The petitioner is before this Court invoking its writ
jurisdiction under Articles 226 and 227 of the Constitution of
India and its inherent powers under Section 528 of BNSS,
2023 (i.e., Section 482 of the CrPC, 1973). The petitioner
seeks a writ in the nature of Certiorari to quash the
proceedings in Crime No.03/2025 (F.No.
DGGI/INT/INTL/1506/2024-Gr C-01-O/o Pr ADG-DGGI-ZU) on
the file of the Special Court for Economic Offences,
Nrupathunga Road, Bengaluru, which were initiated by the
respondent for offences punishable under Section 69(1) read
with Sections 132(1)(a), 132(1)(b), and 132(1)(i) read with
132(5) of the Central Goods and Services Tax Act, 2017
(Annexure A).
1.1. Furthermore, the petitioner seeks the consequential
relief of quashing the order of remand dated 31.01.2025
(Annexure B, pp. 67-69) passed by the Special Court in
Crime No.03/2025, as well as quashing the application for
remand of the arrestee-petitioner dated 31.01.2025 (Annexure
A).
1.2. The petitioner, as of the date of this order, has been
in judicial custody for over 40 days pursuant to the impugned
remand order of the Learned Special Court.
2. The petitioner challenges his arrest on the grounds
that there was non-compliance with the statutory requirement
for the issuance of a notice under Section 35(3) of BNSS,
2023 (i.e., the Section 41-A notice under CrPC, 1973).
3. The factual matrix of the case is as follows: The
petitioner, a proprietor of two entities--M/s. JMG
Enterprises/Heena Enterprises (bearing GSTIN No.
27AQMPG1606J1ZV) and M/s. Heena International--is
alleged by the respondent to have raised fake invoices for
purported supplies of goods and services in order to avail
inadmissible input tax credit (ITC) without actually supplying
the Fast Moving Consumer Goods (FMCG). This scheme
purportedly resulted in wrongful ITC to the tune of Rs.5.10
crores through his proprietary firms and further facilitated
fictitious transactions with various entities, including M/s.
Samruddhi Trading Company, M/s. Navoday Enterprises Ltd.,
and M/s. Mini Boss Consultancy Pvt. Ltd., among others.
4. In brief, the petitioner is alleged to have colluded with
various persons to generate fabricated invoices for the supply
of FMCG goods without any actual movement of goods or
rendering of services. Furthermore, he is accused of diverting
the supply of invoiced goods to other entities in the open
market without issuing corresponding invoices in the names of
the recipient companies, thereby enabling those companies to
claim wrongful ITC. A review of the application for the
petitioner's remand reveals a specific allegation that the
petitioner-accused No. 3 attempted to influence individuals
into providing false statements to authorities regarding those
who orchestrated the fake invoicing scheme, and further, that
he destroyed evidence by deleting WhatsApp messages, thus
misleading or hampering the investigation.
5.1. Accordingly, the learned Senior Counsel argued that
since the petitioner was deprived of an opportunity to appear
before the investigative authorities, his arrest under Section 69
of the CGST Act, 2017, cannot be permitted as a justifiable
restriction on liberty under the law. This non-compliance
amounts to a violation of the petitioner's fundamental right
under Article 21 of the Constitution. Therefore, the petitioner
has invoked the constitutional writ remedy and sought the
relief of quashing the remand order under this Court's inherent
powers.
5.2. In addition, the learned Senior Counsel contended
that the petitioner's arrest by the respondent also violates
Section 74(1) of the CGST Act, 2017, which mandates that a
notice be issued by the proper officer at least six months
before the expiry of five years from the date of wrongful
availment of ITC, directing such assessee to show cause as to
why the specified amount should not be paid.
6. Per contra, Sri Madhu N. Rao, learned counsel for
the respondent - DG GST Intelligence, argued that the instant
petition is not maintainable under Section 528 of BNSS, 2023
(i.e., Section 482 of CrPC, 1973), and further contended that a
review of the memorandum of the petition fails to reveal any
grounds warranting a writ petition under Articles 226 and 227,
so as to grant extraordinary constitutional remedy. He further
submitted that the petition is not maintainable because the
offence is registered under the CGST Act, 2017, and no order
of remand was issued under the governing Sanhita or BNSS.
6.1. In other words, the learned counsel argued that the
provisions of the CGST Act, 2017--particularly those in
Chapter XIV dealing with the powers of inspection, search,
seizure, and arrest--render the Act self-contained.
