M/S. vs. Ferrous Enterprises Private Limited Vs Union Of INDIA

Held

The Court held that the writ petitions are maintainable. It found that while protection under Sections 41 and 41-A of the Cr.P.C. might be available for cognizable and non-bailable offenses under the CGST Act, and acknowledged incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, it would not grant relief against arrest. The Court reasoned that the alleged involvement in circular trading with a substantial turnover and input tax credit claims, amounting to approximately Rs. 1,289.00 crores and Rs. 225.00 crores respectively, posed a threat to the implementation of the GST regime. The Court emphasized that the object of pre-trial arrest is manifold, including preventing further offenses, ensuring proper investigation, preventing evidence tampering, and preventing inducement or threats to witnesses, not solely facilitating further investigation. Therefore, despite the technical objections, the Court dismissed the writ petitions, refusing to grant protection against arrest due to the special circumstances.

Facts

The petitioners, who are 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 argued that they were either unavailable, sought extensions, or claimed to have cooperated. In one instance, a summon was found pasted on a residence door. The petitioners sought to challenge the summons and the potential for arrest under Section 69.

Key Issues

1. Whether the writ petitions are maintainable challenging the summons issued under Section 70 of the CGST Act, 2017, and the invocation of penal provisions under Section 69 of the Act? The petitioners argued that the summons were issued without proper jurisdiction and that the invocation of Section 69 was premature and punitive. They contended that the Proper Officer under the CGST Act is not a police officer and therefore cannot seek custody for investigation. They also argued that arrest under Section 69 does not facilitate further investigation but serves as punishment before trial. The respondents argued that the petitions are maintainable and that the actions taken are within the scope of the law to prevent tax evasion and fraudulent claims.