Guwhati High Court rejects bail application in GST evasion

Fact and Issue of the case

Having filed the instant petition under Section 439 of the CrPC, the Petitioner, namely, Subhash Kumar Singh has prayed for enlarging him on bail in connection with the BI (E.O) Assam Tax P.E. No. 03(03)/2021 registered under Section 132(1) (i) of Assam GST Act, 2017. The Petitioner was arrested on 1207-2021 in connection with the aforesaid case and has been in detention since then.

Observation of the court

In view of the submission of the respective learned counsel for both the parties, as exhaustively indicated above, this Court is of the view that Section 132 in the section 69 of the AGST Act providing the power to arrest is only with regard to the nature of the offences specified in the clauses (a), (b), (c) and (d) of the sub-section (1) of the section 132 for which the punishment is provided in the clauses (i) and clause (ii) of the sub-section(1) and the sub-section (2) of section 132 of the CGST Act. Therefore, when a Commissioner forms an opinion and has reason to believe that a person has committed any offence as specified in the clauses (a), (b), (c) and (d) of the sub-section (1) aforesaid, which is punishable under the clauses(i) and (ii) of the sub section(1) and the subsection (2) of section 132 of the AGST Act, he may by order authorize any officer of the central tax to arrest such person and accordingly, on authorization to arrest the accused person and on the strength of the said warrant the accused was arrested on 12.07.2021. This Court is of the view that the arresting authority falls under the term “proper officer”. This Court is of the further view, in disagreement with the submission of the learned senior counsel for the Petitioner, that the Respondent authorities cannot invoke the power to arrest under section 69 read with section 132 of the AGST Act, 2017 prior to the completion of adjudication/assessment is bereft of reasonable and valid logic.

Section 69 is independent of the section 132 of the AGST Act which falls under Chapter XIX and which prescribes the offences and the penalties. The plain perusal of section 132 of the Act indicates that it only provides punishment for certain offences. In this context the sub-section(2) of section 69 of the AGST Act is also relevant as it provides that where a person is arrested under the subsection (1) of section 69, for an offence specified under the sub-section(5) of the section 132 of the AGST Act which provides that the offences specified in the clauses (a), (b), (c) and (d) of the sub-section(1)of the section 132 and punishable under the clause (i) of the sub-section(1)of the section 132, shall be cognizable and non-bailable, then the officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours. In other words, when a person is arrested pursuant to the order passed by the Commissioner who has reason to believe that such person has committed any offence specified in the clauses (a), (b), (c) or (d) of sub-section(1) of section 132 of the AGST Act which is punishable under the clause(i) of that sub-section, then such offence being cognizable and non bailable as per sub-section (5) of Section 132 ofthe AGST Act, the officer authorized to arrest such person is duty bound to inform such person about the grounds of arrest and produce him before the Magistrate within twenty-four hours. Therefore, the reference to section 132(5) in subsection(2) of section 69 of the ACGST Act is made so as to differentiate between the person for whom the 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 the AGST Act.

It is relevant here to refer to sub-section(3) of section 69 of the AGST Act which refers to the Code of Criminal Procedure, 1973 and provides that subject to the provisions of the Code where a person is arrested under subsection(1) of the section 69 of the AGST Act for any offence specified under the sub-section(4) of the section 132 which provides that notwithstanding anything contained in the Code, all the offences under the AGST Act, except the offences referred to in the sub-section (5) shall be non-cognizable and bailable, then such person shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate. In other words, the sub-section(3)(a) of section 69 of the AGST Act provides that when the Commissioner has reason to believe that a person has committed offence under the clauses(a),(b),(c) and (d) of the sub-section(1) of the section 132 of the AGST Act which is punishable under the clause (ii) of the sub-section(1) and the Sub-section(2) of the Section 132 then such person is covered by the sub-section(4) of section 132 of the AGST Act and as such offence would be non-cognizable and bailable and in such circumstances, the officer who is authorized to arrest shall grant bail or in default of bail, forward such person to the custody of the Magistrate. It appears that with a view to give effect to the power to grant bail by the authorized officer under the clause (a) of the sub-section (3) of the section 69, sub-clause(b) of sub-section(3)of the section 69 of the AGST Act provides for method, of course, subject to the provisions of the Code of Criminal Procedure, that in case of a non-cognizable and bailable offence, Deputy Commissioner or the Assistant Commissioner shall for the purpose of releasing an arrested person on bail or otherwise, has the same powers and be subjected to the same provisions as an officer-in-charge of a police station.