Consequently, the provisions of BNSS, 2023 (or the CrPC) do
not apply to criminal proceedings initiated under the CGST
Act. Thus, if an offence punishable under Section 131 of the
CGST Act, 2017 is registered and an order remanding the
petitioner to judicial custody is issued by the Commissioner of
Central Tax, the petitioner cannot invoke the inherent powers
of this Court under Section 528 of BNSS (or Section 482 of
the CrPC).
6.2. In rebuttal to the contention of non-compliance with
the issuance of a notice of appearance under Section 35(3) of
BNSS, 2023, the learned counsel produced the Memo of
Documents dated 10.03.2025, which contains a summons
issued to the petitioner under Section 70 of the CGST Act,
2017 on 02.01.2025. He argued that the issuance of such
summons thereunder for the purpose of tendering evidence
satisfies the requirement of a notice of appearance under
Section 35(3) of BNSS, as the summons indicates a threshold
higher than mere reasonable suspicion, as stipulated under
Section 35(3) of BNSS, 2023.
6.2.1. The learned counsel further submitted that since
the petitioner had already tendered evidence in the
investigation into the wrongful availment of ITC by a syndicate
of individuals and companies--and had admitted during an
inquiry conducted under Section 50 of the CGST Act to
diverting goods to other entities without issuing corresponding
invoices--the petitioner was already afforded a reasonable
opportunity to present his defense in the judicial proceeding
under Section 50. Therefore, issuance of another notice under
BNSS prior to his arrest was unnecessary.
investigation into the wrongful availment of ITC (as evidenced
by the prior issuance of a summons under Section 70 of the
CGST Act), the requirement for a separate notice of
appearance under BNSS need not be strictly enforced.
Furthermore, the learned counsel argued that the petitioner
cannot contend that his arrest was vitiated on account of non-
issuance of a notice of appearance under Section 35(5) of
BNSS, given that the Sanhita does not apply to criminal
proceedings arising from self-contained statutes such as the
CGST Act, 2017.
6.3. Additionally, the learned counsel for the respondent
produced the arrest memo dated 05.03.2025 and reiterated
the gravity of the alleged offences committed by the petitioner,
arguing that continued incarceration is necessary to conclude
the investigation.
5. PV Ramana Reddy v. Union of India, 2019 (26) GSTL (S.C.)
[27.05.2019].
NC: 2025:KHC:10469
Issues
7. Having heard the learned counsels and reviewed
the material on record, the following issues arise for
consideration:
7.1. Is the instant petition maintainable? In other
words, may the petitioner--currently in judicial custody
in connection with offences punishable under Sections
132(1)(a), 132(1)(b), and 132(1)(i) read with 132(5) of
the CGST Act, 2017--invoke the inherent powers of this
Court under Section 528 of BNSS, 2023 (i.e., Section
482 of the CrPC, 1973) to challenge the non-compliance
with the mandatory issuance of a notice of appearance
under Section 35(3) of BNSS (i.e., Section 41-A of the
CrPC)?
7.1.2. Do the provisions of the CGST Act, 2017,
render it a self-contained law, thereby excluding the
applicability of BNSS, 2023 (and by extension, the
CrPC, 1973) in criminal proceedings instituted under the
CGST Act?
7.2. Can the issuance of a summons under
Section 70 of the CGST Act, 2017, be equated with the
notice of appearance that must be mandatorily issued
under Section 35(3) of BNSS, 2023?
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7.3. Whether the arrest of the petitioner for an
offence punishable with imprisonment for a maximum
term of less than seven (7) years, without issuance of
notice of appearance, as stipulated under Section 35(3)
of BNSS, 2023 (i.e. Section 41A of CrPC, 1973) is
vitiated?
8. For convenience, all issues are addressed
together. The scope of this adjudication is limited solely to
determining whether the petitioner's arrest--as accused No. 3
in the case registered by the respondent--is vitiated on
account of non-compliance with the provisions of Section
35(3) of BNSS, 2023. Accordingly, this order is not an
adjudication on the merits of the underlying charges.
