Akhil Krishan Maggu And Another vs Deputy Director, Dggi And Others on 15 November, 2019

Judgment Summary

Title: Akhil Krishan Maggu And Another vs Deputy Director, Dggi And Others
Date of Decision: 15 November, 2019
Bench: Hon'ble Mr. Justice Jaswant Singh, Hon'ble Mr. Justice Lalit Batra
Court: High Court of Punjab & Haryana at Chandigarh

1. Outcome

The writ petition was disposed of with the following directions:
* The prayer to quash the summons was not granted.
* Petitioner No. 1 (Akhil Krishan Maggu) was directed to cooperate with the investigation and appear before the authorities when summoned.
* The Respondent (DGGI) was directed not to arrest Petitioner No. 1 without the prior approval of the High Court.
* No specific directions were issued for Petitioner No. 2 (Sanjeev Maggu) as he was already in judicial custody in a case initiated by the Directorate of Revenue Intelligence (DRI).
* The Court clarified that it had not expressed any opinion on the merits of the case and the DGGI was free to continue its investigation as per law.

2. Core Issue

The core legal issues examined by the court were:
1. Whether the summons issued to the petitioners by the Directorate General of GST Intelligence (DGGI) should be quashed.
2. What is the scope and what are the limitations on the power of arrest under Section 69 of the CGST Act, 2017, especially during the investigation stage and prior to the formal adjudication and determination of tax liability.

3. Key Facts

• Petitioners: Akhil Krishan Maggu (Petitioner No. 1), a practicing tax lawyer, and his father Sanjeev Maggu (Petitioner No. 2).
• Background: Petitioner No. 1 was professionally representing four exporters against whom the DGGI had initiated an investigation for allegedly availing fraudulent refunds of IGST through dummy firms.
• Initial Incident: A commotion occurred between the petitioners and DGGI officials during a search at the residence of the petitioners' neighbor, Ramesh Wadhera, who was allegedly the owner of the dummy firms.
• Consequences of Incident: An FIR was registered against both petitioners for obstructing public servants (IPC Sec 186, 353), and they were arrested and incarcerated for a week. A second FIR was later lodged against Petitioner No. 2 for a similar incident during a search at his own residence.
• Investigation against Petitioners: Following the commotion, the DGGI re-recorded the statements of the dummy exporters, who then implicated the petitioners in the GST fraud. The DGGI also searched the petitioners' residence and arrested Petitioner No. 1's brother.
• Impugned Summons: The DGGI issued summons to the petitioners to tender statements, leading them to file the present writ petition apprehending coercive action, including arrest.
• Developments during Petition: As directed by the Court, the petitioners appeared before the DGGI. Petitioner No. 2 was subsequently handed over to the DRI, arrested in a separate matter, and sent to judicial custody.

4. Arguments

Petitioners' Contentions:
* The DGGI's actions are a case of vendetta, initiated because Petitioner No. 1 was legally representing the exporters and due to the altercation during the search.
* There is no credible evidence to connect them to the alleged refund scam.
* The DGGI's primary intention is to arrest and harass them, not to conduct a fair investigation. This is evidenced by their failure to record statements while the petitioners were in custody for a week following the FIR.
* Petitioner No. 1 is being unduly pressured to make a self-incriminating confession.

Respondents' (DGGI) Contentions:
* The petitioners are the masterminds behind the dummy firms and have fraudulently availed IGST refunds in connivance with others.
* Petitioner No. 1 is not cooperating with the investigation and is misusing his professional position as a lawyer.
* Custodial interrogation is necessary to unearth the full scope of the fraud, and they should be allowed to proceed without the protection of the court.

