THE STATE OF GUJARAT ETC. versus CHOODAMANI PARMESHWARAN IYER & ANR. ETC. on 17 July 2023

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 asHhis clients are not in touch with him past almost six months.

3. In view of the aforesaid, we had no benefit of any assistancefrom the learned counsel appearing for the private respondents.

4. We have heard Mr. Kanu Agrawal, the learned counselappearing for the State of Gujarat.

5. It appears from the materials on record that a summons cameto be issued dated 31.10.2018 to the respondents under Section 145 ofthe Central Excise Act, 1944 (for short “the Act 1944”) as made applicableto the service tax vide Section 83 of the Finance Act, 1994 and Section70 of the Central Goods and Service Tax Act, 2017 (for short “the CGSTAct 2017”) calling upon them to remain present for the purpose ofinterrogation in connection with an inquiry against one M/s. Iyer EnterpriseMundra Kutch. The authority concerned wants to interrogate therespondents in regard to the alleged evasion of Goods and Service TaxLiability/Contravention of the Provision of the Finance Act 1994 andCGST Act 2017.

6. Upon receipt of the summons, the respondents apprehendedarrest at the end of the concerned officials of the Department.

7. In such circumstances as referred to above, two writapplications came to be filed before the High Court being Special CriminalApplication Nos. 11010 of 2018 and 11076 of 2018 resply. Both the writapplications came to be disposed by a common order dated 24.12.2018.The relevant part of the impugned order reads thus:- “7. Considering the voluntary nature of pleadings where thepetitioners are desirous of getting themselves assisted by theadjudicatory process, let them represent their case before theconcerned authority. The authority concerned shall completethe same in 8 weeks’ time and if there is a need for anyapprehension after once the adjudicatory process iscompleted, if they are not ready to fulfill their obligation, theymay be given an opportunity of two more weeks for takingnecessary steps. Petitioners shall appear on or before 11/01/2019 before the concerned Police Station.

In view of the above, the present applications standdisposed of. Direct service is permitted.”

8. The State of Gujarat being dissatisfied with the aforesaid orderpassed by the High Court is here before this Court with the presentappeal.

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A9. For the first time, this Court took up the matter on 29.04.2019and issued notice. While issuing notice, this Court granted relief stayingthe directions issued by the High Court that the adjudicatory processmust be completed within a period of eight weeks.

10. The learned counsel appearing for the State of Gujarat pointedBout that as many as 14 summons have been issued to one of therespondents. Only once, one of the respondents appeared for the purposeof interrogation. Thereafter, none of the respondents appeared beforethe authority. It’s been now 5 years that the inquiry is still pending. Hefurther submitted that it is only after the respondents are interrogated,that the department will be able to ascertain whether there is any evasionCor not and on the basis of which the future course of action like filing ofcomplaint etc., would be decided.

11. We are not convinced with the manner in which the HighCourt has disposed of both the writ applications filed by the respondents.It was expected of the respondents to honour the summons and appearDbefore the authority for the purpose of interrogation.

12. It is well-settled position of law that power to arrest a personby an empowered authority under the GST Act and could be termed asstatutory in character and ordinarily the writ court should not interferewith exercise of such power. We say so because such power of arrestEcan be exercised only in those cases where the Commissioner or hisdelegatee has reasons to believe that the person has committed anyoffence 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) or sub-section (1) or sub-Section (2) of the said Section.F

13. As observed by this Court in Union of India Vs. PadamNarain Aggarwal and Ors.(2008) 13 SCC 305, (which was in contextwith the powers of Custom Officers to arrest under the Customs Act)such statutory powers must be exercised on objective facts of commissionof an offence enumerated and the officer concerned must have reasonGto believe that a person sought to be arrested has been guilty of such anoffence.

14. This Court in Padam Narain Aggarwal (supra)made it veryclear that ordinarily the Court should not impose any condition beforeeffecting arrest. If any conditions are imposed before effecting arrestfor instance giving prior intimation to the person concerned etc., theH

THE STATE OF GUJARAT ETC. v. CHOODAMANIPARMESHWARAN IYER & ANR. ETC.

statutory provisions would be rendered ineffective, nugatory andmeaningless.