9. It is well established in modern criminal
jurisprudence and constitutional law that any challenge to the
legality of an arrest involves a contest between the entrenched
right to life and liberty and the larger public interest and state
obligation to punish the guilty. Thus, any interpretative
exercise by this Court--whether under its writ jurisdiction or
inherent powers--must employ a "test of proportionality." This
test, as consistently endorsed by the Apex Court in recent
cases (including in the cases of Association of Democratic
Reforms and Anr. v. Union of India and Ors., 2024 INSC 113;
Arvind Kejriwal v. Directorate of Enforcement, 2024 INSC 512;
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and Radhika Agarwal v. Union of India, 2025 INSC 272),
requires that the justifiability of any state action curtailing
liberty be examined against the following parameters:
(i) Whether the impugned state action serves a legitimate
aim or purpose;
(ii) Whether the restrictions imposed have a rational nexus
with the stated aim and objective;
(iii) Whether less restrictive, yet equally effective, alternatives
were available to minimize the impairment of liberty; and
(iv) Whether an appropriate balance is struck between the
individual's liberty and the pursuit of the public purpose.
9.1. It is needless to state that any determination based
on the above factors must be made after a careful
consideration of the unique facts and circumstances of the
case, with due regard to the need for a judicious exercise of
discretion.
9.2. As regards the grant of bail, it is pertinent to advert
to the following judicial pronouncements:
9.2.1. In the case of P Chidambaram v. Directorate of
Enforcement, 2020 13 SCC 791, the Apex Court has
observed as follows:
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"23. ... the basic jurisprudence relating to bail
remains the same inasmuch as the grant of bail
is the rule and refusal is the exception so as to
ensure that the accused has the opportunity of
securing fair trial. However, while considering the
same the gravity of the offence is an aspect which is
required to be kept in view by the Court. The gravity
for the said purpose will have to be gathered from
the facts and circumstances arising in each case.
Keeping in view the consequences that would befall
on the society in cases of financial irregularities, it
has been held that even economic offences would
fall under the category of "grave offence" and in
such circumstance while considering the application
for bail in such matters, the Court will have to deal
with the same, being sensitive to the nature of
allegation made against the accused. One of the
circumstances to consider the gravity of the offence
is also the term of sentence that is prescribed for
the offence the accused is alleged to have
committed. Such consideration with regard to the
gravity of offence is a factor which is in addition to
the triple test or the tripod test that would be
normally applied. In that regard what is also to be
kept in perspective is that even if the allegation is
one of grave economic offence, it is not a rule
that bail should be denied in every case since
there is no such bar created in the relevant
enactment passed by the legislature nor does
the bail jurisprudence provide so. Therefore, the
underlining conclusion is that irrespective of the
nature and gravity of charge, the precedent of
another case alone will not be the basis for
either grant or refusal of bail though it may have
a bearing on principle. But ultimately the
consideration will have to be on case-to-case
basis on the facts involved therein and securing
the presence of the accused to stand trial."
(emphasis supplied)
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9.2.2. In the case of Sanjay Chandra v. CBI (2012) 1
SCC 40, the Apex Court has observed as follows:
40. The grant or refusal to grant bail lies within
the discretion of the court. The grant or denial is
regulated, to a large extent, by the facts and
circumstances of each particular case. But at the
same time, right to bail is not to be denied merely
because of the sentiments of the community against
the accused. The primary purposes of bail in a
criminal case are to relieve the accused of
imprisonment, to relieve the State of the burden
of keeping him, pending the trial, and at the same
time, to keep the accused constructively in the
custody of the court, whether before or after
conviction, to assure that he will submit to the
jurisdiction of the court and be in attendance
thereon whenever his presence is required.
(emphasis supplied)
9.2.3. In the case of Satender Kumar Antil v. CBI
(2022 Live Law (SC) 577), the Apex Court observed in
respect of grant of bail to persons accused of offences
punishable with less than seven years of imprisonment that
"one would expect a better exercise of discretion on the part of
the court in favour of the accused".
10. In addressing the maintainability of the instant
petition under Section 528 of BNSS (or Section 482 of the
CrPC, 1973), it is necessary to determine whether the
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provisions of BNSS, 2023 (or the CrPC, 1973) apply to
criminal proceedings arising under the CGST Act, 2017. A
perusal of Sections 4 and 5 of the BNSS, 2017--which deals
with the trial of offences under BNSS, 2023 and under other
laws, along with the relevant saving provisions--is instructive.
The provisions read as follows:
Section 4:
(1) All offences under the Bharatiya Nyaya Sanhita, 2023
shall be investigated, inquired into, tried, and otherwise
dealt with according to the provisions contained herein.
