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November 11, 2020

Telangana High Court prohibits use of physical abuse by GST Officials

by CA Shivam Jaiswal in GST

Telangana High Court prohibits use of physical abuse by GST Officials

Keeping in mind the government’s anti-tax evasion scheme, GST also has strict provisions to inspect and search places of business for suspected tax evaders. However, can one resort to physical abuse while conducting the said search and seizure? Let us refer to the case of M/S. Agarwal Foundries Private vs Union Of India, where the issue under consideration was whether officials belonging to the GST Intelligence Department of the Union of India can resort to physical violence while conducting interrogation of the petitioners and their employees in connection with proceedings initiated against the petitioners under the CGST Act, 2017 and IGST Act, 2017.

Facts of the Case:

  • The petitioner is a Private Limited Company incorporated under the Companies Act, 1956 and registered under GST involved in the business of steel.
  • The brother of the Director is allegedly involved in his own business unconnected and unrelated to the business and affairs of the petitioner.
  • The relative of the director and his brother is alleged to be engaged in trade with the petitioner-company but not involved in the business affairs of petitioner-company.
  • Admittedly, officials attached to the Directorate General of GST Intelligence, conducted simultaneous raids on business units of the petitioner and the residential house of the director around 08:30 am, without any prior intimation or show-cause notice.
  • The material on record indicates that the search on the several premises connected with the petitioners started from 8.30 am on 11.12.2019 till the following day i.e., 12.11.2019.
  • As to the events which transpired during this period there were conflicting versions.
  • The petitioners alleged that there was use of violence and coercion against the petitioners and their employees by the respondents during the said search operations.
  • However, the respondents denied the same and alleged that it was the petitioners and their employees who had obstructed the search operations and allegedly assaulted the respondent.
  • However, this was denied by the petitioners.

Observations of the High Court (HC) on whether there was use of violence on the petitioners or not

  • Normally these disputed questions of fact were not entertained into in a Writ proceeding under Article 226 of the Constitution of India.
  • But HC could not ignore the material such as the Outpatient Discharge advice of Sunshine Hospital given after treatment of the brother of the director by the emergency physician which stated that “assault today, injury to the left thigh, unable to walk and bear weight, blunt injury at left thigh”.
  • This suggested that the said brother was injured to such a degree that he was unable to walk and required medical treatment.
  • The respondents suggested that such evidence procured by the petitioners ought to be disbelieved as the said hospital was a ‘private hospital’ and not a Government Hospital.
  • HC did not agree with such contention because there is no presumption in law that Doctors in private hospitals did not speak the truth and only Government doctors spoke the truth.
  • An injured person was likely to go the nearest available hospital for treatment instead of searching for a Government hospital at that juncture.
  • HC also could not ignore the acknowledgement given by the Police that there was a call made by an employee of the company to Phone No.100 and that a case was assigned to it.
  • In contrast, the FIR was registered by the Police at the instance of the respondents much later at against the petitioners i.e., 2 hours after the police were contacted by the petitioner’s employee and 1 hour after the brother was treated in the hospital for alleged assault and injury to his left thigh.
  • HC was not saying that this material was conclusive of any violence used by the respondents against the petitioner or their employees but prima-facie it suggested such a possibility.
  • The fact the police did not register any FIR on the complaint made by the petitioners, was not that significant because it was not unusual for the police to refuse to register any complaint against Government Officials.
  • The omission of the police to register any FIR at the instance of petitioners did not mean that what the respondents alleged was true.
  • No provision of any law was cited by the respondents to say that they were entitled to use physical violence against persons they suspect of being guilty of tax evasion while discharging their duties under the CGST Act, 2017.
  • Merely because the authorities under the CGST Act, 2017 were not to be treated as police officials, they could not claim any immunity if they indulged in acts of physical violence against persons, they suspected of being guilty of tax evasion.
  • After India adopted the Constitution of India, protection against torture by State was recognized as part of right to life and liberty guaranteed by Article 21 of the Constitution of India.
  • India has enacted the Protection of Human Rights Act, 1993 for protection of human rights in the country in fulfilment of its obligations as a party to the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights adopted by the General Assembly of the United Nations on 16.12.1966.
  • Under this Act, there were provisions for constitution of a National Human Rights Commission and also State Human Rights Commissions and their powers are set out with clarity under the Act.
  • Reference could also be made to Section 30 of the said Act which provides for specification of a Court of Session in each District to be a Human Rights’ Court by the State Government so that offences arising out of violation of human rights are tried and disposed of speedily.
  • In view of this statutory regime already in place, it would be futile for the respondents to claim any liberty to torture or use physical violence during the course of search, investigation or interrogation under the CGST Act, 2017 against persons suspected of tax evasion like the petitioners or their employees.
  • In view of the material on record, HC was constrained to observe that the possibility of the use of violence by respondents against the director and his relative and the other employees of petitioner could not be entirely ruled.

