offence, though compounding is permissible even before institution of prosecution. (2) Under 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, wrongful ITC allegedly passed on by petitioners, according to Department is to tune of Rs.225 Crores. Therefore, we do not think that even if we allow Batch petitioners to apply for compounding, they may have meeting point with Department as liability arising out of alleged actions on part of petitioners is so huge. Therefore, argument that there cannot be any arrest as long as offences are compoundable, is argument of convenience and cannot be accepted in cases of this nature. 55. Another argument advanced by learned Senior Counsel for petitioners is that since Proper Officer under CGST Act, 2017, even according to respondents is not Police Officer, he cannot and he does not seek custody of arrested person, for completing investigation/enquiry. Section 69(2) Page 107 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT obliges Officer authorized to arrest person, to produce arrested person before Magistrate within 24 hours. Immediately, upon production, Magistrate may either remand him to judicial custody or admit arrested person to bail, in accordance with procedure prescribed under Code of Criminal Procedure. There is no question of police custody or custody to Proper Officer in cases of this nature. Therefore, it is contended by Mr. Raghunandan Rao, learned Senior Counsel for petitioners that arrest under Section 69, does not advance cause of investigation/enquiry, but only provides satisfaction to respondents that they have punished arrested person even before trial. According to learned Senior Counsel, arrest of person which will not facilitate further investigation, has to be discouraged, since same has potential to punish person before trial. 56. But, aforesaid contention proceeds on premise as though only object of arresting person pending investigation is just to facilitate further investigation. However, it is not so. objects of pre-trial arrest and detention to custody pending trial, are manifold as indicated in section 41 of Code. They are: (a) to prevent such person from committing any further offence; (b) proper investigation of offence; (c) to prevent such person from causing evidence of offence to disappear or tampering with such evidence in any Page 108 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT manner; (d) to prevent such person from making any inducement, threat or promise to any person acquainted with facts of case so as to dissuade him from disclosing such facts to Court or to police officer; Therefore, it is not correct to say that object of arrest is only to proceed with further investigation with arrested person. 57. It is true that in some cases arising out of similar provisions for arrest under Customs Act and other fiscal laws, Supreme Court indicated that object of arrest is to further process of enquiry. But, it does not mean that furthering of enquiry/ investigation is only object of arrest. 58. Therefore, all technical objections raised by petitioners, to entitlement as well as necessity for respondents to arrest them are liable to rejected. Once this is done, we will have to examine whether, in facts and circumstances of these cases, petitioners are entitled to protection against arrest. It must be remembered that petitioners cannot be placed in higher pedestal than those seeking anticipatory bail. On other hand, jurisdiction under Article 226 has to be sparingly used, as cautioned by Supreme Court in Km.Hema Misra (cited supra). 59. We have very broadly indicated, without going deep, that petitioners Page 109 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT have allegedly involved in circular trading with turnover on paper to tune of about Rs.1,289.00 crores and benefit of ITC to tune of Rs.225.00 crores. GST regime is at its nascent stage. law is yet to reach its second anniversary. There were lot of technical glitches in matter of furnishing of returns, making ITC claims etc. Any number of circulars had to be issued by Government of India for removing these technical glitches. 60. If, even before GST regime is put on tracks, someone can exploit law, without actual purchase or sale of goods or hiring or rendering of services, projecting huge turnover that remained only on paper, giving rise to claim for input tax credit to tune of about Rs.225.00 crores, there is nothing wrong in respondents thinking that persons involved should be arrested. Generally, in all other fiscal laws, offences that we have traditionally known revolve around evasion of liability. In such cases, Government is only deprived of what is due to them. But in fraudulent ITC claims, of nature allegedly made by petitioners, huge liability is created for Government. Therefore, acts complained of against petitioners constitute threat to very implementation of law within short duration of its inception. 61. In view of above, despite our finding that writ petitions are maintainable and despite our finding that protection under Sections 41 and 41-A of Cr.P.C., may be available to Page 110 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 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 CGST Act, 2017, we do not wish to grant relief to petitioners against arrest, in view of special circumstances which we have indicated above. 69. We are in complete agreement with above dictum of law except with regard to findings of Telangana High Court that there is incongruity within section 69(1) and section 69(3) of Act. We reiterate that Section 69(1) of CGST Act provides for power to arrest for both types of offences i.e. cognizable and non bailable offences as well non-cognizable and bailable offences as per provisions of sub-section(5) and sub- section(4) of section 132 of CGST Act. We again make it clear that in sub-section(5) of section 132 reference is made to offences specified in clauses (a) to (d) of subsection (1) of section 132 for which punishment is prescribed in clause (i) of sub-section (1) of section 132 which are to be treated as cognizable and non bailable offence whereas sub-section(4) of section 132 starts with non obstante clause that Notwithstanding anything contained Page 111 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT in Code of Criminal Procedure, 1973 (2 of 1974), all offences under this Act, except offences referred to in sub-section (5) shall be non-cognizable and bailable which means that all types of offence as per Clauses (a) to (l) of sub-section (1)) of section 132 shall be non cognizable and bailable offences which are not punishable under clause(i) of sub-section (1) of section 132 of CGST Act. It is pertinent to observe that Clause(i) of sub-section (1) of section 132 prescribes punishment in cases where amount of tax evaded or amount of input tax credit wrongly availed or utilized or amount of refund wrongly taken exceeds rupees five hundred lakh with imprisonment for term which may extend to five years and with fine. Therefore, any other offence where amount of tax evaded or amount of input tax credit wrongly availed or utilized or amount of refund wrongly taken does not exceed rupees five hundred lakh, such offence would be non cognizable and bailable. Hence, sub- section(3) of section 69 of CGST Act which is subject to provisions of Code provides for conferring powers upon Deputy Commissioner and Assistant Commissioner to grant bail to person who is arrested for non-cognizable and bailable Page 112 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT offence as punishable as per clause(ii) of sub- section(1) or sub-section(2) of section 132 read with sub-section(1) of section 69 and subsection (4) of section 132 of CGST Act. 70. lot was argued on power of authorised officer to arrest person without valid warrant insofar as non cognizable and bailable offences under Act is concerned. This argument is based on use of phrase officer in charge of police station as appearing in section 69(3)(b) of Act. We do not find any substance in this submission canvassed by learned counsel appearing for petitioners. It is true that there is reference to officer in charge of police station in section 69(3)(b) of Act referred to above, but question is what powers of police officer have been conferred to GST officers. provision does not confer upon GST officers, powers of officer in charge of police station in respect of investigation and report. Instead of defining power to grant bail in detail, saying as to what they should do or what should not do, short and expedient way of referring to powers of another officer when placed in somewhat similar Page 113 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT circumstances, has been adopted. By its language, sub-section does not equate officers of GST with officer in charge of police station, nor does it make him one by implication. It only, therefore, means that he has got powers as defined in Code of Criminal Procedure for purpose of releasing such person on bail or otherwise. This does not necessarily mean that person alleged to have committed non cognizable and bailable offence cannot be arrested without warrant issued by Magistrate. 