15. What is important are the observations made in paragraphs44 and 45 resply of the decision of this Court in the case of PadamNarain Aggarwal (supra),which read thus:- “44. In the case on hand, the respondents were only summonedunder Section 108 of the Act for recording of their statements.The High Court was conscious and mindful of that fact. It,therefore, held that the applications for anticipatory bail, inthe circumstances, were premature. They were, accordingly,disposed of by directing the respondents to appear beforethe Customs Authorities. The Court, however, did not stopthere. It stated that even if the Customs Authorities find anynon-bailable offence against the applicants (the respondentsherein), they shall not be arrested without ten days’ prior noticeto them.

45. In our judgment, on the facts and in the circumstances ofthe present case, neither of the above directions can be saidto be legal, valid or in consonance with law. Firstly, the orderpassed by the High Court is a blanket one as held by theConstitution Bench of this Court in Gurbaksh Singh and seeks-to grant protection to the respondents in respect of any nonbailable offence. Secondly, it illegally obstructs, interferesand curtails the authority of the Customs Officers fromexercising statutory power of arrest of a person said to havecommitted a non-bailable offence by imposing a condition ofgiving ten days’ prior notice, a condition not warranted bylaw. The order passed by the High Court to the extent ofdirections issued to the Customs Authorities is, therefore, liableto be set aside and is hereby set aside.” (Emphasis supplied)

16. Thus, the position of law is that if any person is summonedunder Section 69 of the CGST Act, 2017 for the purpose of recording ofhis statement, the provisions of Section 438 of Criminal Procedure Code,1908 cannot be invoked. We say so as no First Information Report getsregistered before the power of arrest under Section 69(1) of the CGSTAct, 2017 is invoked and in such circumstances, the person summonedcannot invoke Section 438 of the Code of Criminal Procedure for A

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Aanticipatory bail. The only way a person summoned can seek protectionagainst the pre-trial arrest is to invoke the jurisdiction of the High Courtunder Article 226 of the Constitution of India. Undoubtedly, this is exactlywhat the respondents did in the present case. What the respondentssought by filing two criminal applications under Article 226 of theConstitution before the High Court was the direction to the appellantBherein not to arrest them in exercise of the power conferred by Section69(1) of the GST Act, 2017. This, in essence, is key to prayer foranticipatory bail. However, as we have explained aforesaid, at the stageof summons, the person summoned cannot invoke Section 438 of theCode of Criminal Procedure.C

17. This Court in Kartar Singh Vs. State of Punjab,(1994) 3SCC 569, has, in no uncertain terms, observed that a claim for pre-arrest protection is neither a statutory right nor a right guaranteed underArticles 14, 19 and 21 resply of the Constitution of India. Although theConstitution Bench of this Court held that there is no bar for the HighDCourt to entertain an application for pre-arrest protection under Article226 of the Constitution of India, yet it was held that such power shouldbe exercised sparingly. There is a fundamental distinction between apetition for anticipatory bail and the writ of mandamus directing an officernot to effect arrest. A writ of mandamus would lie only to compel theperformance of the statutory or other duties. No writ of mandamus would Elie to prevent an officer from performing his statutory function. When awrit application is filed before the High Court under Article 226 of theConstitution, the writ court owes a duty to examine the fact of the caseand ascertain whether the case of the writ applicant falls under thecategory of exceptional cases as indicated in Kartar Singh (supra).FThe writ court should also ensure whether by issuing the writ ofmandamus, it would be preventing the competent authority or properofficer from performing any of their statutory functions.

