Smt. Jagannagari Ragavi Reddy vs. Union Of INDIA

Held

The Court held that the writ petitions are maintainable. It found that while the Proper Officer under Section 70 is not a police officer, the object of arrest under Section 69 is not solely to facilitate further investigation but also to prevent further offences, ensure proper investigation, prevent disappearance or tampering with evidence, and prevent inducement or threats to witnesses. The Court acknowledged potential incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, and that protection under Sections 41 and 41-A of the Cr.P.C. might be available. However, despite these findings, the Court declined to grant relief against arrest to the petitioners. The Court reasoned that the alleged involvement in circular trading with a turnover of approximately Rs. 1,289 crores and fraudulent Input Tax Credit (ITC) claims of Rs. 225 crores posed a significant threat to the nascent GST regime. Therefore, in view of these special circumstances, the Court dismissed the writ petitions.

Facts

The petitioners, including Directors, a Chief Financial Officer, and a Partner of various companies, challenged summons issued under Section 70 of the Central Goods and Services Tax (CGST) Act, 2017, and the invocation of penal provisions under Section 69. The summons were issued by the Superintendent (Anti-Evasion) of the Hyderabad GST Commissionerate following searches conducted at the companies' premises. The petitioners alleged that the summons were issued arbitrarily and that they were subjected to prolonged questioning. In one case, the petitioner claimed to have appeared but was questioned until the early hours of the next day and subsequently sought time due to ill health. In another, the summon was found pasted on the residence door after the petitioner returned to Hyderabad. The petitioners sought protection against arrest and challenged the legality of the summons and the potential for prosecution.

Key Issues

1. Whether the writ petitions are maintainable against the summons issued under Section 70 of the CGST Act, 2017, and the threat of prosecution under Section 69 of the Act? The petitioners argued that the summons were issued without jurisdiction, arbitrarily, and with a predetermined intention to arrest, thus warranting interference under Article 226 of the Constitution. They contended that the Proper Officer under Section 70 is not a police officer and cannot seek custody for investigation. The respondents argued that the petitions are not maintainable as alternative remedies are available and that the summons are part of a lawful investigation into alleged evasion. 2. Whether the provisions for arrest under Section 69 of the CGST Act, 2017, are arbitrary and violative of fundamental rights? The petitioners argued that arrest under Section 69 does not facilitate further investigation and serves only to punish before trial, especially when offences might be compoundable. They also raised concerns about potential incongruities between Sections 69 and 132 of the Act. The respondents contended that arrest serves multiple purposes beyond just facilitating investigation, including preventing further offences and tampering with evidence, and that the alleged evasion of Rs. 225 crores warrants such action.