The Gauhati High Court ruled that Section 69 of the Central Goods and Services Tax Act 2017, which gives a Commissioner the authority to make an arrest under the Act, mandates that the authority document not only “reasons to believe” that an assessee committed the specified offense but also the necessity of making an arrest.
Since December 12, 2024, Dharmendra Agarwal, the petitioner, has been detained on suspicion of evading GST by fraudulently claiming more than ₹9 crore in ITC. It is clear from the allegations against the petitioner that he used a forged or false bill to obtain the input tax credit without actually receiving the good, which is a violation of Section 132 (1) (c) and a crime punishable under Clause (I) of the same section.
In addition to praying for his release from jail, the petitioner has contested the legality of the action taken against him under Section 132(1)(c) of the Central Goods and Services Tax (CGST) Act, 2017.
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Numerous rulings from the Apex Court and this nation’s High Courts have addressed the writ court’s authority to order someone to be released from custody.
The Gujarat High Court dismissed the writ petition, ordering the petitioner to appear before the authority and giving them two weeks’ notice if any apprehension is required. Revenue filed an appeal with the Apex Court after feeling wronged.
The petitioner argued that even though Section 69 grants the authority to detain, the custody of the petitioner was unnecessary because the precise amount of demand had not yet been established and the evaluations had not been completed. The petitioner had cooperated with the relevant authorities, hence it was further argued that keeping him in custody was neither necessary nor necessary.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The Standing Counsel appearing for the GST Department on the other hand submitted that an authorization was duly issued by the Commissioner towards the arrest and detention of the petitioner and the grounds of arrest had also been communicated to the petitioner.
The High Court noted that although there is no dispute with the idea that Section 69 gives the Commissioner the authority to order an arrest in the event of any of the offenses listed in Section 132 of the CGST Act, the question still stands as to whether an arrest or detention is necessary just because the Commissioner has the authority to do so.
In addressing a writ petition contesting the petitioner’s arrest, Justice Soumitra Saikia noted that the prerequisite under Subsection (1) of Section 69 is to have “reasons to believe” that the individual in question has committed the stated offense and the reason for their detention.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The bench concluded that aside from mentioning the requirements of Section 41 of the CrPC, the Principal Additional Director General did not specifically mention any instances in which the petitioner attempted to tamper with the evidence, threatened or coerced any witnesses, or otherwise refused to cooperate with the investigation.
The Court observed that the Petitioner had been called in, had been subjected to a lengthy interrogation, and that the investigating authorities had also recorded his statements. The bench granted the petitioner interim bail after concluding that there was no prima facie evidence from the documents presented at the stage that his custody was required to avoid evidence tampering or that he would likely interfere with ongoing investigations.
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