Therefore, the provisions of section 69 of the AGST Act are absolutely clear and unambiguous which provides that during the course of inspection, search and seizure when the Commissioner has reason to believe that the person has committed any offence as per the clauses (a), (b), (c) or (d) of the sub-section(1) of section 132 of the AGST Act, which is punishable under the clause(i) or clause (ii) of the sub-section (1) or the sub-section (2) of the section 132 of the AGST Act, then he may pass an order authorizing an officer of the department to arrest such person. Thereafter, if the offence falls under the category of cognizable and non bailable offence as per the sub-section (5) of the section 132, then sub-section (2) of section 69 casts duty upon the officer authorized to arrest such person and to inform such person of the grounds of arrest and produce him before the Magistrate within twenty-four hours; whereas if the offence is non-cognizable and bailable as per the sub-section(4) of the section 132 then subject to the relevant provisions of the Code, the clauses (a) and (b) of the subsection (3) of section 69 provides for enlarging such person on bail by the concerned officer i.e. Deputy Commissioner or Assistant Commissioner exercising the same powers and be subjected to the same provisions as an officer-in-charge of a police station as held in Vimal Yashwantgiri Goswami Vs. State of Gujarat (In R/Special civil Application No. 13679 of 2019 with 3209/2020, 4468/2020, 4456/2020, 13893/2019 and 14141/2019) by the Hon’ble High Court of Gujarat.

It is necessary to keep in mind that section 69 of the AGST Act falls under the Chapter XII which provides for inspection, search, seizure and arrest which are in nature of measures prescribed under the provisions of the AGST Act to find out the evasion of tax, if any, by any person. On the other hand, section 132 of the AGST Act prescribes punishment for certain offences falling under Chapter XIX which provides for the offences and penalties. Thus, Section 132 of the AGST Act is enacted by the legislature prescribing punishment for the offences committed by an assesee either upon adjudication and assessment proceedings having been completed or otherwise as per the clauses (a) to (l) of the sub-section (1) of the section 132 of the ACGST Act. Therefore, section 69 and section 132 of the AGST Act operate in totally different fields and the attempt on the part of the petitioners to canvass that unless and until adjudication proceedings of the assessment determining the tax and penalty liability is completed by the department as provided under Chapter VIII of the AGST Act, the Commissioner cannot form any opinion to “reason to believe” that the assesse has committed any offence, is contrary to the entire scheme of the AGST Act. The Principal Commissioner of State Tax, Assam by applying his mind rightfully issued the warrant, upon examination of all materials and incriminating documents, against the accused person and it would be wholly improbable to suggest that the Principal Commissioner of State Tax, Assam did not apply his mind in correct perspective while exercising his jurisdiction under Section 69 of the Assam GST Act, 2017. It is pertinent to mention that vide Notification Order No. 01/2021 dated 02.01.2021 issued by the Principal Commissioner of State Tax, Assam, vide no. CT/GST-12/2017/110 in pursuant to Government Notification No. FTX.79/2017/74 dated 18th December, 2020 the Special Commissioner of State tax, Additional Commissioner of State tax, Joint Commissioner of State tax, Deputy Commissioner of State tax Assistant Commissioner of State Tax and Superintendent of State tax, are designated the “proper officer”, as per Section 35 (6) of the Assam GST Act, 2017.

It has been, prima facie, found that the evasion of tax was more than Rs. 5 crores which necessitated the arrest of the Petitioner in compliance of the provision of Section 132 (1) (i) of the Assam GST Act, 2017. Hence, the argument put forth by the learned counsel for the Petitioner that the arrest of the Petitioner is illegal and arbitrary is devoid of any merit. This Court has also taken note of the fact, as appears from the materials in the case record, that the Petitioner evaded tax worth more than Rs. 5 crores and the investigating agency has collected materials to show that the Petitioner is the originator of the fake invoices, etc and direct documentary evidence is there in the record about the active involvement of the Petitioner in tax evasion. The investigation of the case is still continuing in order to ascertain the location of the godown and to examine other related witnesses and also for calculation of interest in view of the revised notification (the notification is specifically referred to in para 34) regarding rate of interest which keeps varying from time to time. Moreover, if the Petitioner is enlarged on bail at this stage, he is more than likely to hamper the investigation and/or tamper evidence which may likely to compromise with the entire investigation.

Before parting with the record, I wish to make it clear that any observations/views/opinion expressed in this order are only for the limited purpose of deciding this bail application and shall not impact the case in the trial or in any other proceeding arising out of this case.

In view of the discussions above, and taking into account, the fact that to carry out further investigation as per the observations made by this Court in the later part of Para 35 as regards requirement of further investigation, this Court is not inclined to grant bail to the Petitioner, at this stage.

Therefore, the prayer for bail of the Petitioner stands rejected.