71. We also do not subscribe to view expressed in decision of learned Single Judge of Madras High Court in case of Jaychandran Alloys P. Ltd. (supra) wherein it is held in facts of that case that officials cannot be seen to be acting in excess of authority vested in them under statute and provisions of section 132 of CGST Act would stand triggered only once it is established that assessee has committed offence that has to necessarily be post- determination of demand due from assessee that itself has to necessarily follow process of assessment. However, as discussed above, provisions of section 69 and section 132 of CGST Act, operate in Page 114 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT different fields. reference to section 132 is made in section 69 only with regard to offences which are specified in section 132 of CGST Act so as to confer power of arrest only in certain cases. By invoking power to arrest under section 69, no punishment prescribed under section 132 is inflicted upon assessee. power to arrest as provided under section 69 of CGST Act is measure taken during course of inspection, investigation, search or seizure as explained in detail by Telangana High Court and therefore, it cannot be said that by invoking power under section 69 of CGST Act punishment prescribed under section 132 is inflicted. Therefore, there is basic fallacy in argument of petitioners that unless and until there is completion of adjudication process by determination of demand, as per provisions of CGST Act, power to arrest as provided under sub-section (1) of section 69 of CGST Act cannot be invoked. We, therefore, reject such argument. 72. Similarly reliance placed on decision of Punjab and Haryana High Court in case of Akhil Krishan Maggu (supra) is also of no help to petitioners as same is also based upon facts of its case. We do not subscribe Page 115 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to view of Punjab and Haryana High Court that Commissioner has no power to arrest in every case during investigation and that too without determination of tax evaded as well as finding that accused has committed offence described under section 132 of CGST Act as explained herein above. 73. As discussed earlier, sub-section(1) of section 69 of CGST Act clearly provides that person can be arrested only if Commissioner has reason to believe that he has committed offences specified in clauses (a), (b), (c) or (d) of sub-section (1) of section 132 of CGST Act, which is punishable under clause (i) or clause (ii) of sub-section(1) or sub-section(2) of section 132 of CGST Act only and if Commissioner has reason to believe that person has committed offences other than aforesaid clauses, such person cannot be arrested. It is required to be made clear that arrest and bail both are different parallels of law and cannot be mixed together. Clause (a) of sub- section(3) of section 69 of CGST Act provides for provision of default bail if person is arrested for any offence specified under sub-section(4) of section 132 of CGST Act which means offences under clauses Page 116 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (a)to (d) punishable under clause(ii) of sub-section (1) or sub-section (2) of section 132 of CGST Act. Therefore, except offences referred to in sub-section(5) which are cognizable and non bailable, all other offences are bailable and non-cognizable. In order to understand provisions of section 69, conferring powers to arrest, same can be summarized as under: OFFENCE AND PUNISHMENT UNDER SECTION 132 OF CGST ACT Sr. Offence Punishment under Bailable No. clause (i) or (ii) or non- of sub-section (1) bailable or sub-section (2) under sub- section(4) or (5) 1. Cognizable (i) in cases where and non- amount of tax evaded or amount bailable of input tax credit Any offence as per sub wrongly availed or specified utilised or section in clause amount of refund (a) to (d) (5)of wrongly taken sub-section exceeds five hundred section (1) of lakh rupees, with section 132. 132 imprisonment for term which may extend to five years and with fine; 2. any offence (ii) in cases where Bailable Page 117 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT specified amount of tax and non- in clause evaded or amount cognizable (a) to (d) of input tax credit as per sub of sub- wrongly availed or section section (1) utilised or (4)of of section amount of refund section 132 wrongly taken 132 exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for term which may extend to three years and with fine. 74. Thus, person can be arrested only in aforesaid two situations. offence is cognizable and non bailable only in case of serial no. 1 of aforesaid table and offence at serial no.2 of aforesaid table is non- cognizable and bailable and in that case person can be arrested but is entitled for default bail as mandated in section 69(3)(a) of CGST Act. 75. Now, questions with regard to exercise of power of arrest as provided under section 69 of CGST Act and applicability of provisions of Code of Criminal Procedure,1973 and whether concerned respondent authority can be considered as police officer as per provision of Code or not, are concerned, same are not res Page 118 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT integra in view of recent pronouncement by co-ordinate bench of this court where one of us (Coram : J.B. Pardiwala, J.) is author of decision in case of Sundeep Mahendrakumar Sangahavi Versus Union Of India in Special Civil Application No. 8669 of 2020 rendered on 4th August,2020. It is held in said judgment in context of provisions of section 104 of Customs Act,1962 which is pari materia to section 69 of CGST Act that officer in charge is not police officer and as such provisions of Code are not required to be adhered to while exercising power of arrest as under: 41. We may also quickly answer question as same is no longer res integra, whether Customs/DRI officers are police officers and whether they are required to register FIR in respect of offence under Sections 133 to 135 of Customs Act, 1962. 42. In Lalitha Kumari v. Government of Uttar Pradesh and others, (2014) 2 SCC 1), issue which arose for consideration was, whether police officer was bound to register First Information Report upon receiving any information relating to commission of cognizable offence under Section 154 of Code of Criminal Procedure, 1973, and police officer has power to conduct preliminary enquiry in order Page 119 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to test veracity of such information before registering same. decision in Lalitha Kumari's case does not, as such, apply to present case. 43. In Soni Vallabhdas Liladhar and another v. Assistant Collector of Customs, Jamnagar, AIR 1965 SC 481, Constitution Bench of Supreme Court held that Customs Officers are not police officers and statements made to them were not inadmissible under Section 25 of Indian Evidence Act. In Ramesh Chandra Mehta v. State of West Bengal, AIR 1970 SC 940 . 44. In Illias v. Collector of Customs, Madras, AIR 1970 SC 1065, constitution bench of Supreme Court held: 12. ....... After examining various provisions of Central Excise Act and in particular Section 21 it was observed that police officer for purpose of clause (b) of Section 190 of Code of Criminal Procedure could only be one properly so called. Central Excise Officer had to make complaint under Cl.(1) of Section 190 of Code to magistrate to enable him to take cognizance of offence committed under special statute. argument that Central Excise Officer under Section 21(2) of Central Excise Act had all powers of officer-in-charge of police station under Chapter XIV of Page 120 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Code and therefore he must be considered to be police officer within meaning of those words in Sec. 25 of Evidence Act was repelled for reason that though such officer had power of officer-in-charge of police station he did not have power to submit charge-sheet under Section 173 of Code 45. In Badaku Joti Savant v. State of Mysore, AIR 1966 SC 1746, Constitution Bench of Supreme Court held that Central Excise Officer under Central Excise and Salt Act, 1944, has no power to submit charge sheet under Section 173 of Code of Criminal Procedure. It was held that police officer for purposes of clause (b) of Section 190 of Code can only be police officer properly so-called. Central Excise officer will have to make complaint under clause (a) of Section 190 of Code. 46. In Superintendent of Customs v. Ummerkutty & others, 1984 K.L.T. 1, it was held that officer acting under provisions of Customs Act is not police officer or officer- in- charge of police station as contemplated in Code of Criminal Procedure. Therefore, he cannot initiate action under Section 190(1)(b) of Code. He is entitled to submit complaint under Section 190(1)(a) of Code. Page 121 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 47. In Percy Rustomji Basta v. State of Maharashtra, AIR 1971 SC 1087, following decision in Ramesh Chandra Mehta v. State of West Bengal, AIR 1970 SC 940, Supreme Court held that Customs Officer conducting inquiry under Section 107 or Section 108 of Customs Act is not police officer and person against whom inquiry is made is not accused and statement made by such person in that inquiry "is not statement made by person accused of offence". decision in Illias v. Collector of Customs, Madras, AIR 1970 SC 1065, was also followed in decision in Percy Rustomji Basta v. State of Maharashtra, AIR 1971 SC 1087. 48. In Veera Ibrahim v. State of Maharashtra, (1976) 2 SCC 302), Customs authorities called appellant and his companion to Customs house, took them into custody, and after due compliance with requirements of law, Inspector of Customs questioned appellant and recorded his statement under Section 108 of Customs Act. Supreme Court held that under circumstances it was manifest that at time when Customs Officer recorded statement of appellant, he was not formally "accused of any offence" and therefore, his statement is not hit by Article 20(3) of Constitution of India. Page 122 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 49. In Directorate of Enforcement v. Deepak Mahajan and another, (1994)3 SCC 440, question of law raised for consideration by Supreme Court was following: Whether Magistrate before whom person arrested under sub-section (1) of Section 35 of Foreign Exchange Regulation Act of 1973 which is in pari materia with sub- section (1) of Section 104 of Customs Act of 1962, is produced under sub-section (2) of Section 35 of Foreign Exchange Regulation Act, has jurisdiction to authorise detention of that person under Section 167(2) of Code of Criminal Procedure? 