M/S. Ms Agarwal Foundries Private Limited vs. Union Of INDIA

It is s ,al.ed that petitioner No. 1 is a Pn\/ate Limrted Company inr orporated under the Companies F c t , 1!156 and engaged in tl e business of steel manufacturing 1t r the last 28 years. [t is rt gistered under the Goods and Serv ces T:x (GST) authorities ir ttre State of Telangana and has b<:cr: filing its tax returns and paying due taxes. Petitioner Nc,.1 ha.s been recognised a: the highest GST payer in the Stat( ol' Telangana insofar TMT it.eel Industry is concerned. Petitioner No.2 is the Director of pe .itioner No.

He has his o rn business which is unconnected .r-rcl unrelated to petitioner I o.1. 4 . On 1 1 . 2.2019 , personnel and oflicials belonging to the second respo: dcnt i.e., Directorate General of GSI Intelligence, New Delhi he I conducted simultaneous raids on he business and residentii I premises of petitioner No.1 and pt:litioner No.

It is alleged that in the course of such raids, the cfficials

This Court after hearing the matter and on due consideration allowed the writ petition vide order dated 06.ll.2O2O by issuing certain directions.

Petitioners have stated that they have been cooperating with the investigation. Petitioners had paid total tax of more than Rs.29O crores for the period from April, 2021 to December, 202t.

Respondents have accepted the order of this Court dated 06.11.2020 and did not challenge the same before a higher forum. Thus, order dated 06.11.2O2O has attained hnality.

Respondent No.4 issued summons under Section 70 of the Central Goods and Services Tax Act, 2017 (briefly, 'CGST Act' hereinafter) calling upon the petitioners to appear before ,// I I I I

This ( ourt by order dated 11.O2.2022 disposed of the said writ petitior by directing the petitioners to lespond to the summons d; ted O2.O2.2O22 and appear before r,:r;pon(lent No.4 on 08.O3.2O |2 at 1 1.30 a.m. 1O. Apprej rending their arrest on appearance, Jrr,titioners have filed the pft sent writ petition seeking the reiiert :rs indicated above. I l. On O. .03.2022, this Court directed tlrz t petitioners should appe. .r before respondent No.4 on 08.03.2022 at 11.30 a.m. physica ly as was directed earlier. Further C ourt dire<:ted

Respondents have hled a common counter affidavit. While elaborate statements have been made regarding non- maintainability of the writ petition and about the conduct of the petitioners, the stand taken by the respondents is that as per investigation conducted so far, it is a case of evasion of CST to the tune of Rs.9.O0 crores. Allegation is that from the facts unearthed during the investigation it has come to light that petitioner No.1 and its associated entities had indulged in huge evasion of GST to the tune of Rs.9.OO crores approximately which was further likely to increase.

Insofar effecting arrest under CGST is concerned, it is stated that prior to such arrest written approval of the Principal Additional Director General is required. It is further stated that there is no such proposal for arrest of petitioners or approval.

Petitio rers have frled reply affidavit reiteratirg their contentions. Memo was also f'iled on behalf of tht: petitioners on 07.O4.2022 stating that petitioners had a-lre a d1, cleposited Rs. 1,1O,O0,( 10.0O. Further petitioners were reaCy' tc, deposit Rs.3,OO,OO,( 3O.O0 to show their bona fides. In the proceedings recorded on 29 -O4 .2022, petitioners deposited hrrther surn of (

Respondents have filed sur-rejoinder on 06.06.2022. Here also respondents reiterated their allegation that petitioners were not cooperating with the investigation though it is stated that based on record GST liability of Rs.9.O0 crores approximately has been worked out against the petitioners. 16. karned Senior Counsel for petitioners submits that petitioners have cooperated with the investigation. That apart petitioners have deposited Rs.4.1O crores as against the allegation of GST evasion to the tune of Rs.9.O0 crores. Such payment is without admission of any further liability. The payments have been made only to show t}:,e bona frdes of the petitioners. Therefore there cannot be any reason to cause arrest of the petitioners. He submits that the above apprehension is not without any basis given the past events. He has referred to Section 107(6) of the CGST Act and submits that even under that provision a person aggrieved by an order passed by the adjudicating authority may prefer appeal before the appellate authority and two pre-conditions for filing such appeal are that the appellant should pay the entire amount of I vi

