-By Nitesh Mishra
The Central Goods and Services Act, 2017 (“the Act” or “CGST Act”) ushered in a novel tax regime in India. Section 132 of the Act has prescribed certain offences which attract punishment in accordance with the provisions of the Act. Owing to the recent enactment of the Act, there does not exist ample judicial interpretation of the substantive offences prescribed. However, the jurisprudence around granting of anticipatory bail in such offences has been deliberated by the courts at great length, and it is this developing jurisprudence that this article shall essentially concern itself with.
The offences under the Act are either: (i) cognizable and non-bailable, as defined under clauses (a) to (d) of Section 132(1); or (ii) non-cognizable and bailable, as defined under rest of the clauses to Section 132(1). Despite there existing a legislative lacuna with respect to the arrest provision in the Act for the latter kind of offences, as noted by the Telangana High Court in case of P.V. Ramana Reddy v. Union of India, there has been a bail provision prescribed for such offences under Section 69(3)(b).
While a major portion of the bail jurisprudence in cases of offences under the Act has been passed down from the erstwhile tax regime and the pre-existing criminal law jurisprudence around bails, the High Courts have encountered novel issues as well and have taken divergent views, while deliberating upon bail and anticipatory bail applications under the CGST Act. Such issues yet remain to be conclusively settled by the Supreme Court, as noted in Union of India v. Sapna Jain.
Through the course of this article, a person apprehending arrest and applying for an anticipatory bail shall be referred to as “concerned person”, since the Telangana High Court in P.V. Ramana Reddy case has held that such person cannot be considered as an ‘accused person’, until a prosecution has been initiated against him by means of a private complaint, with the previous sanction of Commissioner under the Act.
Pre-Requisites to arresting a person under CGST Act:
It is pertinent to note, at the outset, that the anticipatory bail jurisprudence in cases of offences under the CGST Act require certain procedural pre-requisites to be met before a concerned person is arrested for such offences. The non-compliance of such procedural pre-requisites have been factored in by the courts, often in favour of the concerned persons, while deciding on the anticipatory bail applications.
- Adequate Evidence against the Concerned Person:
In Akhil Krishan Maggu v. DGGI, the Punjab & Haryana High Court has ruled that the power of arrest that has been provided for under Section 69 of the Act ought not to be casually exercised by the authorities, as per their “whims and caprices”. The requirement of adequate and proper evidence against the concerned person, prior to their arrest, has been stressed upon by the Court.
In Jayachandran Alloys (P) Ltd. v. Superintendent of GST & Custom Excise, Salem, the Madras High Court has held, while granting an anticipatory bail, that the authorities empowered to act under the CGST Act ought not to proceed against a concerned person without having adequately determined the commission of the offences by such person, unless such person is a habitual offender. The procedure for assessment of guilt of the concerned person, as described under the Act, is required to be mandatorily complied with.
- Requirement of Show-Cause Notice to the Concerned Person:
Sections 73 and 74 of the Act provide for a show-cause notice to be issued to the concerned person, prior to any proceeding being initiated against them. However, the state authorities often do not comply with such notice-requirement, and such non-compliance has been held to be improper and illegal.
The Delhi High Court, in Makemytrip (India) Pvt. Ltd. v. Union of India, while dealing with a similar notice-requirement provision under the Finance Act, 1994, has pressed upon the mandatory nature of such notices. Subsequently, the Supreme Court affirmed the judgment of the Delhi High Court, thereby holding that a show-cause notice needs to be necessarily issued, prior to arresting a concerned person.
In Purshottam Mantri v. Union of India, the Bombay High Court relied on the two above-mentioned judgments to hold that the issuance of show-cause notice was an essential pre-condition to be met by the authorities prior to arresting a person. The non-compliance to such requirement ought to be factored in favour of the concerned person while deciding on the anticipatory bail application.
The Pre-Deposit Condition in Anticipatory Bail Applications:
Another streak of cases involving GST offences have evolved the concept of “pre-deposits” that the concerned persons offer to pay, in order to secure an anticipatory bail. A portion of the total alleged amount involved in such offences is deposited with the court by the concerned person, while seeking an anticipatory bail. Since such person is, generally, not even an accused at this stage, such a “pre-deposit” is alluded favourably to them, and signifies their willingness to cooperate in further investigations.
In C. Pradeep v. Commissioner of GST and Central Excise, Salem, the Supreme Court allowed an anticipatory bail to the petitioner, on deposit of 10% of the disputed liability in the case. Furthermore, in Orion Security Solutions & Anr. v. Commissioner of CGST Delhi East, the Delhi High Court granted anticipatory bail on the partial deposit of INR 5.5 crores, out of the INR 11.5 crore liability of the petitioner.
It is pertinent to note the difference in the deposits made in the two above-mentioned cases. In C. Pradeep case, the deposit was made with respect to an unadjudicated liability. However, in the Orion Security case, the liability of INR 11.5 crores was already adjudicated and admitted by the concerned person. Hence, the C. Pradeep case provides for a greater scope in terms of grant of anticipatory bail.
General Conditions for Grant of Anticipatory Bails:
Apart from the pre-requisites and conditions mentioned above, which are peculiar to the CGST Act itself, the pre-existing criminal law jurisprudence around anticipatory bails has also been taken into consideration by the courts for grant of anticipatory bails in cases involving offences under the Act.
The general conditions and parameters which are taken into consideration while deciding an application under Section 438 of Code of Criminal Procedure, as noted in a catena of cases decided by the Supreme Court, including Gurbaksh Singh Sibbia case, Siddharam Satlingappa Mhetre case and Sushila Aggarwal case, have to be considered by the courts while deciding anticipatory bail applications in GST offences. These factors include the gravity of offences, chances of evidence being tampered and witness being influence, and the probability of the concerned person fleeing from justice.
Furthermore, the Telangana High Court in G. Eswara Rao v. Directorate General of GST & Ors.[1]has also considered the sufficiency of the evidence on record against the concerned person and the reputation of such person as well, while deciding an anticipatory bail application in favour of the applicant.
However, previous conduct of non-cooperation with the investigating authorities is considered adversely by the courts against the concerned person seeking anticipatory bail, as was done in the case of Ashok Kumar & Ors. v. Commissioner CGST & Central Excise, Navi Mumbai Commissionerate & Ors. The Bombay High Court denied anticipatory bail to the main applicant in this case on the basis of previous adverse conduct, despite him providing an undertaking to cooperate with the investigative process in future.
Concluding Remarks:
Owing to the infancy of the CGST Act, the jurisprudence of anticipatory bails in cases involving offences under the Act, has not been adequately settled. While the High Courts have had consistent opinions on certain aspects of the law, the divergence in opinion is stark in certain other aspects. It is for the Supreme Court to eventually settle these differences in opinions of the High Courts.
[1]Criminal Petition No. 939 of 2019, Order dated 07.03.2019, ¶ 9.
[The author is a fourth-year student at National Law University, Delhi.]