Observation of the High Court (HC) on the Arrest Time

  • The respondents could not say that detention of the director in the office of the company till much after midnight on the intervening night of 11.12.2019 and 12.12.2019 was a routine thing.
  • Prima-facie it amounted to deprivation of the liberty, since he was forced to be present with the respondents at that late hour on that night.
  • In HC’s opinion, the respondents could not contend that they would interrogate the persons suspected of committing any tax evasion as per their sweet will, forcibly keeping them in their custody for indefinite period.
  • If it was done, it had to be construed as informal custody and the law relating to an accused in custody has to be expressly or impliedly applied.
  • In view of the admitted fact that the search operations were continued well past midnight and summons were issued to director to appear at 00:30 hrs on 12.12.2019, HC did not accept the plea of the respondents that they did not act contrary to established procedure, that the search proceedings were carried out under proper and applicable law and procedure, and no harm or damage were made to any human/person or property and no sentiments were hurt.
  • No doubt in P V Ramana Reddy a Division Bench of this court held that enquiry by officers of the GST Commissionerate is not a criminal proceeding, but it is a judicial proceeding and under Section 70(1) of the CGST Act, 2017, the proper officer under the CGST Act has the power to summon a person either to give evidence or to produce a document.
  • If such person who is issued a summons gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant, under Sections 193 and 228 of the IPC, he would be liable for punishment; that though the High Court can entertain an application for pre-arrest protection under Article 226 of the Constitution of India, such power should be exercised by the High Court sparingly.
  • Under Section 69 of the CGST Act there is power to order arrest in cases where the Commissioner has reasons to believe that a person has committed any offence specified in Clauses (a) to (d) of Section 132(1).
  • Such power is confined to cognizable and non- bailable offences.
  • Under Section 69(3) bail can also be obtained by persons arrested in connection with non-cognizable and bailable offences and Section 41 and Section 41A of CrPC would apply in the event the Commissioner intends to arrest any person; and that normally relief of protection against arrest ought not to be granted.
  • It was also contended that the Commissioner exercising power under Section 69(1) was not a police officer.
  • The decision in P.V. Ramana Reddy (1 supra) was binding on the HC.
  • Following the principle laid down therein that the High Court can entertain an application for pre-arrest protection under Article 226 of the Constitution of India, but such power should be exercised by the High Court sparingly, HC held that, this case fell under the exceptional category and this Writ Petition was undoubtedly maintainable.

Observations of the High Court (HC) on the transfer of investigation

Coming to the plea of the petitioners for transfer of investigation is concerned, though normally such transfer is not to be done, in view of the facts and circumstances of this case and the absence of counter- affidavit by the respondent denying the allegations of physical violence by him in the course of the search operations, HC felt that it would not be appropriate for the said respondent to be a participant in the proceedings initiated by the respondents against the petitioners.

In conclusion HC passed the following order

  • the respondents shall not use any acts of violence or torture against petitioner or their employees in furtherance of enquiry proceedings
  • the enquiry in the above proceedings against the petitioner shall not be handled by the respondent who committed the said violence, and he shall not participate in such enquiry, and it shall be transferred to another official
  • any interrogation of petitioner or their employees shall be between 10:30 a.m. and 05:00 p.m. on week days in the visible range of an Advocate appointed by them, who shall not be in hearing range;
  • the respondents shall adhere to the provisions of the CGST Act, 2017 in conducting search, investigation or enquiry in relation to the alleged tax evasion by the petitioners.

The HC also made it clear that they did not express any opinion on any of the other contentions raised by the petitioners or by the respondents.

In simple word, a tax officer cannot physically abuse anyone during any investigation under GST laws. However practically this has happened in numerous cases, one of which has reached its logical end.

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