ORDER

Heard Mr. D.Prakash Reddy, learned Senior Counsel along with Mr. N.Naveen Kumar, learned counsel for the petitioners. Also heard Mr. B.Mukherjee, learned counsel appearing on behalf of Mr. N.Rajeshwar Rao, learned Assistant Solicitor General of India for respondent No.1 and Mr. Anurag Ojha, learned counsel for respondent Nos.2 to 4.

2. By filing this petition under Article 226 of the Constitution of India petitioners have prayed for the following reliefs.

A. Declaring the action of the Respondents in resorting to the penal provisions including under Section 69 of CGST Act, 2017 in relation to the directors/employees/agents of Petitioner No.1, including the Petitioner No.2 to 4 herein, referable to the search conducted on the premises of Petitioner No.1 on 11.12.2019 and the subsequent summons dated 24.02.2022 vide CBIC–DIN- 202202CC00000000F565/21709 and CBIC-DIN-202202CC00000 000F565/21710 to the Petitioner No.2 and 3 respectively as illegal, arbitrary and unconstitutional;

B. Direct the Respondents not to cause the arrest of any of the directors/employees/agents of Petitioner No.1 including the Petitioner No.2 to 4 herein; and

C. Pass such further order or orders as this Hon’ble Court deems fit and proper in the circumstances of the case.

3. It is stated that petitioner No.1 is a Private Limited Company incorporated under the Companies Act, 1956 and engaged in the business of steel manufacturing for the last 28 years. It is registered under the Goods and Services Tax (GST) authorities in the State of Telangana and has been filing its tax returns and paying due taxes. Petitioner No.1 has been recognised as the highest GST payer in the State of Telangana insofar TMT Steel Industry is concerned. Petitioner No.2 is the Director of petitioner No.1. On the other hand, petitioner No.3 is the Proprietor of a concern called M/s.Gautam Trading Company. Petitioner No.3 is a relative of petitioner No.2. Though petitioner No.3 is not involved in the business affairs of petitioner No.1, nonetheless it is engaged in trade with petitioner No.1. Petitioner No.4 is the brother of petitioner No.2. He has his own business which is unconnected and unrelated to petitioner No.1.

4. On 11.12.2019, personnel and officials belonging to the second respondent i.e., Directorate General of GST Intelligence, New Delhi had conducted simultaneous raids on the business and residential premises of petitioner No.1 and petitioner No.2. It is alleged that in the course of such raids, the officials physically assaulted petitioner No.3 and subsequently petitioner Nos.2 and 3. In such circumstances, petitioners had approached this Court by filing W.P.No.28268 of 2019. The writ petition was filed basically to protect the petitioners from the alleged violence committed on them by the respondents. The writ petition was contested by the respondents by filing counter affidavit denying all such allegations.

5. This Court after hearing the matter and on due consideration allowed the writ petition vide order dated 06.11.2020 by issuing certain directions.

6. Petitioners have stated that they have been cooperating with the investigation. Petitioners had paid total tax of more than Rs.290 crores for the period from April, 2021 to December, 2021.

7. 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 06.11.2020 has attained finality.

8. 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 him in person in his office at New Delhi. When respondent No.4 directed petitioner Nos.2 and 3 to appear before him in person on 17.02.2022 by issuing summons dated 02.02.2022 under Section 70 of the CGST Act, during that period elder brother of petitioner Nos.2 and 4 and uncle of petitioner No.3 Mr. Prabhu Agarwal expired on 04.02.2022 on account of Covid-19 related complications. It was in that context petitioners filed W.P.No.7620 of 2022 challenging the summons dated 02.02.2022 for appearance in person before respondent No.4 on 17.02.2022 at 10.30 a.m.

9. This Court by order dated 11.02.2022 disposed of the said writ petition by directing the petitioners to respond to the summons dated 02.02.2022 and appear before respondent No.4 on 08.03.2022 at 11.30 a.m.

10. Apprehending their arrest on appearance, petitioners have filed the present writ petition seeking the reliefs as indicated above.

