CA R.V. Shah

  1. Hon’ble Supreme Court in its judgment dated 16th August, 2021 in Criminal Appeal No. 838 of 2021, arising out of SLP (Cr.1) No. 5442/2021 has observed that:
    1. Personal liberty is an important aspect of Constitutional mandate;
    2. Occasion to arrest an accused during investigation arises when custodial investigation becomes necessary, or
    3. It is a heinous crime; or
    4. Where there is a possibility of influencing witnesses or,
    5. Accused may abscond.

      Merely because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of power to arrest and justification for exercise of it. If arrest is made in a routine manner it can cause incalculable harm to the reputation and self-esteem of a person. If an Investigation Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with investigation, then there is no compulsion on the Officer to arrest the accused.

  2. The Board has examined the above judgment and has issued the guidelines with respect to arrest under CGST Act, 2017.
  3. Conditions Precedent to Arrest:

    Section 132(1) of CGST Act, 20417 deals with punishment of offences specified therein. Section 69(1) gives the power to the Commissioner to arrest a person where he has reason to believe that the alleged Offender has committed any offence specified in Section 132(1)(a) or clause (b) or clause (c) or clause (d) which is punishable under Section 132(2)(i) or clause (ii) of sub-section 132(1) or sub- section (2) of Section 132 of CGST Act, 2017. Therefore, before arresting a person, the legal requirement must be fulfilled. The reason to believe to arrive at a decision to place an offender under arrest must be unambigious. The reasons to believe must be based on credible materials.

    The power to arrest must be exercised carefully since arrest impinges on personal liberty of an individual. The arrest should not be made in a routine and mechanical manner. Even if all the legal conditions precedent to arrest mentioned in Section 132 of CGST Act, 2017 are justified, that will not mean that arrest must be made. Once the legal ingredients of the offence are made out by the Commissioner or the competent authority if the answer to any or some of the following questions is in affirmative.

    1. Whether credible information received of the person concerned in the non-bailable offence.
    2. Whether arrest is necessary ensure proper investigation of the offence.
    3. Whether the person, if not restricted, is likely to temper the course of further investigation or is3 likely to tamper with evidence or intimidate or influence witnesses.
    4. When a person is mastermind or key operator in effecting proxy / benami transaction in the name of dummy GSTIN or non-existent persons etc. for passing fraudulent input tax credit etc.
    5. Unless such person is arrested, his presence before the investigation Investigation officer Officer cannot be ensured.

    The approval to arrest should be granted only where the intention to evade tax or commit act leading to availment or utilization of wrongful Input Tax Credit or fraudulent refund of tax or failure to pay amount collected as tax as specified in Section 132(1) of the CGST Act, 2017 is evident and element of mensrea / guilty mind is palpable.

    Thus, there must be proper investigation and prevent the possibility of tampering with or intimidating or influencing witnesses exists. These are the relevant factors before deciding to arrest a person. Arrest should not be resorted to in cases of technical nature, i.e., where the demand of tax is based on a difference of opinion regarding interpretation of law. The prevalent practice of assessment could also be one of the determining factors while ascribing intention to evade tax to the alleged offender. Other factors influencing the decision to arrest could

    be if the alleged offender is cooperating in the investigation such as compliance to summons, furnishing of documents called for, voluntary payment of tax, extending cooperation in investigation and not giving evasive replies.

  4. Procedure for Arrest

Principal Commissioner / Commissioner shall record on file after considering the nature of offence the rule of person involved and evidence available, his reason to believe that the person has committed an offence as laid down in Section 132 and may authorize an Officer of Central Tax to arrest the concerned person. The provisions of the Code of Criminal Procedure, 1973 read with Section 6D(3) of the CGST Act relating to arrest and the procedure must be adhered to. It is, therefore, necessary all the officers are familiar with the provisions of the Code of Criminal Procedure, 1973 (CPC).

The arrest memo must be in compliance with the decision of Supreme Court in case of D.K. Basu v. State of West Bengal 1997 (1) SCI 416 (Para 35). Format of arrest memo has been prescribed under Board’s Circular No. 126/47/2019-GST, dated 23rd December, 2019. The arrest memo has been prescribed under Board’ Circular No. 128/47/2019. It should indicate relevant Section (i) of CGST Act, 2017 or other laws attracted to the case and to the arrested person and inapplicable provisions should be struck off.

Further, the grounds of arrest must be explained to the arrested person and this fact must be mentioned in the arrest memo.

A nominated or authorized person of the arrested person should be informed immediately and this fact shall be mentioned in the arrest memo.

Arrest and Bail in relation to Offences

The date of arrest and time of arrest shall be mentioned in the arrest memo and it should be given to the person arrested under proper acknowledgment.

A separate arrest memo has to be made and provided to arrested person. The arrested person should be informed immediately and this fact be mentioned in the arrest memo.