(2) All offences under any other law shall be investigated,
inquired into, tried, and otherwise dealt with according to
the same provisions, subject to any enactment in force
that regulates the manner or place of investigating,
inquiring into, trying, or otherwise dealing with such
offences.
Section 5:
Nothing contained in this Sanhita shall, in the absence of
a specific provision to the contrary, affect any special or
local law currently in force, or any special jurisdiction or
power conferred, or any special form of procedure
prescribed by any other law in force.
11. The Apex Court, in Ashok Munilal Jain and Anr. v.
Assistant Director, Directorate of Enforcement (2018) 16
SCC, held that the procedure prescribed under the Criminal
Procedure Code (CrPC), 1973 is equally applicable to criminal
proceedings arising under the CGST Act, 2017.
12. This ratio was reaffirmed by a three-judge Bench of
the Apex Court in Radhika Agarwal v. Union of India (2025)
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SCC OnLine SC 449. In that decision, the Apex Court held
that the provisions of BNSS, 2023 (i.e., the CrPC, 1973) are
applicable to proceedings arising under the Customs Act,
1962 and the CGST Act, 2017, because the provisions in the
former complement those in the latter, unless a specific
provision to the contrary exists in the latter. The Court further
referred to its earlier decision in AR Antulay v. Ramdas
Sriniwas Nayak and Anr. (1984) 2 SCC 500, noting that the
Code of Criminal Procedure (now BNSS, 2023) is the 'parent
statute' that governs the investigation, inquiry, and trial of
cases by criminal courts of various designations.
13. Having established the applicability of BNSS, 2023
to criminal proceedings arising under the CGST Act, 2017, it is
pertinent to recall the settled position of law regarding the
exercise of the extraordinary jurisdiction conferred under
Section 528 of BNSS (or Section 482 of the CrPC, 1973):
13.1. The exercise of authority by courts under Section
528 of BNSS is essentially discretionary and should not be
invoked in matters covered by the specific provisions of the
Sanhita. (See, LV Jadhav v. Shankarrao AIR 1983 SC 1219; Arun
Shankar Shukla v. State of UP AIR 1999 SC 2554; and Madhu
Limaye v. State of Maharashtra AIR 1978 SC 47.)
13.2. The inherent powers may be invoked in three
circumstances:
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(a) to give effect to any order under this Code;
(b) to prevent the abuse of the process of any court;
and
(c) to otherwise secure the ends of justice.
The power under Section 528 of BNSS is meant to
achieve real and substantial justice--particularly where
the court is of the opinion that non-interference would
result in a failure of justice, where grave injustice has
occurred and must be remedied, or where the required
statutory provision has not been complied with. (See,
Sanapareddy Maheedhar Seshagiri v. State of Andhra
Pradesh AIR 2008 SC 787; Mast Ram v. Smt Shanti Devi
2002 CrLJ 1616 (1617) HP.)
13.3. The inherent powers of a High Court are not
negated by any overlap with the judicial review powers
conferred under Articles 226 and 227. Writs are extraordinary
constitutional remedies and operate independently of the
statutory right under Section 528 to address grievances not
specifically provided for in the Sanhita.
13.4. The High Court may, at its discretion, entertain a
petition under Article 227 of the Constitution or under Section
528 of BNSS to address a substantial question of law that
goes to the root of the matter or the genesis of the
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prosecution. (See, Ratansi Mulji v. Vindo Ratilal Gandhi, 1991
CrLJ 2766 (2770) (Bom)).
14. Furthermore, a coordinate Bench of this Court in the
case of Sudarshan Ramesh v. Union of India (2023 SCC
OnLine Kar 71) observed at paragraph 24 as follows:
"The petitioner has challenged the order rejecting
the request for withdrawal of LOC on the ground
that he cannot be subjected to investigation
indefinitely on the basis of mere suspicion, since he
is not prosecuted for any cognizable offence nor
has a non-bailable warrant been issued to secure
his presence. The proceedings initiated under the
provisions of the PMLA against the petitioner's
brother form the basis for issuing the LOC, and any
action taken or order passed under the PMLA may
be challenged by invoking the inherent jurisdiction
under Section 482 Cr.P.C. or under Article 226 read
with Section 482 Cr.P.C. to prevent abuse of the
process of law or to secure the ends of justice."