5. Court’s Reasoning

The Court's reasoning was multi-faceted, focusing on the principles of personal liberty and the statutory limits on the power of arrest:

• Lack of Evidence: The Court perused the investigation records submitted in a sealed cover and noted the absence of any direct or concrete evidence (like financial transactions or confessional statements from key accused) implicating the petitioners in the fraud.
• Principle of Post-Adjudication Arrest: The Court heavily relied on the Delhi High Court's judgment in Make My Trip (upheld by the Supreme Court), which held that the power of arrest under fiscal statutes should be used with great circumspection and normally only after the tax liability is determined. Arrest at the investigation stage is an exception, not the rule. The Court found the provisions of the CGST Act to be para materia with the Finance Act, 1994 (Service Tax) discussed in that case.
• Safeguards under Cr.P.C.: The Court emphasized that the CGST Act does not exclude the Code of Criminal Procedure, 1973. For offences under the CGST Act (where the maximum punishment is 5 years), the safeguards under Sections 41 and 41A of the Cr.P.C. are applicable. These provisions mandate that for offences punishable with imprisonment up to 7 years, arrest should not be made routinely. A person who complies with a notice of appearance should not be arrested unless there are compelling, recorded reasons.
• Personal Liberty (Article 21): Citing the Supreme Court in Siddharam Satlingappa Mhetre, the Court reiterated that arrest is a gross violation of human rights and personal liberty, and it should be the last option, restricted to exceptional cases.
• Guidelines for Arrest in GST Cases: The Court laid down illustrative exceptional circumstances where arrest during investigation may be justified:
  • If the person is a habitual offender.
  • If there is a risk of them fleeing the country.
  • If they are the originator of fake invoices.
  • In cases of huge tax evasion where the person has no permanent place of business.
  • When direct, concrete evidence of active involvement is already on record.
• Application to Present Facts: The Court found the DGGI's conduct suspicious. It noted the failure to interrogate the petitioners when they were already in custody for the FIR and the subsequent handing over of Petitioner No. 2 to another agency (DRI). This suggested the DGGI's primary intent was to arrest Petitioner No. 1 rather than conduct a thorough investigation. Given the lack of direct evidence, the Court concluded that the drastic measure of arrest was not justified at this stage.

6. Statutory References

• Constitution of India: Article 21, Article 22, Article 226.
• Central Goods and Services Tax (CGST) Act, 2017: Section 69 (Power to arrest), Section 132 (Punishment for certain offences), Sections 67(10), 73, 74.
• Code of Criminal Procedure (Cr.P.C.), 1973: Section 41 (When police may arrest without warrant), Section 41A (Notice of appearance before police officer), Section 438 (Anticipatory Bail).
• Indian Penal Code, 1860 (IPC): Sections 34, 186, 353.
• Finance Act, 1994 (Service Tax): Sections 73A, 82, 89, 90, 91.

7. Precedents Cited

• Make My Trip Vs. Union of India (Delhi HC): Heavily relied upon for the principle that arrest should generally follow tax determination.
• Jayachandran Alloys (P) Ltd. Vs. Superintendent of GST & C. Ex., Salem (Madras HC): Followed the Make My Trip ratio in the context of the CGST Act.
• Siddharam Satlingappa Mhetre Versus State of Maharashtra and Others (SC): Cited for the principles governing personal liberty, arrest, and anticipatory bail.
• Dr. Rini Johar & Anr. Versus State of M.P. & Ors. (SC): Cited for the mandatory application of Sections 41 and 41A of the Cr.P.C.
• VIMAL YASHWANTGIRI GOSWAMI Vs STATE OF GUJARAT (Gujarat HC): Supported the view that prosecution should normally be launched post-adjudication.
• P.V. RAMANA REDDY Vs. UNION OF INDIA (Telangana HC): A contrary view relied upon by the Respondent, which the Court distinguished, stating it cannot be a blanket authority to arrest in every case.
• D.K. Basu vs. State of West Bengal (SC): On constitutional safeguards during arrest.
• Joginder Kumar v. State of U.P. and Others (SC): On irrational and indiscriminate arrests.
• Arnesh Kumar v. State of Bihar and another (SC): On the need for caution before exercising the power of arrest.