50. Answering above question, Supreme Court in Deepak Mahajan's case held thus: 116. It should not be lost sight of fact that police officer making investigation of offence representing State files report under Section 173 of Code and becomes complaint whereas prosecuting agency under special Acts files complaint as complainant i.e. under Section 61(ii) in case of FERA and under Section 137 of Customs Act. To say differently, police officer after consummation of investigation files report under Section 173 of Code upon which Magistrate may take cognizance Page 123 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of any offence disclosed in report under Section 190(1)(b) of Code whereas empowered or authorised officer of special Acts has to file only complaint of facts constituting any offence under provisions of Act on receipt of which Magistrate may take cognizance of said offence under Section 190(1)(a) of Code. After taking cognizance of offence either upon police report or upon receiving complaint of facts, Magistrate has to proceed with case as per procedure prescribed under Code or under special procedure, if any, prescribed under special Acts. Therefore, word 'investigation' cannot be limited only to police investigation but on other hand, said word is with wider connotation and flexible so as to include investigation carried on by any agency whether he be police officer or empowered or authorised officer or person not being police officer under direction of Magistrate to make investigation vested with power of investigation. .................. 120. From above discussion it cannot be said that either Officer of Enforcement or Customs Officer is not empowered with power of investigation Page 124 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT though not with power of filing final report as in case of police officer. ................... 132. For aforementioned reasons, we hold that operation of Section 4(2) of Code is straightaway attracted to area of investigation, inquiry and trial of offences under special laws including FERA and Customs Act and consequently Section 167 of Code can be made applicable during investigation or inquiry of offence under special Acts also inasmuch as there is no specific provision contrary to that excluding operation of Section 167. .................... 136. In result, we hold that sub-sections (1) and (2) of Section 167 are squarely applicable with regard to production and detention of person arrested under provisions of Section 35 of FERA and Section 104 of Customs Act and that Magistrate has jurisdiction under Section 167(2) to authorise detention of person arrested by any authorised officer of Enforcement under FERA and taken to Magistrate in compliance of Section 35(2) of FERA. Page 125 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 51. In Union of India v. Padam Narain Aggarwal, AIR 2009 SC 254), it was held that power to arrest person by Customs Officer is statutory in character and cannot be interfered with. Referring to Section 108 of Customs Act, it was held that Section 108 does not contemplate magisterial intervention. power is exercised by Gazetted Officer of Department. It obliges person summoned to state truth upon any subject respecting which he is examined. He is not absolved from speaking truth on ground that such statement is admissible in evidence and could be used against him. Section 108 of Customs Act enables officer to elicit truth from person examined. underlying object of Section 108 is to ensure that officer questioning person gets all truth concerning incident. It was also held that statements recorded under Section 108 of Customs Act are distinct and different from statements recorded by police officers during course of investigation under Code. Supreme Court followed decisions in Ramesh Chandra Mehta v, 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 Page 126 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT question whether authorities under Central Excise Act, 1944, have power to arrest person under Section 13 of said Act without warrant and without filing FIR or lodging complaint before court of competent jurisdiction. This Court held that mere conferment of powers of investigation into criminal offences under Central Excise Act does not make Central Excise officer police officer. It was further held: 26, From decisions referred to hereinabove, following principles emerge:- ....... (v) Where Customs Officer arrests person and informs that person of grounds of his arrest (which he is bound to do under Article 22(1) of Constitution) for purposes of holding enquiry into infringement of provisions of Customs Act which he has reason to believe has taken place, there is no formal accusation of offence. In case of offence by infringement of Customs Act and punishable at trial before Magistrate there is accusation when complaint is lodged by officer competent in that behalf before Magistrate. Page 127 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (vi)Arrest and detention are only for purpose of holding effectively inquiry under Sections 107 and 108 of Customs Act with view to adjudging confiscation of dutiable or prohibited goods and imposing penalty. At that stage there is no question of offender against Customs Act being charged before Magistrate. Ordinarily, after adjudging penalty and confiscation of goods or without doing so, if Customs Officer forms opinion that offender should be prosecuted, he may prefer complaint in manner provided under Section 137 with sanction of Collector of Customs and until complaint is so filed, person against whom inquiry is commenced under Customs Act does not stand in character of person accused of offence under Section 135. (vii) Customs Officer is revenue officer primarily concerned with detection of smuggling and enforcement and levy of proper duties and prevention of entry into India of dutiable goods without payment of duty and of goods of which entry is prohibited." Page 128 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 53. In Bhavin Impex Pvt. Ltd.'s case, this Court further held that: 31. above discussion leads to inevitable conclusion that Section 13 of Central Excise Act empowers Central Excise Officers to arrest person whom he has reason to believe to be liable to punishment under Act without issuance of warrant and without registration of FIR or complaint before Magistrate. xxx 55. Thus, above referred case-law makes it abundantly clear that Customs/DRI officers are not police officers. Customs officer conducting inquiry under Section 107 or Section 108 of Customs Act is not police officer and person against whom such inquiry is made is not accused. power to arrest person by Customs officer is statutory in character and ordinarily should not be interfered with by court unless compelling circumstances are made out. statements recorded under Section 108 of Customs Act are distinct and different from statements recorded by police officers under Section 161 of Code of Criminal Procedure during course of investigation under Code. xxxx Page 129 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT 60. We are not satisfied that under Act of 1962 such powers have been vested in Customs officers that they must be regarded as police officers. close reading of provisions shows that powers that are conferred upon them do not make them police officers or bring them to level of police officers and are merely intended to avoid certain inconveniences in discharge of their duties. When we say inconveniences; inconveniences both to citizen and to department. powers of search, seizure and arrest are contained in Chapter 13 of Act of 1962. 61. Much reliance is, however, placed by Mr. Pandya on provisions of Section 104 of Customs Act, 1962 which contains power of arrest. Section 104 is equivalent to Sections 173 to 175 of old Act. Under those sections if reasonable suspicion existed against any person that he was guilty of offence under that Act, he could be arrested in any place by any officer of Customs or other person duly employed for prevention of smuggling. Under Section 174 of old Act every person arrested had forthwith to be taken before nearest Magistrate or Customs Collector. If he was taken to Magistrate, then Magistrate under Section 175 could direct him to be committed to jail or to be kept in custody of Police for such time as was necessary to enable Magistrate to communicate with Page 130 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT proper officers of Customs and it provided that Magistrate should release any such person on his giving satisfactory security. Section 104 of Customs Act, 1962 restricts exercise of power of arrest to officers who are either generally or specially authorised by Collector of Customs only if they have reason to believe that offence has been committed. marked difference between Section 173 of old Act and Section 104 of Act, 1962 is that, under old Act he could arrest on reasonable suspicion, while under new section he must have reasonable belief that person has been guilty of offence. Certainly, provision is for benefit of citizen and it is not intended to invest Customs officers with larger powers. Sub- section (2) of Section 104 of Act, 1962, is practically similar to Section 174 of old Act except that word 'forthwith' has been substituted with words 'without unnecessary delay'. This, however, means same thing. It is intended to meet inconvenience of temporary duration. Sub-section (3), however, is very much relied for it provides: Where officer of Customs has arrested any person under sub- section (1), he shall, for purpose of releasing such person on bail or otherwise, have same powers and be subject to same provisions as officer-in-charge Page 131 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT of police station has and is subject to under Code of Criminal Procedure, 1898. 