[Kerala GST Act] 'Officials Can Invoke Power To Arrest U/S 69 If Offence Made Out U/S 132': HC Denies Bail To Man In ₹6.4 Crore Tax Evasion Case

Section 132 (1) provides the punishment for the commission of certain offences under the Act. The allegation against the accused who was a GST dealer was that he was supplying goods without issuing invoices and committed large-scale tax evasion of an estimation of 6.4 crores from 2018 onwards.

Justice Mohammed Nias C.P. stated that the accused can be certainly arrested to prevent any possibility of tampering with the evidence or intimidating or influencing witnesses and to ensure a proper investigation.

The power to arrest under Section 69 can be invoked if the Commissioner has a reason to believe that the person has committed offences that are prescribed and which are punishable under Section 132 of the CGST Act, 2017. Thus, the reference to Section 132 in Section 69 is only to indicate the nature of the offences based on which reasonable belief is found and recorded by the Commissioner to pass an order for arrest…… But, once the ingredients of the offence are made out, the Commissioner or the competent authority can determine if the offender is to be arrested or not.”,

Rejecting the bail to the accused, Justice Nias held that there was an allegation of tax evasion of more than 6.5 crores and a thorough investigation was needed.

Background Facts

The petitioner was the sole accused in a cognizable and non-bailable offence registered under Section 132 (1) of the Act. The petitioner, a wholesale distributor of mobile accessories and electronic items was a GST dealer under the GST Act. The electronic items supplied by the petitioner was taxable at 18 per cent.

Advocate C.S.Manilal, S.Nidheesh, Counsels for the petitioners submitted that he was wrongly accused by adding the income of his brothers also who has separate GST registrations. It was submitted that the police have already raided his house, seized documents, electronic records and further custodial interrogation was not necessary. It was also argued that the remand report also does state that continued custody of petitioner was necessary. Relying upon other High Court decisions in Jayachandran Alloys (P) Ltd. v. Superintendent of GST & C. Ex., Salem (2019) and Jagdish Arora and others v. Union of India (2020), it was argued that power of arrest can be invoked only after an assessment is made and not before that.

On the other hand, Special Government Pleader for Taxes, Mohamed Rafiq opposed the bail application. It was argued extensive investigation is needed and the police has unearthed a significant case of tax evasion. He further argued that enquiry revealed huge tax evasion and proper investigation was required.

The Court noted that the petitioner tampering with the evidence and influencing the witnesses in the case. It also took note of the fact that the investigation was only in a preliminary stage.

The Court rejected the argument that arrest can be made only after assessment and not before that since the list of offences under Section 132 (1) has no co-relation with assessment. It also noted that the petitioner has not offered to compound the offence or has paid the tax payable on such compounding or has admitted the liability.

In this case, the Court held that continued custody of the petitioner was necessary for conducting a proper investigation and to prevent him from tampering with the evidence. It held that if a case was made out under Section 13291), then the officials can invoke the power to arrest.

“The contra view taken by the Madras High Court in Jayachandran Alloys's case (supra) and also followed by the Madhya Pradesh High Court in Jagdish Arora's case (supra) cannot be treated as good law.”, the Court stated while noting that power to arrest can be invoked on fulfilling other condition precedents set out in Section 132.

Accordingly, the Court rejected the bail application as the investigation was still going on.

Citation: 2023 LiveLaw (Ker) 736

Case title: Badha Ram v Intelligence Officer

Case number: BAIL APPL. NO. 10492 OF 2023

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