18. In the aforesaid context, we may refer to a Division Benchdecision of the High Court of Telangana which ultimately came to beGaffirmed by this Court in the Special Leave Petition (Crl.) No. 4430 of2019 order dated 27.05.2019. We are referring to a decision in the caseof P.V. Ramana Reddy Vs. Union of IndiaWrit Petition Nos. 4764 of2019 and allied petitions decided on 18[th] April, 2019. There are fewimportant observations made by the High Court and we are in completeagreement with the said observations. The observations of the HighH

Court fell in the context of certain incongruities noticed in Section 69(1)and Section 132 resply of the CGST Act, 2017. We quote the relevantobservations hereunder:-

“34. If CGST Act, 2017 is a complete code in itself in respectof (1) the acts that constitute offences, (2) the procedurefor prosecution and (3) the punishment upon conviction, thenthe power of Commissioner, who is not a Police Officer, toorder the arrest of a person should also emanate fromprescription contained in the Act itself. Section 69(1) of CGSTAct, 2017 very clearly delineates the power of theCommissioner to order the arrest of a person whom he hasreasons to believe, to have committed an offence which iscognizable and non-bailable. Therefore, we do not know howa person whom the Commissioner believes to have committedan offence specified in clauses (f) to (l) of sub-Section (1) ofSection 132 of CGST Act, which are non-cognizable andbailable, could be arrested at all, since Section 69(1) of theCGST Act, 2017 does not confer power of arrest in such cases.

35. The fact that the power of arrest under Section 69(1) ofthe CGST Act, 2017 is confined only to cognizable and non-bailable offences, is also fortified by sub-Section (2) of Section69 which obliges the Officer, who carries out the arrest toinform the arrested person of the grounds of arrest and toproduce him before a Magistrate within 24 hours. The dutyenjoined upon the Officer carrying out the arrest, to informthe arrested person of the grounds of arrest and to producehim before a Magistrate within 24 hours, is co-relatable undersub-Section (2) of Section 69 of the CGST Act, 2017 to Section132(5) of the CGST Act, 2017 that deals only with cognizableand non-bailable offences.

36. But, interestingly, clauses (a) and (b) of sub-Section (3)of Section 69 of the CGST Act, 2017 deal in entirety only withcases of persons arrested for the offences which are indicatedas non-cognizable and bailable. The phrase “subject to theprovisions of the Code of Criminal Procedure” is used onlyin sub-Section (3), which deals in entirety only with theprocedure to be followed after the arrest of a person who isbelieved to have committed a non-cognizable and bailable ABC

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offence. While clause (a) of sub-Section (3) gives two optionsto the Officer carrying out the arrest, namely, to grant bail byhimself or to forward the arrested person to the custody ofthe Magistrate, clause (b) confers the powers of an Officerincharge of a police station, upon the Deputy Commissioneror the Assistant Commissioner (GST), for the purpose ofreleasing an arrested person on bail, in the case of non-cognizable and bailable offences.

37. In other words, even though Section 69(1) of the CGSTAct, 2017 does not confer any power upon the Commissionerto order the arrest of a person, who has committed an offencewhich is non-cognizable and bailable, sub-Section (3) ofSection 69 of the CGST Act, 2017 deals with the grant ofbail, remand to custody and the procedure for grant of bailto a person accused of the commission of non-cognizable andbailable offences. Thus, there is some incongruity betweensub-Sections (1) and (3) of Section 69 read with section 132of the CGST Act, 2017.

38. Another difficulty with Section 69 of the CGST Act, 2017is that sub-Sections (1) and (2) of Section 69 which deal withthe power of arrest and production before the Magistrate inthe case of cognizable and non-bailable offences, do not usethe phrase “subject to the provisions of Cr.P.C.” This phraseis used only in sub-Section (3) of Section 69 in relation to thearrest and grant of bail for offences which are non-cognizableand bailable, though no power of arrest is expressly conferredin relation to non-cognizable and bailable offences.

39. It is important to note that under sub-Section (4) ofSection 132 of the CGST Act, 2017, all offences under theAct except those under clauses (a) to (d) of Section 132 (1),are made non-cognizable and bailable, notwithstandinganything contained in Cr.P.C. In addition, Section 67(10)of the CGST Act, 2017 makes the provisions of Cr.P.C.relating to search and seizure, apply to searches and seizuresunder this Act, subject to the modification that the word“Commissioner” shall substitute the word “Magistrate”appearing in Section 165 (5) of Cr.P.C., in its application toCGST Act, 2017.