62/ Now, it is true that there is reference to 'officer-in- charge of police station' in this sub- section. But then question is what powers of police officer are given to Customs officers. provision does not give Customs officers powers of officer-in-charge of police station in respect of investigation and report. Instead of defining power to grant bail in detail saying as to what they should do or should not do, short and expedient way of referring to powers of another officer when placed in somewhat similar circumstances has been adopted. By its language sub-section does not equate officers of Customs with officer-in-charge of police station, nor does it make him one by implication. It only, therefore, means that he has got powers as defined in Code of Criminal Procedure for purpose of releasing such person on bail or otherwise. xxxx 67. From above, following is discernible: (i) main purpose of provisions of Customs Act is levy and collection of duty on Page 132 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT imports and exports, import export procedures, prohibitions on imports and exports of goods, penalties, offences, etc. and 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) Customs Officer is not member of police force. He is not entrusted with duty of maintaining law and order. He is entrusted with powers that specifically relate to collection of customs duty and prevention of smuggling. power to arrest, power to detain, power to search or obtain search warrant and power to collect evidence are vested in Customs Officer for enforcing compliance of provisions of Sea Customs Act. Customs Officer does not exercise, when enquiring into suspected infringement of Sea Customs Act, powers of investigation which police officer may in investing commission of offence. He is invested with power to enquire into infringements of Act primarily for purpose of adjudicating forfeiture and penalty. He has no power to Page 133 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT investigate offence triable by Magistrate, nor has he power to submit report under Section 173 of Code of Criminal Procedure. He can only make complaint in writing before competent Magistrate. (iii) expression 'any person' includes person who is suspected or believed to be concerned in smuggling of goods. But person arrested by Customs Officer because he is found in possession of smuggled goods or on suspicion that he is concerned in smuggling goods is not when called upon by Customs Officer to make statement or to produce document or thing, person accused of offence within meaning of Article 20 (3) of Constitution. steps taken by Customs Officer are for purpose of holding enquiry under Customs Act and for adjudging confiscation of goods dutiable or prohibited and imposing penalties. Customs Officer does not at that stage accuse person suspected of infringing provision of Customs Act with commission of any offence. His primary duty is to prevent smuggling and to recover duties of customs: when collecting evidence in respect of smuggling against person suspected of infringing Page 134 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT provisions of Customs Act, he is not accusing person of any offence punishable at trial before Magistrate. (iv) Where Customs Officer arrests person and informs that person of grounds of his arrest (which he is bound to do under Article 22(1) of Constitution) for purposes of holding enquiry into infringement of provisions of Customs Act which he has reason to believe has taken place, there is no formal accusation of offence. In case of offence by infringement of Customs Act and punishable at trial before Magistrate there is accusation when complaint is lodged by officer competent in that behalf before Magistrate. (v)Arrest and detention are only for purpose of holding effectively inquiry under Sections 107 and 108 of Customs Act with view to adjudging confiscation of dutiable or prohibited goods and imposing penalty. At that stage there is no question of offender against Customs Act being charged before Magistrate. Ordinarily, after adjudging penalty and confiscation of goods or without doing so, if Customs Officer forms opinion that offender Page 135 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT should be prosecuted, he may prefer complaint in manner provided under Section 137 with sanction of Collector of Customs and until complaint is so filed, person against whom inquiry is commenced under Customs Act does not stand in character of person accused of offence under Section 135. (vi) Customs Officer is revenue officer primarily concerned with detection of smuggling enforcement and levy of proper duties and prevention of entry into India of dutiable goods without payment of duty and of goods of which entry is prohibited. (vii) person arrested under Section 104 (1) of Customs Act would fall within ambit of expression 'suspected of commission of any non-bailable offence'. person arrested by Customs Officer under Section 104 would be person suspected of commission of such offence inasmuch as arrest itself is made when officer of customs has reason to believe that such person has been guilty of offence punishable under Section 135 of Customs Act. (viii) police is instrument for prevention and detection of crime which can be said to be main object of having police. Page 136 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT powers of customs officers are really not for such purpose and are meant for checking smuggling of goods and due realization of customs duties and determining action to be taken in interest of revenue of country by way of confiscation of goods of which no duty has been paid and by imposing penalties and fine. OM PRAKASH'S CASE : 68. We shall now look into decision of Supreme Court in case of Om Prakash (supra). three Judge Bench of Supreme Court, considering distinction between offences punishable under Indian Penal Code and that under Central Excise Act, 1944, and Customs Act, 1962, held as under: 16. As has been indicated hereinbefore in this judgment, Section 2(a) of Code defines 'bailable offence' to be offence shown as bailable in First Schedule to Code or which is made bailable by any other law for time being in force. First Schedule to Code which deals with classification of offences is in two parts. first part deals with offences under Penal Code, while second part deals with classification of offences in respect of other laws. Inasmuch as, Page 137 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT offences relate to offences under 1944 Act, it is second part of First Schedule which will have application to cases in hand. last item in list of offences provides that if offence is punishable with imprisonment for less than three years or with fine only, offence will be non-cognizable and bailable. Accordingly, if offences come under said category, they would be both non-cognizable as well as bailable offences. However, in case of 1944 Act, in view of Section 9-A, all offences under Act have been made non-cognizable and having regard to provisions of Section 155, neither could any investigation be commenced in such cases, nor could person be arrested in respect of such offence, without warrant for such arrest. 34. Mr. Parasaran's next submission was with regard to provisions of Part II of First Schedule to Code of Criminal Procedure and it was submitted that same has to be given meaningful interpretation. It was urged that merely because discretion had been given to Magistrate to award punishment of less than three years, it must fall under third head of said Schedule and, therefore, be non-cognizable and bailable. On Page 138 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT other hand, as long as Magistrate had power to sentence person for imprisonment of three years or more, notwithstanding fact that he has discretion to provide sentence of less than three years, same will make offence fall under second head thereby making such offence non- bailable. It was submitted that in essence it is maximum punishment which has to determine head under which offence falls in Part II of First Schedule to Code and not use of discretion by Magistrate to award lesser sentence. 35. In support of his submissions, Mr. Parasaran referred to decisions of this Court in CBI v. Tapan Kumar Singh [(2003) 6 SCC 175 : 2003 SCC (Cri) 1305] and Bhupinder Singh v. Jarnail Singh [(2006) 6 SCC 277 : (2006) 3 SCC (Cri) 101] , to which reference will be made, if necessary. 36. As we have indicated in first paragraph of this judgment, question which we are required to answer in this batch of matters relating to Central Excise Act, 1944, is whether all offences under said Act are non- cognizable and, if so, whether such offences are bailable ? In order to answer said question, it would be Page 139 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT necessary to first of all look into provisions of said Act on said question. 37. Sub-section (1) of Section 9-A, which has been extracted hereinbefore, states in completely unambiguous terms that notwithstanding anything contained in Code of Criminal Procedure, offences under Section 9 shall be deemed to be non- cognizable within meaning of that Code. There is, therefore, no scope to hold otherwise. It is in said context that we will have to consider submissions made by Mr.Rohatgi that since all offences under Section 9 are to be deemed to be non- cognizable within meaning of Code of Criminal Procedure, such offences must also be held to be bailable. 