Whether anticipatory bail application is maintainable for offences under CGST Act, 2017

Anticipatory bail is a direction to release a person on bail, issued even before the person is
arrested. It is only issued by the Sessions Court and High Court.

Anticipatory bail is mentioned in Sec 438 of Cr.P.C. 1973. It reads as

438. Direction for grant of bail to person apprehending arrest.

(1) When any person has reason to believe that he may be arrested on an accusation of having
committed a non- bailable offence, he may apply to the High Court or the Court of Session for a
direction under this section; and that Court may, if it thinks fit, direct that in the event of such
arrest, he shall be released on bail.

(2) When the High Court or the Court of Session makes a direction under sub- section (1), it may
include such conditions in such directions in the light of the facts of the particular case, as it may
think fit, including-

(i) a condition that the person shall make himself available for interrogation by a police officer as
and when required;

(ii) a condition that the person shall not, directly or indirectly, make 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 any police officer;

(iii) a condition that the person shall not leave India without the previous permission of the
Court;

(iv) such other condition as may be imposed under sub- section (3) of section 437, as if the bail
were granted under that section.

(3) If such person is thereafter arrested without warrant by an officer in charge of a police station
on such accusation, and is prepared either at the time of arrest or at any time while in the custody
of such officer to give bail, be shall be released on bail; and if a Magistrate taking cognizance of
such offence decides that a warrant should issue in the first instance against that person, he shall
issue a bailable warrant in conformity with the direction of the Court under sub- section (1).

In CGST Act, the below mentioned offences shall be cognizable and non-bailable:-

 supplies any goods or services or both without issue of any invoice, in violation of the
provisions of this Act or the rules made there under, with the intention to evade tax
 issues any invoice or bill without supply of goods or services or both in violation of the
provisions of this Act, or the rules made there under leading to wrongful availment or
utilisation of input tax credit or refund of tax
 avails input tax credit using such invoice or bill
  collects any amount as tax but fails to pay the same to the Government beyond a period
of three months from the date on which such payment becomes due
 receives or is in any way concerned with the supply of, or in any other manner deals with
any supply of services which he knows or has reasons to believe are in contravention of
any provisions of this Act or the rules made there under

Let us refer to the case of Sri Hanumanthappa Pathrera Lakshmana Vs State of Karnataka 1
(Karnataka High Court) where petition was filed by the petitioner under Section 438 of the Code
of Criminal Procedure, 1973 (Cr.P.C.) for granting anticipatory bail.

Facts of the Case-

The respondent had issued notice/summons to the petitioner as per Section 70 of the CGST Act
summoning him to appear before the Authorized Officer.

Petitioner was the proprietor of M/s. Sri Om Traders, registered dealer under the GST provisions,
dealing in both ferrous and non-ferrous scrap.

During his regular course of business, he had purchased goods from various registered and
unregistered dealers and had issued tax invoices as per law.

He had collected the taxes and remitted to the Government as per the CGST and the SGST Act.

It was contended that, the respondent had issued summons to appear before an Officer and prior
to that, the respondent had conducted inspection of the business premises.

The petitioner was ready to appear before the respondent and co-operate with the investigation.

However, the respondent had already collected all the documents and completed their
investigation and the petitioner has apprehended his arrest in the hands of the respondent for the
offence punishable under Section 132(5) of the CGST Act.

In case, if he was arrested and sent to judicial custody, he would be put into hardship and
irreparable loss as he was having a old age mother and a daughter and due to COVID-19
lockdown situation, his heath may affect.

Even though, he had not committed any offence, there was a likelihood of his arrest for the non-
bailable offence. He is ready to abide by any condition imposed by the Court.

The offence was not punishable with death or imprisonment for life. He was ready to offer any
surety and hence prayed for an anticipatory bail.

1
Submissions by Respondent-

Intelligence was developed by the Officers of the respondent that the petitioner was engaged in
availment of fake input tax credit (ITC) i.e., availing of credit on the invoices received from the
persons without actual supply of goods.

Based upon the authorization given by the Competent Authority, summons was issued to the
petitioner to appear before the Officer as per Section 70 of the CGST Act.

The power conferred on the Officer under Section 70 of the CGST Act was to summon any
person to appear and produce document.

The inquiry was deemed to be judicial proceedings within the meaning of Section 193 and
Section 228 of the Indian Penal Code.

In spite of issuing so many notices/summons, the petitioner had failed to appear before the
Authority on various dates.

The preliminary investigation revealed that ITC was taken by the petitioner from the bogus
entities.

The petitioner was operating from rented premises and his whereabouts were not known to his
neighbors.

The respondent was authorized to conduct proceedings in terms of Section 67 of the CGST Act.

Neither the petitioner nor his authorized person approached the respondent. The whereabouts of
the petitioner were not known.

The petitioner was a habitual offender, he could commit same offence and he was deliberately
avoiding his appearance for the purpose of enquiry proceedings.

His bail petition filed before the City Civil and Sessions Judge came to be dismissed. If the bail
was granted to the petitioner, he would destroy the evidentiary material and other documents.

Thus, the anticipatory bail was not maintainable and was pre-matured.

Observations of the HC on whether petition under Section 438 of the Cr.P.C. was
maintainable

The respondent admitted that there was no statutory bar in the CGST Act either expressly or
impliedly for entertaining the bail petition under section 438 of the Cr.P.C.