Attention is also invited to Board Circular No. 122/41/2019-GST dated 5th November, 2019 which makes generation and quoting of Document Identification Number (DIN) mandatory on communication issued by the Officers of CBIC to taxpayers and other concerned persons for the purpose of investigation. Any lapse in this regard will be viewed seriously.

There are certain modalities which should be complied with at the time of arrest and pursuant to an arrest. It should include the following:

  1. A woman should be arrested only by a woman officer in accordance with Section 46 of Code of Criminal Procedure, 1973.
  2. Medical examination of an arrested person should be conducted by a medical officer in the service of Central or State Government and in case the medical officer is not available by a registered medical practitioner as soon as the arrest is made.
  3. If an arrested person is female, then such an examination shall be made only by the female medical officer and in case of non-availability of female medical officer, then by a female registered medical practitioners.

It shall be the duty of the person having the custody of an arrested person to take reasonable care of health and safety of the arrested person.

Arrest should be made with minimal use of force and publicity and without violence. The person arrested should be subjected to reasonable restrict to prevent escape.

Post arrest formalities

  1. Separate procedure is outlined for different categories of offences as listed in Section 132(4) and (5) of CGST Act, 2017.

    In cases, where are person is arrested under Section 69(1) of CGST Act, 2017 for an offence specified under Section 132(4) of the CGST Act, 2017, the Assistant Commissioner of Deputy Commissioner is bound to release a person on bail against a bail bond. The bail conditions should be informed in writing to the arrested person and also on telephone to the nominated person or persons so arrested. The arrested person should be allowed to talk to the nominated person.

  2. The conditions will relate to execution of a personal bail bond and one surety of like amount given by a local person of repute, appearance before the Investigating Officer when required and not leaving the country without informing the officer. The amount to be indicated in personal bail bond and surety will depend upon the facts and circumstances of each case, inter alia, of the amount of tax involved. It should be ensured that the amount of Bail Bond / Surety should not be excessive and should commensurate with the financial status of the arrested person.
  3. If the conditions of the bail are fulfilled by the arrested person, he shall be released by the Officer concerned on bail forthwith. However, only in cases

    where the conditions for granting bail are not fulfilled, the arrested person shall be produced before the appropriate Magistrate without unnecessary delay and within 24 hours of arrest. If necessary, the arrested person may be handed over to the nearest police station for his safe custody, during the night under a challan, before he is produced before the Court.

  4. In cases, where a person is arrested under Section 69(1) of CGST Act, 2017 for an offence under Section 182(5) of the CGST Act, 2017, the Officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before the Magistrate within all 24 hours. However, in the event of circumstances, preventing the production of the arrested person before a Magistrate, if necessary, the arrested person may be handed over to nearest Police Station for his safe custody under proper challan and produced before the Magistrate on the next day and the nominated person of the arrested person may also be informed accordingly. In any case, it must be ensured that the arrested person should be produced before the appropriate Magistrate within 24 hours of the arrest, executive of the time necessary for journey from the place of arrest to the Magistrate Court.
  5. Formats of the relevant documentation, i.e., Bail Bond in the Code of Criminal Procedure, 1973 and the challan for handing over to the Police Station should be followed.
  6. After arrest of the accused, efforts should be made to file prosecution complaint under Section 132 of the Act, before the Competent Court at the earliest, preferably within 60 days of arrest, where no bail is granted. In all other cases arrest

    also, prosecution complaint should be filed within a definite time frame.

  7. Every Commissioner / Directorate should maintain a Bail Register containing the details of the case, arrested person, bail amount, surety amount etc. The money/ instruments/documents received as surety should be kept in safe custody of a single nominated office who shall ensure that these instruments / documents received as surety are kept valid till the bail is discharged.
  8. Report to be sent

    Pr. Director General (DGGI) / Pr. Chief Commissioner(s)/Chief Commissioner(s) shall send a report on every arrest to Member (Compliance Management) as well as to the Zonal Member within 24 hours of the arrest giving details as has been prescribed to maintain on All India record of assets made in the Zone shall be sent by the Pr. Chief Commissioner(s) / Chief Commissioner(s) to the Directorate General of GST Intelligence, Head Quarters, New Delhi in the format prescribed by the 5th of the succeeding month. The monthly reports received from the information shall be compiled by DGGI and a compiled zonewise report shall be sent to Commissioner (GST Investigation), CBIC by 10th of every year.

    Further, all such reports shall be sent only by e-mail and the practice of sending hard copies to the Board be stopped with immediate effect.

    The field formations are hereby directed to circulate these guidelines / instructions to all the formations under their charge for strict compliance. Difficulties, if any, in implementation of the aforesaid guidelines / instructions may be brought to the notice of the Board.

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