38.The expression "bailable offence" has been defined in Section 2(a) of Code and set out hereinabove in para 6 of judgment, to mean offence which is either shown to be bailable in First Schedule to Code or which is made bailable by any other law for time being in force. As noticed earlier, First Schedule to Code consists of Part I and Part II. While Part I deals with offences under Penal Code, Part II deals with offences under other laws. Accordingly, if provisions of Part II of Page 140 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT First Schedule are to be applied, offence in order to be cognizable (sic non-cognizable) and bailable would have to be offence which is punishable with imprisonment for less than three years or with fine only, being third item under category of offences indicated in said Part. offence punishable with imprisonment for three years and upwards, but not more than seven years, has been shown to be cognizable and non-bailable. If, however, all offences under Section 9 of 1944 Act are deemed to be non-cognizable, then, in such event, even second item of offences in Part II could be attracted for purpose of granting bail since, as indicated above, all offences under Section 9 of 1944 Act are deemed to be non-cognizable. 69. It is, thus, evident from above that main thrust of Om Prakash decision to ascertain whether offence was bailable or non-bailable, was on point that offence being non-cognizable, it had to be bailable. 70. In Om Prakash (supra), question arose, with respect to investigation in cases relating to Central Excise Act, 1944, and Customs Act, 1962, as to whether officers under said Act could arrest without warrant in connection with those offences which were non-cognizable and Page 141 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT bailable. powers of officers of Excise or Customs to initiate investigation and to arrest without warrant has been discussed and whether officers have powers akin to that of Police Officer was also looked into. It was held that offence, in order to be cognizable and bailable, would have to be offence which is punishable with imprisonment for less than three years. Further, for all those offences which are punishable for period of three to seven years can be considered as cognizable and non- bailable. Supreme Court held that offences under Indian Penal Code cannot be equated with those listed in Central Excise Act to draw conclusion as to which of those offences are non-cognizable and non-bailable. It was held that in view of Central Excise Act, 1944, non-cognizable offences are bailable in nature and if person is arrested, he shall be released on bail. Supreme Court held that offences under Customs Act are bailable and officers have same powers as that of Police Officer. 71. We take notice of various decisions of different High Courts explaining true purport of ratio of Om Prakash (supra). 72. We have to our advantage very exhaustive judgment delivered by Division Bench of Bombay High Court in case of Chhagan Chandrakant Page 142 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Bhujbal v. Union of india and others, reported in 2016 SCC Online Bom 9938. Division Bench of Bombay High Court was dealing with matter under PMLA Act. Bombay High Court considered decision of Om Prakash (supra) and also question whether arresting authority under PMLA Act was required to follow procedure laid down under Section 155(1) of Code of Criminal Procedure, 1973 .. xxx 77. only idea with which we have referred to Division Bench decision of Bombay High Court drawing fine distinction between scheme of Section 108 of Customs Act and Section 67 of NDPS Act is to meet with vociferous submissions of Mr.Pandya as regards admissibility of such statements in evidence. Mr.Pandya, in course of his submissions, has referred to Noor Aga (supra), Nirmal Singh Pehalwan @ Nimma (supra) and Vinod Solanki (supra) to make good his submissions that statements recorded by Customs Officer while person is in custody of such officer is inadmissible in evidence and is hit by Section 25 of Evidence Act, 1872. In all above referred cases of Supreme Court, subject matter was Section 67 of NDPS Act. 78. In any view of matter, issue is at large before Supreme Court. Page 143 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT constitution bench of Supreme Court would be deciding this issue. xxx 84. This Court had occasion to deal with term 'proper officer' in 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). issue involved in said matter pertained to exercise of powers by 'proper officers' vis-a-vis Sections 17, 18 and 28 of Act. Reliance was placed on 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 Customs Act, 1962, by Customs Officer, if such officer has reasons to believe that such person has committed offence punishable under Section 132 or Section 133 or Section 135 or Section 135A or Section 136 of Customs Act, 1962, and in such circumstances, Customs Officer is not obliged to follow dictum of Supreme Court as laid in case of Lalitha Kumari (supra). Page 144 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (2) When any person is arrested by officer of Customs, in exercise of his powers under Section 104 of Customs Act, 1962, officer effecting arrest is not obliged in law to comply with provisions of Sections 154 to 157 of Code of Criminal Procedure, 1973. officer of Customs, after arresting such person, has to inform that person of grounds for such arrest, and person arrested will have to be taken to Magistrate without unnecessary delay. However, provisions of Sections 154 to 157 of Code will have no application at that point of time. (3) Customs/DRI Officers are not Police Officers and, therefore, are not obliged in law to register FIR against person arrested in respect of offence under Sections 133 to 135 of Customs Act, 1962. (4) decision of Supreme Court in case of Om Prakash (supra) has no bearing in case on hand. (5) DRI Officer is 'proper officer' for purposes of Customs Act, 1962. As Customs/DRI Officers are not Police Officers, statements made to them are not inadmissible under Section 25 of Evidence Act. (6) Police Officer, making investigation of offence, representing State, files report Page 145 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT under Section 173 of Code, becomes complainant, whereas, prosecuting agency under special Acts files complaint as complainant, i.e. under Section 137 of Customs Act. (7) power to arrest person by Customs Officer is statutory in character and should not be interfered with. Section 108 of Act does not contemplate any Magisterial intervention. statements recorded under Section 108 of Customs Act are distinct and different from statements recorded by Police Officers during course of investigation under Code. (8)The expression 'any person' in Section 104 of Customs Act includes person who is suspected or believed to be concerned in smuggling of goods. However, person arrested by 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 Customs Officer to make statement or to produce document or thing, person is accused of offence within meaning of Article 20(3) of Constitution of India. Where Customs Officer arrests person and informs that person of grounds of his arrest, for purposes of holding inquiry into infringement of provisions of Customs Act which he Page 146 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT has reason to believe has taken place, there is no formal accusation of offence. accusation could be said to have been made when complaint is lodged by officer competent in that behalf before Magistrate. arrest and detention are only for purpose of holding effective inquiry under Sections 107 and 108 of Customs Act with view to adjudging confiscation of dutiable or prohibited goods and imposing penalty. (9)The main thrust of decision in case of Om Prakash (supra) to ascertain whether offence was bailable or non-bailable, was on point that offence being non- cognizable, it had to be bailable. In other words, Om Prakash (supra) deals with question, whether offences under Customs Act, 1962, and Central Excise Act, 1944, are bailable or not ? At time when decision in Om Prakash (supra) was rendered, offence under Customs Act was not cognizable. So also, categorization of cases which are non-bailable and cases which are bailable was not there before amendment of Section 104 by Act No.23 of 2012 and Act No.17 of 2013 respectively. (10) Notification dated 7th July 1997 issued by Central Board of Central Excise makes it clear that all officers of Directorate of Revenue Intelligence are appointed as officers of Customs. Under Page 147 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Notification dated 7th March 2002, officers of DRI have been given jurisdiction over whole of India. In such circumstances, submissions of learned counsel appearing for writ-applicant as regards territorial jurisdiction of DRI office at Vapi to summon writ- applicant under Section 108 of Customs Act, 1962, pales into insignificance. (11)Although allegations of harassment at end of DRI officials at Vapi are not substantiated by any credible material on record, yet there should not be any unnecessary harassment to person summoned for purpose of interrogation under Section 108 of Customs Act, 1962. 93. In view of aforesaid discussion, this writ-application stands disposed of accordingly. 