As per the provisions of Section 70 of the CGST Act, the Officer had power to summon any
person whose attendance was considered as necessary either to give evidence or to produce
document or any other thing in any inquiry in the same manner as provided in the case of Civil
Court under the provisions of the Code of Civil Procedure, 1908, and every such inquiry shall
deemed to be “judicial proceedings” within the meaning of Section 193 and Section 228 of the
Indian Penal Code.

Section 69 of the CGST Act clearly empowered the Commissioner to authorize any Officer to
arrest a person, if the Commissioner has reasons to believe that if a person committed the offence
specified in Clause (a) or (b) or (c) or (d) of Section 132(1) and as per Section 132 (4) of the
CGST Act.

If any offence is committed, other than the offence, Clause (a), (b), (c) or (d) of Section 132(1)
shall be non-cognizable and bailable.

As per Section 132(5), the offences specified in Clause (a) or (b) or (c) or (d) of Section 132(1)
shall be cognizable and non-bailable and punishable up to 5 years and fine.

Therefore, if the petitioner was arrested for the offences other than the offence stated under
Section 132(4) of the CGST Act which was non-cognizable and bailable, the Deputy
Commissioner or Assistant Commissioner had power to release the petitioner on bail.

If the Commissioner has reasons to believe that the petitioner was arrested for the offence
committed under Section 132(1)(a) or (b) or (c) or (d) which was punishable under Section
132(5) of the CGST Act, which was cognizable and non-bailable offence, the Officer authorized
by the Commissioner after informing the grounds of arrest had to produce the assessee before the
Magistrate within 24 hours.

If the assessee was arrested and produced before the Magistrate, the petitioner/assessee was
likely to be remanded to judicial custody.

Therefore, when the offences punishable under Clause (a) or (b) or (c) or (d) of Section 132(1) of
the CGST Act which falls under Section 132(5) of the CGST Act is a cognizable and non-
bailable offence punishable with imprisonment up to 5 years and fine.

Once a person apprehends his arrest in the hands of the Commissioner under Section 69 of the
CGST Act, the assessee has statutory right to seek anticipatory bail under Section 438 of the
Cr.P.C.

Section 438 of the Cr.P.C. pertains to direction for grant of bail to person apprehending arrest.
Where any person has reason to believe that he may be arrested on accusation of having
committed a non-bailable offence, he may apply to the High Court or the Court of Session for a
direction under this section that in the event of such arrest he shall be released on bail; and that
Court may, after taking into consideration, inter-alia, the following factors, namely:-
the nature and gravity of the accusation;

the antecedents of the applicant including the fact as to whether he has previously undergone
imprisonment on conviction by a Court in respect of any cognizable offence;

the possibility of the applicant to flee from justice; and

where the accusation has been made with the object of injuring or humiliating the applicant by
having him so arrested, either reject the application forthwith or issue an interim order for the
grant of anticipatory bail.

On bare reading of Section 69(1) of the CGST Act, where the Commissioner has reasons to
believe if a person committed the offence under Section 132 of the CGST Act, he may, by order,
authorize any officer of central tax to arrest such person.

Therefore, the petitioner had reasons to believe that he may be arrested on accusation for having
committed non-bailable offence under Section 132(5).

Therefore, the petition under Section 438 of the Cr.P.C. was maintainable for the offences
committed under the CGST Act and there was no statutory bar for invoking or exercising power
under section 438 of the Cr.P.C. for the offence committed under the provisions of the CGST
Act.

Observations of the HC

On merits of the case, it was alleged by the prosecution that the petitioner had fraudulent
involvement of ITC on the basis of invoices without actual supply of goods in contravention of
Section 16 of the CGST Act and caused loss to the ex-chequer for Rs.9.05 crore approximately.

It was also stated that the preliminary stage of investigation had been completed and they found
that the ITC was taken by the petitioner from the bogus entities.

Therefore, summons were issued by the authorized officer under Section 70 of the CGST Act
which clearly showed that the petitioner had reasons to believe that he was apprehending his
arrest in the hands of the respondent in case after his appearance before the authorizing officer as
per Section 69 of the CGST Act.

Therefore, in case the petitioner was arrested, he is likely to remand to the judicial custody, after
his production before the Magistrate and by looking to the present COVID-19 situation, if he was
remanded to the judicial custody, he would be put to hardship and definitely, his health would
likely to affect.

The offences were not punishable with death or imprisonment for life.
There is no statutory bar in the CGST Act for granting anticipatory bail by exercising power
under Section 438 of the Cr.P.C.

Order passed by the High Court

The Petition was allowed by the HC. The petitioner was ordered to be sent on bail in the event of
his arrest under Section 69 of the CGST Act by the respondent-Authorised Officer, after enquiry
under Section 70 of the CGST Act, subject to following conditions:

Petitioner shall execute a personal bond for Rs.10,00,000 with two sureties to the Authorized
Officer

Petitioner shall appear before the Authorized Officer within one week, after receipt of this order,
for the purpose of enquiry under Section 70 of the CGST Act

Petitioner shall not tamper with the prosecution evidence or any document directly or indirectly

Petitioner shall co-operate during the course of enquiry and shall not leave the country without
prior permission of the Magistrate or the trial Court and he shall surrender his passport, if any, to
the concerned Authorized Officer

Petitioner shall appear as and when called for the purpose of any further investigation; and

Petitioner shall not indulge in any similar offence.

So we can conclude by saying that anticipatory bail application is maintainable for offences
under CGST Act, 2017.