THE STATE OF GUJARAT ETC. v. CHOODAMANIPARMESHWARAN IYER & ANR. ETC.

40. Therefore, (1) in the light of the fact that Section 69(1) ofthe CGST Act, 2017 authorizes the arrest only of persons whoare believed to have committed cognizable and non-bailableoffences, but Section 69(3) of the CGST Act, 2017 deals withthe grant of bail and the procedure for grant of bail even topersons who are arrested in connection with non-cognizableand bailable offences and (2) in the light of the fact that theCommissioner of GST is conferred with the powers of searchand seizure under Section 67(10) of the CGST Act, 2017, inthe same manner as provided in Section 165 of the Cr.P.C.,1973, the contention of the Additional Solicitor General thatthe petitioners cannot take umbrage under Sections 41 and41A of Cr.P.C. may not be correct.

41. Though for the purpose of summoning of witnesses andfor summoning the production of documents, the ProperOfficer holding the enquiry under the CGST Act, 2017 istreated like a Civil Court, there are four other places in theAct, where a reference is made, directly or indirectly, to theCr.P.C. They are (1) the reference to Cr.P.C. in relation tosearch and seizure under Section 67(10) of CGST Act, 2017,(2) the reference to Cr.P.C. under sub-Section (3) of Section69 in relation to the grant of bail for a person arrested inconnection to a non-cognizable and bailable offence, (3) thereference to Cr.P.C. in Section 132 (4) while making alloffences under the CGST Act, 2017 except those specified inclauses (a) to (d) of Section 132 (1) of CGST Act, 2017 asnon-cognizable and bailable and (4) the reference to Sections193 and 228 of IPC in Section 70(2) of the CGST Act, 2017.Therefore, the contention of learned Additional SolicitorGeneral that in view of Section 69(3) of the CGST Act, 2017,the petitioners cannot fall back upon the limited protectionagainst arrest, found in Sections 41 and 41A of Cr.P.C., maynot be correct. As pointed out earlier, Section 41-A wasinserted in Cr.P.C. by Section 6 of the Code of CriminalProcedure (Amendment) Act, 2008. Under sub-Section (3) ofSection 41A Cr.P.C., a person who complies with a notice forappearance and who continues to comply with the notice forappearance before the Summoning Officer, shall not bearrested. In fact, the duty imposed upon a Police ABC

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AOfficer under Section 41A(1) Cr.P.C., to summon a personfor enquiry in relation to a cognizable offence, is what issubstantially ingrained in Section 70(1) of the CGST Act.Though Section 69(1) which confers powers upon theCommissioner to order the arrest of a person does not containthe safeguards that are incorporated in Section 41 and 41ABof Cr.P.C., we think Section 70(1) of the CGST Act takes careof the contingency.

42. In any case, the moment the Commissioner has reasons tobelieve that a person has committed a cognizable and non-bailable offence warranting his arrest, then we think that theCsafeguards before arresting a person, as provided in Sections41 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 an absolute irrevocable guarantee againstarrest. Despite the compliance with the notices of appearance,Da Police Officer himself is entitled under Section 41A(3)Cr.P.C., for reasons to be recorded, arrest a person. At thisstage, we may notice the difference in language betweenSection 41A(3) of Cr.P.C. and 69(1) of CGST Act, 2017. UnderSection 41A(3) of Cr.P.C., “reasons are to be recorded”, onceEthe Police Officer is of the opinion that the persons concernedought to be arrested. In contrast, Section 69(1) uses the phrase“reasons to believe”. There is a vast difference between“reasons to be recorded” and “reasons to believe.”

19. We are still inclined to give one more opportunity to both theFrespondents to appear before the authorities for the purpose of recordingof their statements. If the respondents fail to appear, then it shall beopen for the authority concerned to proceed further in accordance withlaw.

20. In view of the aforesaid, both the appeals stand allowed. TheGcommon order dated 24.12.2018 passed by the High Court is set aside.

21. Pending application(s), if any, stand(s) disposed of.

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Divya Pandey(Assisted by : Shevali Monga, LCRA)

Appeals allowed.