76. Therefore, question as to whether provisions of Code would be applicable while invoking power to arrest under section 69 of CGST Act or not is now answered in above judgment as provisions of section 69 of CGST Act is pari materia with that of section 104 of Customs Act,1962. Page 148 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT CONCLUSION : 77. In view of foregoing reasons and conspectus of law and analysis of provisions of section 69 read with section 132 of CGST Act and provisions of Code, we may sum up our Final conclusion to answer questions arising in these petitions as under: (1) Q. whether power to arrest as provided under section 69 read with section 132 of CGST Act can be invoked by Commissioner only upon completion of adjudication process of finalising assessment and determination of liability as per provisions of CGST Act? A. we are of opinion that power to arrest as provided under section 69 of CGST Act can be invoked if Commissioner has reason to believe that person has committed offences as provided under clauses (a), (b), (c) or (d) of sub-section(1) of section 132 of CGST Act, which are punishable under clause (i) or clause (ii) of sub-section (1) or sub-section (2) of section 132 of CGST Act without Page 149 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT there being any adjudication for assessment as provided under provisions of Chapter VIII of CGST Act. reference to section 132 in section 69 of CGST Act is only for purpose of indicating nature of offences on basis of same reasonable belief is formed and recorded by Commissioner for purpose of passing order of arrest. (2) Q. whether provisions of section 69 of CGST Act envisages that Commissioner is obliged to record his reasons of belief and furnish same to person who is sought to be arrested? A. (i) Commissioner is required to record reasons of belief to arrest person as per sub-section (1) of Section 69 of CGST Act. However sub-section (2) and sub-section (3) of section 69 with reference to provisions of sub- section(4) and sub-section (5) of section 132 of CGST Act, differentiates between cognizable and non cognizable offences. sub- Page 150 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT section (2) of section 69 provides for informing such person about grounds of arrest if he is alleged to have committed cognizable and non bailable offence and sub-section (3) authorises Deputy Commissioner or Assistant Commissioner subject to provisions of Code for releasing arrested person on bail if he is alleged to have committed non cognizable and bailable offences by exercising power as officer in charge of police station. Therefore, it is not necessary for Commissioner to provide copy of reasons recorded by him for his belief if he has reason to believe that any person has committed offences which are cognizable and non bailable. Sub-section (2) of section 69 of CGST Act provides statutory duty upon office`er authorised to arrest to inform such person about grounds of his arrest and in case if person is ordered to be arrested for offences which are non- cognizable and bailable , he would be released on bail as per provision of sub-section (3) of section 69 of CGST Act. Page 151 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (ii) Commissioner while recording his reasons to believe that person has committed any offence has only to form prima facie opinion based on cogent materials and credible information. words reason to believe contemplate objective determination based on intelligence, care and deliberation involving judicial review as distinguished from purely subjective consideration and hence he is not required to conclude that person sought to be arrested is guilty of any offence. expression 'any person' in Section 69 of CGST Act includes person who is suspected or believed to be concerned in evasion of tax or availing illegal input tax credit. However, person arrested by authorised Officer because he is found to be evading tax or availing input tax credit as specified in clauses (a) to (d) of sub-section (1) of section 132 of CGST Act is not, when called upon by authorised Officer to make statement or to produce document or thing, accused of offence within meaning of Article 20(3) of Constitution of India. Where Page 152 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT authorised Officer arrests person and informs that person of grounds of his arrest, for purposes of holding inquiry into infringement of provisions of CGST Act which he has reason to believe has taken place, there is no formal accusation of offence. accusation could be said to have been made when complaint is lodged by officer competent in that behalf before Magistrate. arrest and detention are only for purpose of holding effective inquiry under provisions of CGST Act with view to adjudging evasion of GST and availing illegal input tax credit and imposing penalty. (iii) order authorising any officer to arrest may be justified if Commissioner or any other authority empowered in law has reasons to believe that person concerned has committed offence under section 132 of Act. However, 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 Page 153 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT material, howsoever vague and indefinite or distant remote or far-fetching, which would warrant formation of belief. (iv) power conferred upon authority under Section 69 of Act for arrest could be termed as very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (v) power under Section 69 of Act should neither be used as tool to harass assessee nor should it be used in manner which may have irreversible detrimental effect on business of assessee. (vi) above are merely incidents of personal liberty guaranteed under Constitution of India. No arrest can be made because it is lawful for police officer to do so. existence of power to arrest is one thing. justification for exercise of it is quite another. Commissioner must be Page 154 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT able to justify arrest apart from his power to do so. Arrest and detention in police lock-up of person can cause incalculable harm to reputation and self-esteem of person. No arrest can be made in routine manner on mere allegation of commission of offence made against person. It would be prudent for authority in interest of protection of constitutional rights of citizen and perhaps in his own interest that no arrest should be made without reasonable satisfaction reached after some investigation as to genuineness and bona fides of complaint and reasonable belief both as to person's complicity and even so as to need to effect arrest. Denying person of his liberty is serious matter. person is not liable to be arrested merely on suspicion of complicity in offence. There must be some reasonable justification in opinion of authority effecting arrest that such arrest is necessary and justified. (3) Q. (i) Whether provisions of Page 155 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT sections 154, 155(1), 155(2), 155(3), 157, 172 of Code of Criminal Procedure, 1973 are applicable or should be made applicable for purpose of invoking power to arrest under section 69 of CGST Act? In other words, whether authorised officer can arrest person alleged to have committed non cognizable and bailable offences without warrant of arrest issued by Magistrate under provisions of Code of Criminal Procedure, 1973? (ii)For purpose of section 69(3) of CGST Act, whether officers of GST department could be said to be police officer in charge of police station as defined under section 2(o) of Code of Criminal Procedure, 1973? A. (i) Any person can be arrested for any offence under section 69 of CGST Act, 1962, by authorised officer to whom authority to arrest is given by Commissioner if Commissioner has reasons to believe that such person has committed offence punishable under Page 156 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT clauses (a) to (d) of subsection (1) which is punishable under clause(i) or Clause (ii) of sub- section (1) or sub-section(2) of Section 132 of CGST Act and in such circumstances, authorised Officer is not obliged to follow dictum of Supreme Court as laid in case of Lalitha Kumari (supra). (ii)When any person is arrested by authorised officer, in exercise of his powers under Section 69 of CGST Act, authorised officer effecting arrest is not obliged in law to comply with provisions of Sections 154 to 157 of Code of Criminal Procedure, 1973. authorised officer, after arresting such person, has to inform that person of grounds for such arrest, and person arrested will have to be taken to Magistrate without unnecessary delay, if offences are cognizable and non bailable. However, provisions of Sections 154 to 157 of Code will have no application at that point of time. Otherwise, sub-section (3) of section 69 provides for granting bail as provision does not confer upon GST Page 157 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT officers, powers of officer in charge of police station in respect of investigation and report. Instead of defining power to grant bail in detail, saying as to what they should do or what they should not do, short and expedient way of referring to powers of another officer when placed in somewhat similar circumstances, has been adopted. By its language, sub-section (3) does not equate officers of GST with officer in charge of police station, nor does it make him one by implication. It only, therefore, means that he has got powers as defined in Code of Criminal Procedure for purpose of releasing such person on bail or otherwise. This does not necessarily mean that person alleged to have committed non cognizable and bailable offence cannot be arrested without warrant issued by Magistrate. (iii)The authorised officer exercising power to arrest under section 69 of CGST Act, is not Police Officer and, therefore, is not obliged in law to register FIR against person arrested Page 158 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT in respect of offence under Sections 132 of CGST Act. (iv) decision of Supreme Court in case of Om Prakash (supra) has no bearing in case on hand. (v) authorised Officer is 'proper officer' for purposes of CGST Act. As authorised Officers are not Police Officers, statements made before them in course of inquiry are not inadmissible under Section 25 of Evidence Act. (vi)The power to arrest person by authorised Officer is statutory in character and should not be interfered with. Section 69 of CGST Act does not contemplate any Magisterial intervention. (vii) main thrust of decision in case of Om Prakash (supra) to ascertain whether offence was bailable or non-bailable, was on point that offence being non- cognizable, it had to be bailable. In other words, Om Prakash (supra) deals Page 159 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT with question, whether offences under Customs Act, 1962, and Central Excise Act, 1944, are bailable or not? However, provisions of sub- sections (2) and (3) of Section 69 of CGST Act, provides in built mechanism and procedure in case of arrest for non-bailable offences and bailable offences. (4) Q. Whether constitutional safeguards laid out by Supreme Court in D.K. Basu's case [1997 (1) SCC 416] in context of powers of police officers under Code of Criminal Procedure, 1973 and of officers of Central Excise, Customs and Enforcement Directorate are applicable to exercise of powers under provisions of section 69 of GST Act in equal measure? A. We may now address ourselves on last question as regards applicability of safeguards pertaining to arrest as explained by Supreme Court in case of D.K. Basu (supra), referred to above. It is significant to note that in D.K. Basu Page 160 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (supra), Supreme Court did not confine itself to actions of police officers taken in terms of powers vested in them under Code but also of officers of Enforcement Directorate including Directorate of Revenue Intelligence ('DRI'). This also included officers exercising powers under Customs Act, 1962 Central Excise Act, 1944 and Foreign Exchange Regulation Act, 1973 (FERA') now replaced by Foreign Exchange Management Act, 1999 ('FEMA') as well. It observed: "30. Apart from 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), Central Industrial Security Force (CISF), State Armed Police, Intelligence Agencies like Intelligence Bureau, R.A.W, Central Bureau of Investigation (CBI) , CID, Tariff Police, Mounted Police and ITBP which have power to detain person and to interrogated him in connection with investigation of economic offences, offences under Essential Commodities Act, Excise and Customs Act. Foreign Exchange Regulation Act etc. There are instances of torture and death Page 161 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT in custody of these authorities as well, In re Death of Sawinder Singh Grover [1995 Supp (4) SCC 450], (to which Kuldip Singh, J. was party) this Court took suo moto notice of death of Sawinder Singh Grover during his custody with Directorate of Enforcement. After getting enquiry conducted by additional District Judge, which disclosed prima facie case for investigation and prosecution, this Court directed CBI to lodge FIR and initiate criminal proceeding against all persons named in report of Additional District Judge and proceed against them. Union of India/Directorate of Enforcement was also directed to pay sum of Rs. 2 lacs to widow of deceased by was of relevant provisions of law to protect interest of arrested persons in such cases too is genuine need. ......... 33. There can be no gainsaying that freedom of individual must yield to security of State. right of preventive detention of individuals in interest of security of State in various situations prescribed under different statures has been upheld by Courts. right to interrogate detenues, culprits or arrestees in interest of nation, must take precedence over individual's right to personal liberty. latin maxim salus populi est suprema lex (the safety of people is supreme law) and salus republicae est suprema lex (safety of state is supreme Page 162 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT law) co-exist and are not only important and relevant but lie at heart of doctrine that welfare of individual must yield to that of community. action of 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 crime-suspect must be interrogated - indeed subjected to sustained and scientific interrogation determined in accordance with provisions of law. He cannot, however, be tortured or subjected to third degree methods or eliminated with view to elicit information, extract confession or drive knowledge about his accomplices, weapons etc. His Constitutional right cannot be abridged except in manner permitted by law, though in very nature of things there would be qualitative difference in methods of interrogation of such person as compared to ordinary criminal...." These constitutional safeguards emphasised in context of powers of police officers under Code of Criminal Procedure and of officers of central excise, customs and enforcement directorates, are applicable to exercise of powers under GST Act in equal measure. officer whether of Central Excise department or another Page 163 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT agency like DGCEI, authorised to exercise powers under Central Excise Act and/or FA will have to be conscious of constitutional limitations on exercise of such power. However, in context of D.K.Basu(supra), we would like to clarify that law laid down by Supreme Court in case of Poolpandi and others v. Superintendent, Central Excise and others reported in (1992) 3 SCC 259 has either been set aside or has been deviated from. It appears in paragraph no. 38 of said judgment itself, it has been stated that requirements referred to above (i.e. in paragraph no. 33) are for Articles 21 and 22 respectively of Constitution of India and not to be strictly followed. We may give simple illustration. Take case in which writ application is filed seeking direction for giving opportunity to person who is sought to be interrogated by police officer for any offence punishable under Indian Penal Code to consult his lawyer. Such direction may perhaps be issued in case of accused because of his Page 164 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT right under Article 22 of Constitution of India but same cannot be made applicable to person who is interrogated under section 70 of GST Act or section 108 of Customs Act where no right under Article 22 of Constitution is affected as held by Supreme Court in case of Poolpandi(supra). This Court, however, is quite conscious of fact that pronouncement of Supreme Court in case of Poolpandi(supra) as also in another case, pointing out that right of investigating authority should not be interfered with, as given to them under provisions of Act, does not give them uncharted liberty to proceed in whatsoever manner they like in matter of such inquiry or to extract statements from person concerned by perpetuating torture or by applying third degree methods. That, no doubt, will be in clear violation of right guaranteed under Article 21 of Constitution of India which is available to all citizens including person who will be interrogated under section 70 of GST Act or section 108 of Customs Act as held by Supreme Court Page 165 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT in case of D.K. Basu (supra). 78. petitioners have expressed apprehension of harassment at end of respondent authority. Though, such apprehension is not substantiated by any credible material on record, same would be taken care of by above observations made in answer to question no.4. We also clarify that in none of petitions, any case is made out for grant of any relief having regard to facts narrated by petitioners in their respective petitions. What has been observed and discussed by us are general propositions of law keeping in mind subject matter. 79. We also in this context emphasise mode of exercise powers of arrest under GST Law as power of arrest specified in Section 69 of CGST Act undoubtedly displeases corresponding powers of arrest vested in police officer under Code of Criminal Procedure. Section 69 of CGST Act requires certain preconditions to be fulfilled prior to arrest. In particular, reasons to believe have to be recorded in writing in file. second aspect of Section 69 of GST Act is communication of grounds of arrest. Although, Section 69 uses word Page 166 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT inform in context in which it appears, yet mere communication of grounds would not be sufficient. Merely reading out grounds of arrest to detenu would defeat very object of requiring reasons to believe to be recorded in writing and communicated to detenu. 80. In aforesaid context, we may refer to and rely upon Constitution Bench decision of Supreme Court in case of C.B.Gautam v. Union of India & ors. reported in 1993 (1) SCC 78. said decision is in context of Income Tax Act. judgment explains importance and obligation to record reasons and convey same to party concerned. judgment explains that such course would operate as deterrent against possible arbitrary action by quasi- judicial or executive authority invested with judicial powers. We quote relevant observations as under: 31. recording of reasons which lead to passing of order is basically intended to serve two-fold purpose: (1) that "party aggrieved" in proceeding before acquires knowledge of reasons and, in proceeding before High court or Supreme Page 167 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT court (since there is no right of appeal or revision), it has opportunity to demonstrate that reasons which persuaded authority to pass order adverse to his interest were erroneous, irrational or irrelevant, and (2) that obligation to record reasons and convey same to party concerned operates as deterrent against possible arbitrary action by quasi-judicial or executive authority invested with judicial powers. 32. Section 269UD(1), in express terminology, provides that appropriate authority may make order for purchase of property "for reasons to be recorded in writing". Section 269UD(2) casts obligation on authority that it "shall cause copy of its order under Ss. (1) in respect of any immovable property to be served on transferor". It is, therefore, inconceivable that order which is required to be served by appropriate authority under Ss. (2) would be one which does not contain reasons for passing of order or is not accompanied by reasons recorded in writing. It may be permissible to record reasons separately but order would be incomplete order unless either reasons are incorporated therein or are served separately along with order on affected party. We are, of view, that reasons for order must be communicated to affected party. 