15. Furthermore, a perusal of Section 69(3)(a) of CGST
Act, 2017 reveals that the said Act envisages that the arrestee
charged with a cognizable and non-bailable offence as under
Section 132(4) of the said Act shall be forwarded to the
custody of the Magistrate, in default of bail. The statute does
not provide for custody of the arrestee to either police or the
proper officer. Therefore, the authority of the Magistrate to,
either admit the said arrestee on bail or remand him to judicial
custody, is to be necessarily exercised in accordance with the
provisions of the BNSS, 2023 (i.e. CrPC, 1973).
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15.1. Accordingly, the instant petition is maintainable
under Section 528 of BNSS, 2017, particularly where the
grounds of challenge to the arrest include non-compliance
with the statutory provision of Section 35(3) of BNSS, 2017.
15.2. Similarly, where the issue involves a challenge to
the lawfulness of an arrest and continued remand of more
than 40 days since the date of arrest, a writ petition under
Articles 226 and 227 of the Constitution is not only
maintainable but also entertainable.
16. Shri MT Nananiah submitted that Section 35(3) of
BNSS, 2023 mandates that in all cases where an arrest is not
required under Section 35(1) of BNSS (Section 41 of CrPC),
the notice of appearance must be issued to any person
against whom a complaint has been made or against whom
there is a reasonable suspicion of having committed a
cognizable offence. The learned Senior Counsel further
argued that non-compliance with this requirement, as in the
case at hand, vitiates the arrest of the petitioner. Section 35 of
BNSS, 2023 which deals with the arrest of persons without a
warrant, is reproduced below:
35. (1) Any police officer may, without an order from a
Magistrate and without a warrant, arrest any person:
(a) who commits, in the presence of a police officer, a
cognizable offence;
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(b) against whom a reasonable complaint has been
made, or credible information has been received, or
there exists reasonable suspicion that he has committed
a cognizable offence punishable with imprisonment for a
term that may be less than seven years or up to seven
years (with or without fine), if the following conditions are
satisfied:
(i) the police officer has reason to believe on the
basis of such complaint, information, or suspicion that
the person has committed the said offence; and
(ii) the police officer is satisfied that such arrest is
necessary:
(a) to prevent the person from committing any
further offence; or
(b) for the proper investigation of the offence; or
(c) to prevent the person from causing the
evidence of the offence to disappear or tampering with
such evidence; or
(d) to prevent the person from giving any
inducement, threat, or promise to any person acquainted
with the facts of the case so as to dissuade him from
disclosing such facts to the Court or to the police officer;
or
(e) if, unless the person is arrested, his presence
in Court whenever required cannot be ensured.
The police officer shall record his reasons in
writing when making such an arrest.
Provided that, in cases where arrest is not
required under this sub-section, the police officer shall
record in writing the reasons for not making the arrest.
(c) against whom credible information has been
received that he has committed a cognizable offence
punishable with imprisonment for a term that may
extend to more than seven years (with or without fine or
with a death sentence), and the police officer has reason
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to believe on the basis of that information that such
person has committed the said offence;
(d) who has been proclaimed as an offender either
under this Sanhita or by order of the State Government;
or
(e) in whose possession anything is found that may
reasonably be suspected to be stolen property and who
may reasonably be suspected of having committed an
offence in connection with such property; or
(f) who obstructs a police officer in the execution of his
duty, or who has escaped, or attempts to escape, from
lawful custody; or
(g) who is reasonably suspected of being a deserter
from any of the Armed Forces of the Union; or
(h) who is reasonably suspected of having been
involved in, or against whom a reasonable complaint
has been made, or credible information has been
received, or there exists reasonable suspicion of his
involvement in any act committed outside India which, if
committed in India, would have been punishable as an
offence, and for which he is liable to be apprehended or
detained in India under any law relating to extradition or
otherwise; or
(i) who, being a released convict, commits a breach of
any rule made under sub-section (5) of Section 394; or
(j) for whose arrest any requisition, whether written or
oral, has been received from another police officer,
provided that the requisition specifies the person to be
arrested and the offence or other cause for which the
arrest is to be made, and it appears from the requisition
that the person might lawfully be arrested without a
warrant by the officer who issued the requisition.
(2) Subject to the provisions of Section 39, no person
involved in a non-cognizable offence, or against whom a
complaint has been made, or credible information has
been received, or where there exists reasonable
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suspicion of such involvement, shall be arrested except
under a warrant or an order of a Magistrate.
