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SUPREME COURT OF INDIA
J.B. PARDIWALA, PRASHANT KUMAR MISHRA, JJ.
The State of Gujarat – Appellant
Versus
Choodamani Parmeshwaran Iyer and Another – Respondents
Criminal Appeal Nos. 1963-1964 of 2023, SLP (Crl.) No. 4212-4213 of 2019
Decided On : 17-07-2023
GST Act - Section 69(1), Section 69(3), Section 70(1), Section 132(4), Section 67(10), Section 165(5) - The Court analyzed the provisions of the GST Act, including Section 69(1) which confers the power of arrest, Section 69(3) which deals with the grant of bail, Section 70(1) which deals with the duty of the Proper Officer to summon a person for enquiry, Section 132(4) which makes all offenses under the Act non-cognizable and bailable except those specified in clauses (a) to (d) of Section 132(1), Section 67(10) which applies the provisions of the Code of Criminal Procedure relating to search and seizure, and Section 165(5) which is modified to substitute the word 'Commissioner' for 'Magistrate' in its application to the GST Act. The Court discussed the incongruities in these provisions and their interpretation in previous judgments.
Fact of the Case:
The respondents were summoned under Section 145 of the Central Excise Act, 1944, as made applicable to the service tax and the CGST Act, for interrogation in connection with an inquiry against a company. The respondents filed writ applications before the High Court seeking protection against arrest. The High Court directed the respondents to appear before the concerned authority and complete the adjudicatory process. The State of Gujarat appealed against this order. The Supreme Court held that the power to arrest under the GST Act is statutory and should not be interfered with by the writ court. The Court also clarified that at the stage of summons, the person summoned cannot invoke Section 438 of the Code of Criminal Procedure for anticipatory bail. The Court referred to previous judgments and observed that a claim for pre-arrest protection is not a statutory right or a right guaranteed under the Constitution. The Court allowed one more opportunity for the respondents to appear before the authorities for recording their statements, failing which the authorities can proceed further in accordance with the law.
Finding of the Court:
The Court analyzed the provisions of the GST Act and the Code of Criminal Procedure to determine the power of arrest and the scope of pre-arrest protection. The Court referred to previous judgments and observed that the power to arrest can be exercised only when there are objective facts of the commission of an offense and the officer has reason to believe that the person sought to be arrested is guilty of such an offense. The Court also discussed the distinction between a petition for anticipatory bail and a writ of mandamus directing an officer not to effect arrest. The Court referred to a Division Bench decision of the High Court of Telangana and agreed with its observations regarding certain incongruities in the provisions of the GST Act relating to arrest and bail. The Court held that the power of arrest under the GST Act is confined to cognizable and non-bailable offenses and that the provisions of the Code of Criminal Procedure relating to bail apply to non-cognizable and bailable offenses. The Court also clarified that the power of arrest should be exercised sparingly and that the writ court should examine the facts of the case and ensure that issuing a writ of mandamus does not prevent the competent authority from performing its statutory functions.
Ratio Decidendi: The power to arrest under the GST Act is statutory and should not be interfered with by the writ court. At the stage of summons, the person summoned cannot invoke Section 438 of the Code of Criminal Procedure for anticipatory bail. A claim for pre-arrest protection is not a statutory right or a right guaranteed under the Constitution. The power of arrest under the GST Act is confined to cognizable and non-bailable offenses, and the provisions of the Code of Criminal Procedure relating to bail apply to non-cognizable and bailable offenses. The power of arrest should be exercised sparingly, and the writ court should examine the facts of the case and ensure that issuing a writ of mandamus does not prevent the competent authority from performing its statutory functions.
Result: The appeals are allowed, and the order of the High Court is set aside. The respondents are given one more opportunity to appear before the authorities for recording their statements. If they fail to appear, the authorities can proceed further in accordance with the law.
ORDER :
1. Leave granted.
2. The learned counsel appearing for the private respondents (Assessees) submitted that he is not in a position to assist this Court as his clients are not in touch with him past almost six months.
3. In view of the aforesaid, we had no benefit of any assistance from the learned counsel appearing for the private respondents.
4. We have heard Mr. Kanu Agrawal, the learned counsel appearing for the State of Gujarat.
5. It appears from the materials on record that a summons came to be issued dated 31.10.2018 to the respondents under Section 145 of the Central Excise Act, 1944 (for short “the Act 1944”) as made applicable to the service tax vide Section 83 of the Finance Act, 1994 and Section 70 of the Central Goods and Service Tax Act, 2017 (for short “the CGST Act 2017”) calling upon them to remain present for the purpose of interrogation in connection with an inquiry against one M/s. Iyer Enterprise Mundra Kutch. The authority concerned wants to interrogate the respondents in regard to the alleged evasion of Goods and Service Tax Liability/Contravention of the Provision of the Finance Act 1994 and CGST Act 2017.
6. Upon receipt of the summons, the respondents apprehended arrest at the end of the concerned officials of the Department.
7. In such circumstances as referred to above, two writ applications came to be filed before the High Court being Special Criminal Application Nos. 11010 of 2018 and 11076 of 2018 resply. Both the writ applications came to be disposed by a common order dated 24.12.2018. The relevant part of the impugned order reads thus:
In view of the above, the present applications stand disposed of. Direct service is permitted.”
8. The State of Gujarat being dissatisfied with the aforesaid order passed by the High Court is here before this Court with the present appeal.
9. For the first time, this Court took up the matter on 29.04.2019 and issued notice. While issuing notice, this Court granted relief staying the directions issued by the High Court that the adjudicatory process must be completed within a period of eight weeks.
10. The learned counsel appearing for the State of Gujarat pointed out that as many as 14 summons have been issued to one of the respondents. Only once, one of the respondents appeared for the purpose of interrogation. Thereafter, none of the respondents appeared before the authority. It’s been now 5 years that the inquiry is still pending. He further submitted that it is only after the respondents are interrogated, that the department will be able to ascertain whether there is any evasion or not and on the basis of which the future course of action like filing of complaint etc., would be decided.
11. We are not convinced with the manner in which the High Court has disposed of both the writ applications filed by the respondents. It was expected of the respondents to honour the summons and appear before the authority for the purpose of interrogation.
12. It is well-settled position of law that power to arrest a person by an empowered authority under the GST Act and could be termed as statutory in character and ordinarily the writ court should not interfere with exercise of such power. We say so because such power of arrest can be exercised only in those cases where the Commissioner or his delegatee has reasons to believe that the person has committed any offence specified in Clause (a) or Clause (b) or Claus
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Summons under Section 70 CGST Act for inquiry needs no 7-day notice; voluntary attendance and compliance do not amount to detention, precluding compensation claims.
The main legal point established in the judgment is that the power to arrest under the CGST Act, 2017 should be based on valid reasons and evidence, and that bail should be the rule and jail the exce....
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