In his reJ ly submission, Mr. Ojha has drawn the attt-'ntion of the Court to the averments made by the respon,l:nts in the counter affidav " as well as in the sur-rejoinder. He rirrbmits that conduct of the ttitioners is highly deplorable. The <luantum of tax evasion me y increase depending upon further .rrvestigation which the peti'ioners are avoiding on one pretext or the other. He submits thr t there is no cause of action whatsor:r er for: filing the writ peti-ior-r. Therefore, the writ petition should be dismissed with costs. )

Wc have reard learned counsel for the parties. i I I

To appreciate the factual context and the rival contentions, it would be appropriate to advert to the proceedings of W.P.No.28268 of 2Ol9 Iiled by the petitioners. The said writ petition was filed by the petitioners seeking the following reliefs: A- Declaring the action of respondent Nos.2 to 9 in harassing, manhandling and assaulting petitioner Nos.2 to 4 purportedly conducted in furtherance of inquiry proceedings F.No.574/CE/ 198/2019/lNV initiated against the 1st p€titioner as illegal, arbitrary and unconstitutional apart from being violative of rights guaranteed under Articles 14 and 21 of the Constitution of India; and consequently B. Direct the 2"d respondent to transfer of conduct of enquiry F.No.57alCE/ 198/2019/ll[\/ initiated against 1"t petitioner to 1Oti, respondent or any other unit/wing established under the CGST Act; C. In the alternative to Prayer (B), direct the respondents to follow the due process of law and comply with the principles of natural justice, in initiating any further investigation against the petitioners pursuant to the search conducted on the offices of l.t petitioner arrd the resident premises of 2"d and 3.d petitioner on 11.12.2019. 20. A Division Bench of this Court framed the following question for consideration vide the order dated O6. 1 l.2O2O: Whether officials belonging to the GST Inteltigence Department could resort to physical violenc€ while conducting interrogation of the petitioners and ttreir employees in connection with proceedings initiated under the CGST Act and Integrated Goods and Services Tax Act, 2017 (briefly lGST Act' hereinafter)?

After narrating the rival contentions and from the materials on record, this Court culled out the following facts:

The materiat on record indicates that the search on the several premises connected with the petitioners started from I I

A I to the events which transpired dunng tlri; period there ari conflicting versions.

I crrnally these disputed questions of fact irre not to l)e gon( into in a Writ proceeding under Art.212(i of the Constitr iion of lndia.

V violence employe operatio was the the sez respond

E P-4 wh: l{ospita b5, 11.r" . 1.hat 'as bear ue 68. evidenc byusl not a contenl Doctors Govern likely 1 instead junctur hile the petitioners allege that there rvts trse of and coercion against the p€titioncrs :rr,d th<:ir s by respondents 5 to 9 during the sarc 5ear,:h rs, the respondents deny the same and alk:ge lhat it peritioners and their employees who had cbstructed 'cl-r operations and allegedly assaulted the ittlr nt. This is vehemently denied by the petitio;r(:rs. rt \€ cannot ignore the material such as Aonexu.re :h is the Out paticnt Discharge advir:e of S'unshine given at 7.45 pm after treatment of the 3.d [,clrtiorrer nergency physician there on 11.12.2Oi9 wlir:h stated ault todoV; inJury to the lefr thig\ unable tc tuelk and gltt; .. blunt injury at teft thigh'. lhough the respondents seek to suggest t ra - strch procured by the petitioners ought to be riisbelieved scause Sunshine t'lospital is a 'prival e ho;1rit;rl' and iovernment Hospital, we do not agree witl: srLch on because there is no presumption in larv t.rat in private hospitals do not speak the truth:rrd only ler.rt doctors speak the truth- An in-tured rcrson is ) go the nearest available hospital for 1re;rtm:nt ol' searching for a Government hospitirl irl t:rat Ve cannot also ignore the Annexure P5 uhic-tr is an edgement given by the Police at 6 3) i,m on ) lrl that there was a call made by an emplr.,c,: of the itroner to Phone No. lOO and that a case ,0021545598 was assigned to it and ttrat it \vas I to the Mahankali Police station in Se,:undcralrad.