(3) The police officer shall, in all cases where the
arrest of a person is not required under sub-section
(1), issue a notice directing the person--against
whom a reasonable complaint has been made, or
credible information has been received, or where
there exists reasonable suspicion that he has
committed a cognizable offence--to appear before
him or at such other place as may be specified in
the notice.
(4) When such a notice is issued, the person is duty-
bound to comply with its terms.
(5) If the person complies and continues to comply
with the notice, he shall not be arrested in respect of
the offence referred to therein unless, for reasons
recorded in writing, the police officer deems arrest
necessary.
(6) If, at any time, the person fails to comply with the
terms of the notice or is unwilling to identify himself,
the police officer may, subject to any orders of a
competent Court, arrest him for the offence
mentioned in the notice.
(7) No arrest shall be made without prior permission
from an officer not below the rank of Deputy
Superintendent of Police in cases where the offence is
punishable for less than three years and where the
person is infirm or is above sixty years of age.
17. The Apex Court in Arnesh Kumar v. State of Bihar,
(2014) 8 SCC 273 held that an arrest without a warrant by a
police officer for a cognizable offence punishable with
imprisonment of up to seven years must satisfy not only the
requirement of having 'reason to believe' that the arrestee has
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committed the alleged offence but also that the arrest is
necessary for one or more of the purposes enumerated in
sub-clauses (a) to (e) of clause (1) of Section 41 CrPC (with
Section 35(1) of BNSS corresponding to Section 41 CrPC). As
to the issue of notice of appearance under Section 35(3) of
BNSS (i.e., Section 41-A of CrPC), the Court observed that
such notice must be served on the accused within two weeks
from the date of institution of the case, with an extension by
the Superintendent of Police possible for reasons recorded in
writing. This ratio was recently affirmed in Satender Kumar
Antil v. CBI, (2022 Live Law (SC) 577).
18. A coordinate Bench of this Court in Make My Trip
(India) Pvt. Ltd. v. State of Karnataka (2022) has ruled in
favor of the mandatory issuance of a notice of appearance
under Section 35(3) of BNSS, in economic offences (See also,
Sandeep Goyal v. Union of India (2021))
19. In Union of India v. Sapna Jain (2021) 2 SCC 782,
while referring the matter to a three-judge Bench of the Apex
Court on the issue of grant of pre-arrest bail and the nature of
guarantee accorded under Section 41-A(3) of CrPC against
arrest in relation to cognizable and non-bailable offences
under the CGST Act, the Apex Court observed at paragraphs
no. (3) and (5) as follows:
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"2. As different High Courts of the country have
taken divergent views on this matter, we are of the
view that the position in law should be clarified by
this Court. Hence, the notice...
3. As the respondent-accused have been
granted the privilege of pre-arrest bail by the
High Court in the impugned orders [Sapna Jain v.
Union of India, 2019 SCC OnLine Bom 13064;
Chandraprakash Labhchand Sanklecha v. Union of
India, 2018 SCC OnLine Bom 21184], at this
stage, we are not inclined to interfere with the
same. However, we make it clear that High
Courts, when entertaining such requests in the
future, will bear in mind that this Court, by its
order dated 27-5-2019 in P.V. Ramana Reddy v.
Union of India [P.V. Ramana Reddy v. Union of
India, (2021) 2 SCC 784], had dismissed the
special leave petition filed against the judgment
and order [P.V. Ramana Reddy v. Union of India,
2019 SCC OnLine TS 3332] of the Telangana
High Court in a similar matter, wherein the
Telangana High Court took a view contrary to
that expressed in the present case. Having heard
the learned counsel for the petitioner and perused
the relevant material, we are not inclined to
interfere. The special leave petition is accordingly
dismissed."
(emphasis supplied)
20. The learned counsel for the respondent has placed
reliance on the decision of the Division Bench of the High
Court of Telangana in the case of PV Ramana Reddy v.
Union of India, 2019 (25) GSTL 185 (Telangana): DD
18.04.2019, wherein the High Court had refused grant of
anticipatory bail to the summoned-petitioners therein who
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were accused to have engaged in circular trading by claiming
ITC on material never purchased and passing on such ITC to
companies to whom they never sold any goods, and the
benefit of the wrongful ITC was claimed to the tune of INR 225
crores. The Division Bench had made further observation on
prior issue of notice of appearance under Section 41-A of
CrPC, 1973, inasmuch as Section 41-A(3) (which states that
no arrest shall be effected as long as the noticee complies
and continues to comply with the notice issued under Section
41-A(1)) did not afford an absolute irrevocable guarantee
against arrest of persons without warrant.