11. On 04.03.2022, this Court directed that petitioners should appear before respondent No.4 on 08.03.2022 at 11.30 a.m. physically as was directed earlier. Further Court directed that since it was hearing the matter no coercive steps should be taken by the respondents against the petitioners on the petitioners’ appearance before respondent No.4 on 08.03.2022.

12. The same order has since been continued from time to time.

13. Respondents have filed 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 GST to the tune of Rs.9.00 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.9.00 crores approximately which was further likely to increase.

13.1. 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. Therefore it is contended that prayer B is premature and the writ petition is not maintainable. In the guise of the writ petition, petitioners are seeking anticipatory bail even before joining the investigation. It is further stated that prime object of GST authorities including the respondents is not to arrest persons but to detect and recover legitimate Government revenue from tax evaders, though respondents are armed with the power to arrest as a deterrent measure which is to be exercised by a high ranking officer “on reasons to believe” based on the material available on record. Thus the power to arrest under the CGST Act is not an absolute power. It is categorically stated that as per investigations conducted it is a case of evasion of GST to the tune of Rs.9.00 crores as detected so far. It has also been denied that petitioners are cooperating with the investigation.

14. Petitioners have filed reply affidavit reiterating their contentions. Memo was also filed on behalf of the petitioners on 07.04.2022 stating that petitioners had already deposited Rs.1,10,00,000.00. Further petitioners were ready to deposit Rs.3,00,00,000.00 to show their bona fides. In the proceedings recorded on 29.04.2022, petitioners deposited further sum of Rs.3.00 crores. Thus petitioners have deposited so far a sum of Rs.4.10 crores.

15. 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.9.00 crores approximately has been worked out against the petitioners.

16. Learned Senior Counsel for petitioners submits that petitioners have cooperated with the investigation. That apart petitioners have deposited Rs.4.10 crores as against the allegation of GST evasion to the tune of Rs.9.00 crores. Such payment is without admission of any further liability. The payments have been made only to show the bona fides 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 tax, interest etc relatable to the impugned order as is admitted by him and secondly he should pay a sum equal to 10 per cent of the disputed tax in relation to which the appeal has been filed. He submits that as on today according to the respondents, the alleged tax evasion is to the tune of Rs.9.00 crores. Petitioners have deposited Rs.4.10 crores which is much more than 10 per cent of the disputed amount which the appellant is required to pay for admission of appeal. In this connection, he has placed reliance on an interim order dated 06.08.2019 by the Supreme Court in the SLP No.6834 of 2019 (C.Pradeep v. Commissioner of GST and Central Excise, Selam).

17. In his reply submission, Mr. Ojha has drawn the attention of the Court to the averments made by the respondents in the counter affidavit as well as in the sur-rejoinder. He submits that conduct of the petitioners is highly deplorable. The quantum of tax evasion may increase depending upon further investigation which the petitioners are avoiding on one pretext or the other. He submits that there is no cause of action whatsoever for filing the writ petition. Therefore, the writ petition should be dismissed with costs.

18. We have heard learned counsel for the parties.

19. To appreciate the factual context and the rival contentions, it would be appropriate to advert to the proceedings of W.P.No.28268 of 2019 filed 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/INV initiated against the 1st petitioner 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 2nd respondent to transfer of conduct of enquiry F.No.574/CE/198/2019/INV initiated against 1st petitioner to 10th 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 1st petitioner and the resident premises of 2nd and 3rd petitioner on 11.12.2019.

20. A Division Bench of this Court framed the following question for consideration vide the order dated 06.11.2020:

Whether officials belonging to the GST Intelligence Department could resort to physical violence while conducting interrogation of the petitioners and their employees in connection with proceedings initiated under the CGST Act and Integrated Goods and Services Tax Act, 2017 (briefly ‘IGST Act’ hereinafter)?

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

61. The material on record indicates that the search on the several premises connected with the petitioners started from 8.30 am on 11.12.2019 till the following day i.e., 12.11.2019 (sic 12.12.2019).

62. As to the events which transpired during this period there are conflicting versions.

63. While the petitioners allege that there was use of violence and coercion against the petitioners and their employees by respondents 5 to 9 during the said search operations, the respondents deny the same and allege that it was the petitioners and their employees who had obstructed the search operations and allegedly assaulted the 5th respondent. This is vehemently denied by the petitioners.