Tl is suggests that the 3cd petitioner was injr,lr.r(l tr) such a degre that he u,as unable to walk and required nredi--al treatme rt. 67. 'hirt the 3,d petitioner rvas with reriponde rtr; 5 to 9 on t at dayfron the morning is admitted lry tt em in rhe counter aflidavit filed by respondents I to 4 and l(, lhoLgh they sa. that such:r thing had not happened. 69. acknou tt.t2.t 1"r Pr No.20l assign(

In contrast, the FIR 232 of 2019 was registered by the Police at the instance of the respondents much later at 8.30 pm on I 1. 12.2O i9 against the petitioners 2 to 4 i.e., 2 hours after the police were contacted by the petitioners employec at 6.39 pm, and I hour after the 3.d petitioner was treated in Sunshine Hospital for alleged assault and injury to his left thigh.

We are not saying that this material is conclusive of arly violence used by the respondents against the petitioner No.2 to 4 or their employees but prima-facie it suggests such a possibitity.

The omission of the police to register any FIR at the instance of petitioners does not mean that what the respondents allege is true. This is because admittedly no charge sheet has been filed by the police till date against the petitioners 2 to 4, and the petitioners have admittedly secured anticipatory bail from the competent criminal court later.

No provision of any law is cited before us ty the respondents to say that they are entitled to use physical violence against persons they suspect of being guilty of tax evasion while discharging their dutiesunder the CGST Act, 2017 .

Merely because the authorities under the CGST Act, 2Ol7 are not to be trcated as police oflicials, they cannot claim any immunity if they indulge in acts of physical violence against persons thcy suspect of beingguilty of tax evasion.

However, in view of the material on record, we are constrained to observe that the possibilrty of the use of violence by respondent Nos.5 to 9 against petitioner Nos.2 to 4 and the other employees of petitioner No.l cannot be entirely ruled out having regard to Ex.P.4, in particular. 83. [t bears a date 12.12.2019 and asks the 2od petitioner to appear before 4d respondent at OO:30 h$ on 12.12.2019. /

The fact the police did not register any FIR on the complaint madeby the petitioners, in our opinion, is not that significant because it is not at all unusual for the police to refuse to register any complaint against Government Officials.

This Court further recorded as under:

In addition to the above, the summons Aunexure P-6 issued under Sec.70 of the CGST Act, 2017 to the 2"d petitioner by 4c respondent is also worth mentioning.

Th s prima-facie indicates that it was isstLed aftt:r midnight on the intervening night of I I . 12. 20 r I and 12.12.20 9 asking the 2'd petitionerto appear at th( tngod y hour of 0 ):30 hrs on that day. at was so important to be recorded at suc-r a tim,:, rnot wait till the morning of 12.12.2Ol\r, is n(,t b]' the respondents.

We shall here refer to the plea in para 35 of th,: cor-rntt:r hled by t re respondents I to 4 and 10 in this regr,rC. Thty state as I )liows:

Wl which ca disclosed Pra una pre in Pel thc wa no th.

We therespo petitione: hrs on I responde

Th responde midnight t2.12.20 deprivati forced to hour on '

In they wilt tax evasi their cus construe accused accused Constitu he is als< of India. in Jigner Crl.L.J. I it was imperatiue to record stotement oJ :;lo1 nod Agarutal (in pursuatrce o.,f summon.s r,r:s r,:rl er sec.70 of tlte CGST Act, 2017) on lh,i slroi ,rs- nninary tnuestigation clearlg suggesterl hts'< kt tlte tox euasion bg petilioner No l. 'flrc tioner No.2 uto-s antailable at the spot t.e Corporate OfJice oJ petitioner No.l. lle : served the srrrrrrrtons in his offi.ce. Ther,z is bar to making enquiries under sec.7o cf GST Act, 2077 in the night itself..." arr: unable to accept this explanation o'f':rr:d ty dents to justify the issuance of summonsi lo the 2,d after the midnight ot ll.l2.2Ol9 i.c., afrer ()0:0O ),.72.2019 and asking him to appear before tlre 4th rt at 00:30 hrs on 12.12.2019. respondents cannot say that detention cf the 2.d rt in the office of the lsr respondent lill mdrh aftr:r on the intervening night of 1 | 12.2t) 9 and 9 is a routine thing. Prima-facie it amo lnts I o n of the liberty of the 2"d petitioner sincr: h,: wes be present with the respondents 5 to 9 at tsat lare lar night. our opinion, the respondents cannot conleo(l thirt nterrogate the persons suspected of comrnitting ary ,n as per their sweet will forceably keepinp .lrt:m in ocly for indefinite period. tf it is done, it l,as to l,e .\s infomlal qEtody and the law relati rrl lo an r (:ustody has to be expressly or implir:dl,v z pplied. If can get all the benefits undcr nrt.:22 ol tl.e on, a person in such informal custody carn:;.r] thirt entitled to get relief under Art.2l of thc CorLstir ution 'tris view has been taken by the Gujarat lliE!r (lou1 h Kishorbhai Bhajiawala v. State of GujarrLt 12017 760 para 19 at pg. 1777| while dealing u it lr simiJirr