20.1. Rebutting the contention of the impugned arrest
herein being vitiated, the learned counsel for the respondent
submitted that the issuance of notice of appearance under
Section 35(3) of BNSS (or Section 41-A of CrPC, 1973) may
be dispensed with when the arrestee under Section 69 of
CGST Act, 2017 Act was earlier issued summons under
Section 70 of the said Act to tender evidence or depose
statements.
20.1.1. The learned counsel placed reliance on the
above decision, more particularly, paragraph no. 41 thereof,
wherein the High Court opined, "in fact, the duty imposed
upon a Police Officer under Section 41A(1) of Cr.P.C. to
summon a person for enquiry in relation to a cognizable
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offence, is what is substantially ingrained in section 70(1) of
the CGST Act. Though section 69(1) which confers powers
upon the Commissioner to order the arrest of a person does
not contain the safeguards that are incorporated under
Section 41 and 41A of Cr.P.C., we think section 70(1) of the
CGST, Act takes care of the contingency".
20.2. The learned counsel therefore, submitted that as
long as there existed 'recorded reasons' in the departmental
files, coupled with adequate 'reasons to believe', the arrest
was not bad in law, for the arrestee was summoned earlier on
02.01.2025 to tender evidence in the judicial proceeding of
inquiry opened by the respondent in respect of the same
allegations of wrongful availment of ITC.
20.3. The said submission, however, cannot be
countenanced in light of the fact that summons under Section
70 of the CGST Act can be issued to any person whose
attendance is necessary in the conduct of the inquiry, and all
persons so appearing are statutorily bound to "state the truth
during examination or ... as may be required". Furthermore,
sub-section (2) of the Section 70 of the said Act deems every
such inquiry conducted under sub-section(1) of Section 70 of
the Act to be a judicial proceeding, within the meaning of
Section 193 of IPC,1860 (which deals with punishment for
false evidence) and Section 228 of IPC, 1860 (which deals
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with intentional insult or interruption to public servant sitting in
Judicial Proceeding).
20.4. Furthermore, the the three-Judge Bench of the
Apex Court in the case of Vijay Madanlal Choudhary v Union
of India and Ors, 2022 INSC 757, has elucidated the
distinction between the stages of inquiry deemed to be judicial
proceeding, and an investigation under the PML Act, 2002,
wherein those summoned before inquiry would not be entitled
to avail the fundamental right contained in Article 20(3) of the
Constitution i.e., the right against self-incrimination, for the
reason that at the stage of inquiry, "the recording of statement
for the purpose of inquiring into the relevant facts in
connection with the property being proceeds of crime is, in
that sense, not an investigation for prosecution as such; and
in any case, there would be no formal accusation against the
noticee. Such summons can be issued even to witnesses in
the inquiry so conducted by the authorised officials. However,
after further inquiry on the basis of other material and
evidence, the involvement of such person (noticee) is
revealed, the authorised officials can certainly proceed against
him for his acts of commission or omission. In such a
situation, at the stage of issue of summons, the person cannot
claim protection under Article 20(3) of the Constitution.
However, if his/her statement is recorded after a formal arrest
by the ED official, the consequences of Article 20(3) or
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Section 25 of the Evidence Act may come into play to urge
that the same being in the nature of confession, shall not be
proved against him".
20.5. Therefore, in view of the above, and the legal
protection of right against self-incrimination accorded to
individuals at the stage of investigation vis-a-vis lack thereof at
the stage of inquiry - the primary purpose of which is
ascertainment of facts, I am of the opinion that issuance of
summons under Section 70 of the CGST Act cannot be
equated with the issuance of notice of appearance under
Section 35(3) BNSS, 2023 (Section 41-A of CrPC, 1973), as
the latter is issued at the stage of investigation when a formal
accusation, in form of a reasonable complaint or credible
information has been received or a reasonable suspicion
exists as to the commission of the cognizable offence, thereby
warranting an arrest.
20.6. In the case at hand, the petitioner however, is an
arrestee, who has been in custody since 30.01.2025 who had
tendered evidence and cooperated with the conduct of inquiry,
and thus, had compiled with the summons issued on
02.01.2025 - under Section 70 of the CGST Act, 2017. The
subject of challenge herein is not the issuance of summons,
but the arrest effected in pursuance of the said summons,
when the same was so made without issuance of the notice of
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appearance under Section 35(3) of BNSS, 2023 (or section
41-A(1) of CrPC, 1973).
