The Delhi High Court while pointing out that the mismanagement of arrest process by Director General of GST Intelligence (DGGI) declared the arrest of person accused of wrongful Input Tax Credit (ITC) availment illegal citing that the grounds of arrest were not communicated to the accused.
The bench of Justice Anish Dayal has relied on the decision of the Supreme Court in the case of Arvind Kejriwal v. Directorate of Enforcement in which it was held that the pre-conditions act as stringent safeguards to protect the life and liberty of individuals.
The bench noted, “strangely enough, at 21:58:35, three minutes after the first summons, the second DIN was generated, and a second summons was generated for summoning on 29th November 2024 at 0700 hours. A perusal of the said second summons would also show that it was signed on 27th November 2024, whereas the printed date on the summons is 28th November 2024. Therefore, while the second summons was generated at 21:58:35 hours on 28th November 2024 evening, the summons itself strangely shows the signatures of the officer as of 27th November 2024. This attempt, as per petitioner, of having detained petitioner without any paperwork, and then creating the paperwork subsequently to cover up the tracks.”
The petitioner/assessee is currently a Director of M/s Wee-Pro Resource Recovery Solutions Private Limited carrying the business of e-waste management.
On 28th November 2024, department carried out a search under Section 67, CGST Act at the Company’s principal place of business. Allegedly, unaccounted stock was seized.
The petitioner contended that pursuant to the search, petitioner was taken in his own car from premises of the Company, accompanied by the officers of the respondent, to the respondent’s office located at Dwarka at around 1600 hours and was illegally detained there, without reason or information. His mobility was restricted, and he was not allowed to leave the premises of the respondent; his phone was also cloned at respondent’s premises without his consent.
On the intervening night of 29th and 30th November 2024, petitioner was arrested. Allegations pertained to availing Input Tax Credit (ITC) amounting to Rs. 10,76,99,292/- by procuring fake invoices without actual supply of goods through the firms operated by co-accused Ayyub Malik in contravention of Section 132(1)(c), CGST Act.
On 30th November 2024, at 1245 hours, petitioner was produced before the Chief Judicial Magistrate (Special Court), Patiala House Court, New Delhi (CJM) along with a remand application seeking 14 days’ judicial custody.
The petitioner contested the remand application vehemently before the CJM making various submissions; however, the CJM disposed of the remand application granting 13 days’ judicial custody.
Grounds Of Challenges To Arrest
The petitioner/accused has challenged the arrest on various ground namely:
Belated Summons
The accused contended that while he was in respondent’s custody, two summons dated 28th November 2024 under Section 70, CGST Act were issued to the petitioner.
The accused argued that the summons were generated belatedly by putting back-dated signatures of the IO. The first summons was generated at 21:55 hours on 28th November 2024, as evident from the Document Identification Number (DIN) which shows document generation time as subsequent to when petitioner was directed to appear.
However, the time of appearance was at 17:30 hours on the same day, much prior to the generation of summons. Also, the signatures of the officer were of 27th November 2024. It shows that the summons were never served but generated later.
The second summons, as per the DIN were generated only 3 minutes later, which shows that respondent was trying to camouflage the illegality of the initial arrest/detention. Even this second summons was signed by the officer as of 27th November 20204.
The accused stated that clearly the paperwork was done later and the petitioner was detained without due process.
Discrepancies in Arrest Memo
The accused contended that the Arrest Memo itself shows that it was made at 0100 hours and verified by a witness with signature dated ‘30th December 2024’. Same is in contravention to the respondent’s statement before the CJM that the arrest was made at 0030 hours on 30th November 2024.
Non-supply of Grounds of Arrest
The accused contended that Under Section 69(1), CGST Act, ‘reasons to believe’ are required and once those are formed, condition under Section 69(2) is triggered which has two prerequisites.
Firstly, the officer authorized to arrest the person shall inform such person of the grounds of arrest.
Secondly, produce him before a Magistrate within 24 hours.
It was contended that the term ‘and’ stipulated that the grounds of arrest must be communicated in writing to the arrested person at the time of arrest and only then he shall be produced before the Magistrate within 24 hours.
As the respondent failed to supply the grounds of arrest in writing to the petitioner, same is in contravention of the law as crystallized by the Apex Court in Pankaj Bansal v. Union of India.
Non-production before a Magistrate within 24 hours
Petitioner was taken into custody on 28th November 2024 at 1600 hours by the respondent restricting petitioner’s mobility. Petitioner was produced before the Magistrate on 30th November 2024 at 1245 hours. Same was in gross violation of Section 58 of the BNSS read with Article 22(2) of the Constitution.
Insufficient compliance of Section 69(2), CGST Act
Section 69(1), CGST Act deals with the ‘reasons to believe’ formed by the Commissioner before the arrest of the accused/taxpayer. However, Section 69(2), CGST Act categorically deals with arrest compliances involving two prerequisites. Difference between ‘reasons to believe’ and ‘grounds of arrest’ as propounded by the Supreme Court in Prabir Purkayastha.
Even if the argument of grounds of arrest being subsumed in the remand application is accepted, Senior Counsel for petitioner contended that the same was never supplied to the petitioner either at the time of arrest or thereafter. The remand application was supplied to the petitioner at the time he was presented before the Magistrate i.e. at 1245 hours on 30th November 2024.
No grounds of arrest were explicitly mentioned in the remand application as provided to the petitioner during his production before the CJM.
It was argued that the legislature has placed a higher threshold under Section 69(2), CGST Act (post arrest) as the arresting authority must provide all the facts necessitating a person’s arrest, in comparison to Section 69(1), CGST Act wherein the Commissioner merely draws subjective satisfaction as to whether it appears that the offence under Section 132(l)(a) to (d), CGST Act is committed by the accused person.
No Need and Necessity to Arrest
It was argued that the only allegation against the petitioner is of availing benefit of ITC of about Rs. 10,79,99,292/- based on GST returns filed. All documents pertaining to the same are digital in nature, petitioner has cooperated with the respondent, and there is no possibility of tampering. Thus, the arrest ought not to have occurred in the first place.
DGGI’s Submissions
The department contended that all actions taken by the respondent agency were in strict compliance of the statutory framework under the CGST Act, and other applicable legal norms.
Conclusion
The court held that petitioner was detained illegally at the respondent’s office without summons, and the summons were generated subsequently.
The court while allowing the petition held that the arrest of the petitioner on 30th November 2024 is held illegal and the remand order dated 30th November 2024 is set aside.
Case Details
Case Title: Kshitij Ghildiyal Versus DGGI
Case No.: W.P.(CRL) 3770/2024
Date: 16th December 2024
Counsel For Petitioner: Maninder Singh
Counsel For Respondent: Anurag Ojha