Ultimately and on due consideration this Court allowed W.P.No.28268 of 2Ol9 vide the order dated 06.11.2020 by issuing the appropriate directions (a) the respondents shall not use any acts of violence or torture against petitioner Nos.2 to 4 or their employees in furtherance of enquiry proceedings F.No.574 / CE I 198 / 2019 / IIIV initiated against the 1.t petitioner; (b) the enquiry in the above proceedings against the lst petitioner shall not be handled by the 5th respondent, and he shall not participate in such enquiry, and it shaU be transferred to another official to be designated by the 2nd respondent; (c) any interrogation of petitioner Nos.2 to 4 or thelr employees shall be betu,een 10:30 a.m. and 05:OO p.m. on week days in the visible range of an Advocate appointed by them, who shall not be in hearing range; (d) the petitioner Nos.2 to 4 alone can be summoned to New Delhi for the purpose of the above enquiry by the respondents on one occasion for two to three days, and rest of their interrogation and those of their employees shatl be conducted at Hyderabad by the respondents; and (e) the respondents shall adhere to the provisions of the CGST Act, 2Ol7 in conducting search, investigation or enquiry in relation to the alleged tax evasion by the petitioners.

Insofar the direction contained in (b) as extracted above is concerned, the fifth respondent in the said proceedings was \

In the c;ntext of extreme bitterness between the parties as recorded b r this Court in its order dated 06.1 1 2O12O, the apprehension >f arrest expressed by the petitione r; r:annot be brushed aside However respondents in their counter aflidavit has made a c tegorical statement that there is no question of causing arrest ;f the petitioners since respondent:; are primarily concerned witl recovery of revenue. That apart, it is thc clear stand of the re;pondents that as on today, alleged (iST evasion of the petitione 's would be to the tune of approximzLtely Rs.9.00 crores. We h: ve also noted and recorded t hrr - till date petitioners hav paid Rs.4. l0 crores though not a<trnitting any GST evasion.

From the affidavits hled by the respondents Lt is errident that investigati< n is on. Petitioners being taxable pers,ons under GST are requirt I to cooperate with the investigation rvhich tht: petitioners statt they are cooperating, though disprr -etl by thr: respondents. \ rhile the respondents are empow,rre(l to I I

Thus having regard to the directions contained in the order_ dated 06.ll.2O2O which has attained frnality and in view of t[e.,,above admitted facts, we are of the view that while

Even assuming that Rs.9.O0 crores may be adjudicated as the GST not paid or evaded by petitioners, petitioners have the right to lile appeal under Section 1O7(i) of the CGST Act and under Section 107(6) of the CGST Act if the petitioners deposit 10 per cent of the disputed tax, its appeal would be admitted for adjudication. This is a right provided by the statute. As against the alleged GST evasion of Rs.9.OO crores, petitioners have paid till date Rs.4.10 crores which is much higher than the statutory requirement of depositing 1O per cent in the event of frling of appeal. This view was taken by the Supreme Court in C.Pradeep (supra) when interim protection was granted subject to deposit of 1O per cent of the disputed liability which in that case was quantified at Rs.2.0O crores.

The Senior lntelligence Officer, Directorate General of GST lntelligence, Headquartered at \Atest Block-8, Wing No. 6, 2nd Floor, RK Puram, New Delhi.

One CC to SRI.N.NAVEEN KUMAR, Advocate [OFUC]

One CC to SRI.NAMAVARAPU RAJESHWAR RAO (ASSGI) [OPUC]

One CC to SRI.B.NARp.SIMHA SHARMA, Advocate (OPUC)

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