21. However, this Court on numerous occasions has
opined that arrest of persons for offence of economic nature,
and punishable with imprisonment of not more than seven
years, must be preceded with an notice of appearance under
Section 35(3) BNSS, 2023 (Section 41-A of CrPC, 1973), and
that an arrest must be made only upon failure of the person to
comply with the terms of the notice, as stipulated under sub-
section (6) of section 35 of BNSS, 2023 (Section 41-A(4) of
CrPC, 1973).
22. A further perusal of the decision of the High Court of
Telangana in PV Ramana Reddy (supra), reveals affirmation
of the principle of mandatory issue of notice against
accusations of commission of offences under CGST Act.
Paragraph no. (61) of the judgment and order reads thus -
"In view of the above, despite our finding that the
writ petitions are maintainable and despite out
finding that the protection under Sections 41 and
41-A of Cr.P.C., may be available to persons said
to have committed cognizable and non-bailable
offences under this Act and despite our finding that
there are incongruities within Section 69 and
between Section 69 and 132 of CGST Act, 2017,
we do not wish to grant relief to the petitioners
against arrest, in view of the special circumstances
which we have indicated above".
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22.1. It is pertinent to note that the accused-petitioners
in the above case law were denied the pre-arrest bail on
account of possible failure of the accused to compound the
offence by meeting the huge liability of INR 225 crores raised
by the concerned Department, and furthermore, on the
grounds that "acts complained of against the petitioners
constitute a threat to the very implementation of a law within a
short duration of its inception".
23. The case at hand involves a complaint of wrongful
availment of ITC by the petitioner to the tune of INR 5.10
crores only, and the petitioner has been in remand since the
date of his arrest on 30.01.2025.
23.1. The CGST, Act 2017 provides for assessment
under Section 59, provisional assessment under section 60,
scrutiny of returns under Section 61, assessment of persons
who do not file returns under Section 62, assessment of
unregistered persons under Section 63, summary assessment
in special cases under Section 64, and audit under Sections
65 and 66. It is undisputed that while a prosecution can be
launched prior to conduct of summary assessment or special
audit determining liability, no offence can be said to be made
out in respect of purported discrepancies in the furnished
returns, until completion of the said audits.
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24. In light of the fact that the petitioner-arrestee was
arrested against the offence punishable with no more than five
years of imprisonment plus fine, but without the issuance of
notice of appearance directing him to appear before the officer
authorised under Section 69(1) of the CGST Act, and the fact
that the petitioner has been incarcerated since 30.1.2025,
coupled with the settled bail jurisprudence to exercise
discretion in favour of accused of such nature, I deem it fit that
the petitioner be enlarged on bail.
24.1. At the risk of repetition, it may be observed that
this Court expresses no opinion on the registration of the
impugned case against the petitioner, or the purported guilt of
the petitioner in the alleged offences.
Accordingly, I order the following:
ORDER
(i) The instant Petition is partly allowed by granting
Bail to the Petitioner-accused No. 3 in Crime No.
03/2025 (F. No. DGGI/INT/INTL/1506/2024-Gr C-
01-O/o Pr ADG-DGGI-ZU), pending on the file of the
Special Court for Economic Offences, Nrupathunga
Road, Bengaluru.
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(ii) The Chief Superintendent of Police, Parappana
Agrahara, Central Prison, Bengaluru, is hereby
directed to release forthwith the petitioner in the
aforesaid crime number, subject to following
conditions:
a) The Petitioner - Accused No. 3 shall execute a
personal bond for a sum of Rs.1,00,000/- with one local
surety for the likesum to the satisfaction of the Trial
Court within a period of two weeks from the date of his
release;
b) The Petitioner shall not directly or indirectly threaten
or tamper with the prosecution witnesses;
c) The Petitioner shall appear before the investigating
authorities as and when required;
d) The Petitioner shall not involve in similar offences in
the future;
e) The concerned Jail Authorities are hereby directed to
release the petitioner forthwith without any delay and
immediately upon receipt of this order, if he is not
required for any other cases, if any.
f) The Registry is directed to communicate this Order to
the Jail Authorities concerned forthwith without any
delay through e-mail and telephonically.
Sd/-
(HEMANT CHANDANGOUDAR)
JUDGE