81. We have already indicated in our judgment that Page 168 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT guidelines as laid by Supreme Court in D.K. Basu (supra) shall apply even to officers of GST department. Before being codified in Code, specific requirement to draft arrest memo at time of arrest was first laid down as guideline by Supreme Court in D.K. Basu (supra). In D.K. Basu (supra), Supreme Court laid down 11 guidelines to be followed in all cases of arrest and detention. As one of these guidelines, requirement to draw up arrest memo was first articulated as: 36 (2) That police officer carrying out arrest of arrestee shall prepare memo of arrest at time of arrest and such memo shall be attested by at least one witness, who may be either member of family of arrestee or respectable person of locality from where arrest is made. It shall also be countersigned by arrestee and shall contain time and date of arrest. While producing person arrested under Section 69 of CGST Act, importance of valid, proper and exhaustive arrest memo should not be undermined. Every authorized officer under Act, 2017 carrying out arrest must be clear that preparation of arrest memo is mandatory. At this stage, we may state guidelines issued by Supreme Court in D.K. Basu (supra): Page 169 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (1) police personnel carrying out arrest and handling interrogation of arrestee should bear accurate, visible and clear identification and name tags with their designations. particulars of all such police personnel who handle interrogation of arrestee must be recorded in register. (2) That police officer carrying out arrest of arrestee shall prepare memo of arrest at time of arrest and such memo shall be attested by at least one witness, who may be either member of family of arrestee or respectable person of locality from where arrest is made. It shall also be countersigned by arrestee and shall contain time and date of arrest. (3) person who has been arrested or detained and is being held in custody in police station or interrogation centre or other lock-up, shall be entitled to have one friend or relative or other person known to him or having interest in his welfare being informed, as soon as practicable, that he has been arrested and is being detained at particular place, unless attesting witness of memo of arrest is himself such friend or relative of arrestee. (4) time, place of arrest and venue of custody of arrestee must be notified by police where next friend or relative of arrestee lives outside district or and through Legal Aid Organisation in District and police station of area concerned telegraphically within period of 8 to 12 hours after arrest. Page 170 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (5) person arrested must be made aware of this right to have someone informed of his arrest or detention as soon as he is put under arrest or is detained. (6) entry must be made in diary at place of detention regarding arrest of person which shall also disclose name of next friend of person who has been informed of arrest and names and particulars of police officials in whose custody arrestee is. (7) arrestee should, where he so requests, be also examined at time of his arrest and major and minor injuries, if any, present on his/her body, must be recorded at that time. "Inspection Memo" must be signed both by arrestee and police officer effecting arrest and its copy provided to arrestee. (8) arrestee should be subjected to medical examination by trained doctor every 48 hours during his detention in custody by doctor on panel of approved doctors appointed by Director, Health Services of concerned State or Union Territory, Director, Health Services should prepare such panel for all Tehsils and Districts as well. (9) Copies of all documents including memo of arrest, referred to above, should be sent to Illaqa Magistrate for his record. (10) arrestee may be permitted to meet his lawyer during interrogation, though not throughout interrogation. Page 171 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT (11) police control room should be provided at all district and State headquarters, where information regarding arrest and place of custody of arrestee shall be communicated by officer causing arrest, within 12 hours of effecting arrest and at police control room it should be displayed on conspicuous notice board. safeguards mandated through above- referred guidelines, particularly requirement to prepare arrest memo, are directed towards transparency and accountability in powers to arrest and detain. These safeguards flow from fundamental rights guaranteed in Articles 21 and 22 respectively of Constitution of India. life and liberty of person is secured under Article 21 and supplemented by Article 22 that provides key protection against arbitrary arrest or detention to every arrested person. 82. Unlike powers of police to lodge and register F.I.R. at police station, authorized officer under GST can only lodge complaint in writing before Court concerned. Again cognizance of such complaint has to be taken by Court concerned only in accordance with Section 134 of Act 2017. We are laying emphasis on this mandatory procedure to be adopted because Page 172 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT many times complaint is not lodged immediately. In most of cases when arrest is affected under Section 69 of Act, person arrested would be produced before Magistrate and Magistrate may thereafter remand arrested person to judicial custody after looking into arrest memo. At time of production of accused and also at time when person arrested is remanded to judicial custody, Magistrate may not have any idea as to on what basis and what type of allegations, person has been arrested by authorized officers of GST and has been produced before him. production of person accused should not be accepted by Magistrate without being convinced that arrest is on lawful grounds and on prima-facie materials indicating complicity of accused in alleged offence. It is at that stage that arrest memo assumes importance. It is not just sufficient to state in arrest memo that person arrested and produced has committed offences under Section 132 of Act, 2017. arrest memo should contain some details or information on basis of which Magistrate can arrive at subjective satisfaction that person has been arrested on lawful grounds. It is necessary, therefore, Page 173 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT to incorporate some prima-facie material against accused showing his complicity in alleged offence. 83. There is no doubt that arrest memo is key safeguard against illegal arrest and crucial component of legal procedure of arrest. Full and consistent compliance is responsibility of both, officers of GST as well as Magistrate. It is high time that GST department prescribes standardized format for arrest memo. format must contain all mandatory requirements and necessary additions. gist of offence alleged to have been committed must be incorporated in arrest memo. It would be duty of concerned Magistrate to check that arrest memo has been prepared and duly filled. In given case, if Magistrate finds that arrest memo is absent or improperly filled or bereft of necessary particulars, then Magistrate should decline production of arrested person. At this stage, we may refer to very recent pronouncement of Supreme Court in case of Union of India v. Ashok Kumar Sharma & Ors. reported in 2020 SCC OnLine SC 683. issue in said judgment was as under: Page 174 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT What is interplay between provisions of Code of Criminal Procedure (hereinafter referred to as CrPC for short) and Drugs and Cosmetics Act, 1940 (hereinafter referred to as Act for short)? Whether in respect of offences falling under chapter IV of Act,a FIR can be registered under Section 154 of CrPC and case investigated or whether Section 32 of Act supplants procedure for investigation of offences under CrPC and taking of cognizance of offence under Section 190 of CrPC? Still further, can Inspector under Act, arrest person in connection with offence under Chapter IV of Act. What is important to note are observations made by Supreme Court in para-92 which reads thus: 92. person arrested is not to be subjected to more restraint than is necessary to prevent his escape, declares Section 49 of CrPC. Every Police Officer or other person, arresting person without warrant, is bound forthwith to communicate to him all particulars of offence for which he is arrested or other grounds for such arrest. This is provided for in Section 50 of CrPC. Police Officer, when he arrests person without warrant and he is not accused of committing non-bailable offence, is duty-bound to inform him of his entitlement to be released on Bail. Police Officer is also under obligation to inform, under Section 50A of CrPC, nominated person about factum of arrest. This came into force on 23.06.2006. Section 51 deals with search of arrested person. 84. We have quoted decision of Supreme Page 175 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 C/SCA/13679/2019 CAV JUDGMENT Court referred to above to highlight importance of communication of grounds of arrest to accused and mode and manner of preparation of arrest memo. 85. In view of foregoing reasons, observations and directions, petitions are accordingly ordered to be rejected. Ad interim relief granted earlier stands vacated. Rule is discharged with no order as to costs. Civil Applications, if any, stand disposed off. 86. Registry is directed to circulate this judgment in all sub-ordinate Courts across State of Gujarat. One copy of this judgment shall also be forwarded to Commissioner of State Tax, State of Gujarat. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 176 of 176 Downloaded on : Mon Feb 22 20:39:26 IST 2021 Vimal Yashwantgiri Goswami v. State of gujarat
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