In view of the Supreme Court’s judgment in Siddharth v. The State of Uttar Pradesh (Criminal Appeal No. 838 of 2021) dated 16th August 2021, the Central Board of Indirect Taxes and Customs (“CBIC”), for offences punishable under Section 132 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), recently issued guidelines regarding arrest and bail (“Guidelines”).
In Siddharth v. The State of Uttar Pradesh, the Court, noting personal liberty as a constitutional mandate, stated that the occasion to arrest an accused during investigation arises when -
- Custodial investigation becomes necessary or;
- It is a heinous crime or;
- there is a possibility of influencing the witnesses or;
- accused may abscond.
- Conditions precedent to arrest: The Guidelines, recognising that arrest impinges on the personal liberty of an individual, require the power of arrest to be exercised carefully rather than in a routine or mechanical manner. In that regard, even in the instance that the conditions precedent to arrest under Section 132 of the CGST Act are made, before arrest is made, the competent authority must determine whether the answer to any/some of the following questions are affirmative:
- Whether the person was concerned in a non-bailable offence or credible information has been received/reasonable suspicion exists on having been so concerned?
- Whether arrest is necessary to ensure proper investigation?
- Whether the person, if not restricted, is likely to tamper the course of further investigation or is likely to tamper with evidence or intimidate or influence witnesses?
- Whether person is ‘mastermind’ or ‘key operator’ effecting proxy/benami transaction in the name of dummy GSTIN or non-existent persons, etc. for passing fraudulent input tax credit etc.?
- As unless such person is arrested, his presence before investigating officer cannot be ensured.
Further, the Guidelines require that the request for arrest should be approved only where the intent to evade tax or commit acts regarding wrongful Input Tax Credit or fraudulent refund of tax or failure to pay amount collected as tax is evident i.e. mens rea/guilty mind is palpable. Pertinently, the Guidelines also advise against arrest in cases of a technical nature i.e. where the demand of tax is based on a difference of opinion regarding interpretation of law.
- Procedure for arrest: The arrest procedure provided in the Guidelines has to be read with the procedure stipulated in the Code of Criminal Procedure (“CrPC”), particularly while arresting a woman. As per the Guidelines, the Commissioner is required to record the basis, after considering the nature of offence, the role of persons involved and evidence available, on which the Commissioner comes to the conclusion that an offence has been committed. Further, the arrest memo must comply with the directions of the Hon’ble Supreme Court in D.K. Basu v. State of West Bengal [Writ Petition (CRL) No. 592 of 1987] (that requires preparation of arrest memo in the presence of witnesses) and should include the relevant laws and provisions attracted to the case. The grounds of arrest, the fact that the nominated/authorised person of the arrested person has been informed, date and time of the arrest, should be mentioned in the arrest memo before it is handed over to the arrested person under proper acknowledgement. The Guidelines also refer to the circulars issued by the Central Board of Indirect Taxes and Customs, which provide the format of arrest memo and mandate generation and quoting of Document Identification Number on communication, including the arrest memo, issued by officers of CBIC to tax persons and other persons involved in the investigation.
The Guidelines also include provisions pertaining to medical examination (“ME”) of an arrested person. As per the guidelines, ME soon after the arrest is made, has to be conducted by a medical officer in the service of a Central or State Government, and in the absence of a medical officer, by a registered medical practitioner. Further, the custodian of the arrested person is duty bound to take reasonable care of the health and safety of the arrested person. The Guidelines also state that arrest should be made with minimal use of force and publicity and the arrested person should be subjected to reasonable restraint to prevent escape.
- Post arrest formalities: Under the Guidelines, post arrest formalities for specific offences outlined under sub-section (4) and (5) of Section 132 of the CGST Act, are provided as follows:
- Persons arrested under sub-section (1) of Section 69 for offence specified under Section 132 (4) of the CGST Act - Assistant Commissioner/Deputy Commissioner to release the person arrested on bail bond. Bail conditions should be informed in writing to the person arrested and also over telephone to the person nominated by the individual arrested.
- The conditions inter alia will relate to the following:
- Execution of personal bail bond (format in CrPC) and surety of like amount given by local person of repute (will depend inter alia on facts and circumstances of each case, tax involved etc.1)
- Appearance before the investigating officer when required
- Not leaving the country before informing investigating officer
- In situations where the conditions of bail are not fulfilled, the arrested person has to be presented before the appropriate Magistrate within 24 hours without unnecessary delay.
- Persons arrested under sub-section (1) of Section 69 for offence specified under Section 132 (5) of the CGST Act - Officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before the Magistrate within 24 hours.
- In circumstances preventing the production of the arrested person before a Magistrate, the arrested person may be handed over to the nearest police station for safe custody under a proper challan (format in CrPC).
- Post arrest, prosecution complaint should be filed under Section 132 preferably within 6 days of arrest where no bail is granted and in other cases, within a definite time frame.
- Requirement to maintain Bail Register: To be maintained by every Commissionerate/Directorate containing details pf case, arrested person, bail amount, surety amount.
- Reporting requirement: The Guidelines require Principal Director General (DGGI)/Principal Chief Commissioner (s)/Chief Commissioner(s) to send a report on every arrest to a Member of the Compliance Management Wing as well as a Zonal Member within 24 hours of the arrest. The Guidelines aim to maintain ‘all India records’ of arrests made under the CGST Act starting September 2022. For the purposes of maintaining these ‘all India records’, the Principal Chief Commissioner (s)/Chief Commissioner (s) are required to submit a monthly report of the persons arrested to the Directorate General of GST Intelligence, New Delhi in the format prescribed under the Guidelines before the 5th of the succeeding month.
Considering the above, the Guidelines concern themselves with determining the conditions surrounding arrest and bail for certain offences as provided under Section 132 of the CGST Act.
The Guidelines are a welcome step for safeguarding the personal liberty of arrested persons as they enforce the Supreme Court's observation in Siddharth v. The State of Uttar Pradesh that “merely because an arrest can be made because it is lawful does not mandate that arrest must be made.”
It is pertinent to note however, that arrest as a practice is largely dependent on the discretion of the arresting authority, for instance, the Commissioner under Section 69 (1) of the CGST Act, may arrest a person where he has “reason to believe” that the alleged offender has committed an offence. The impact of these Guidelines, thus, at the preliminary stage especially, depends largely on its on-ground and practical enforcement.
Further, an arrested person would benefit greatly if definitive timelines are provided for a few procedural requirements under the Guidelines, especially for the conduct of ME (which is required to be conducted “soon after the arrest”) and filing of a prosecution complaint in cases of arrest other than bail (which stipulates that the complaint be filed within a “definite time frame”).