64. Normally these disputed questions of fact are not to be gone into in a Writ proceeding under Art.226 of the Constitution of India.

65. But we cannot ignore the material such as Annexure P-4 which is the Out patient Discharge advice of Sunshine Hospital given at 7.45 pm after treatment of the 3rd petitioner by the emergency physician there on 11.12.2019 which stated that ‘assault today; injury to the left thigh; unable to walk and bear weight; .. blunt injury at left thigh’.

66. This suggests that the 3rd petitioner was injured to such a degree that he was unable to walk and required medical treatment.

67. That the 3rd petitioner was with respondents 5 to 9 on that day from the morning is admitted by them in the counter affidavit filed by respondents 1 to 4 and 10, though they say that such a thing had not happened.

68. Though the respondents seek to suggest that such evidence procured by the petitioners ought to be disbelieved by us because Sunshine Hospital is a ‘private hospital’ and not a Government Hospital, we do not agree with such contention because there is no presumption in law that Doctors in private hospitals do not speak the truth and only Government doctors speak the truth. An injured person is likely to go the nearest available hospital for treatment instead of searching for a Government hospital at that juncture.

69. We cannot also ignore the Annexure P5 which is an acknowledgement given by the Police at 6.39 pm on 11.12.2019 that there was a call made by an employee of the 1st petitioner to Phone No.100 and that a case No.20190021545598 was assigned to it and that it was assigned to the Mahankali Police station in Secunderabad.

70. 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 11.12.2019 against the petitioners 2 to 4 i.e., 2 hours after the police were contacted by the petitioners employee at 6.39 pm, and 1 hour after the 3rd petitioner was treated in Sunshine Hospital for alleged assault and injury to his left thigh.

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

72. The fact the police did not register any FIR on the complaint made by 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.

73. 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.

74. No provision of any law is cited before us by 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 duties under the CGST Act, 2017.

75. Merely because the authorities under the CGST Act, 2017 are not to be treated as police officials, they cannot claim any immunity if they indulge in acts of physical violence against persons they suspect of being guilty of tax evasion.

22. This Court further recorded as under:

81. However, in view of the material on record, we are constrained to observe that the possibility of the use of violence by respondent Nos.5 to 9 against petitioner Nos.2 to 4 and the other employees of petitioner No.1 cannot be entirely ruled out having regard to Ex.P.4, in particular.

82. In addition to the above, the summons Annexure P-6 issued under Sec.70 of the CGST Act, 2017 to the 2nd petitioner by 4th respondent is also worth mentioning.

83. It bears a date 12.12.2019 and asks the 2nd petitioner to appear before 4th respondent at 00:30 hrs on 12.12.2019.

84. This prima-facie indicates that it was issued after midnight on the intervening night of 11.12.2019 and 12.12.2019 asking the 2nd petitioner to appear at the ungodly hour of 00:30 hrs on that day.

85. What was so important to be recorded at such a time, which cannot wait till the morning of 12.12.2019, is not disclosed by the respondents.

86. We shall here refer to the plea in para 35 of the counter filed by the respondents 1 to 4 and 10 in this regard. They state as follows:

“ …it was imperative to record statement of Shri Pramod Agarwal (in pursuance of summons issued under sec.70 of the CGST Act, 2017) on the spot as preliminary investigation clearly suggested his role in the tax evasion by petitioner No.1. The petitioner No.2 was available at the spot i.e the Corporate Office of petitioner No.1. He was served the summons in his office. There is no bar to making enquiries under sec.70 of the GST Act, 2017 in the night itself…”

87. We are unable to accept this explanation offered by the respondents to justify the issuance of summons to the 2nd petitioner after the midnight of 11.12.2019 i.e., after 00:00 hrs on 12.12.2019 and asking him to appear before the 4th respondent at 00:30 hrs on 12.12.2019.

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89. The respondents cannot say that detention of the 2nd respondent in the office of the 1st respondent till much after midnight on the intervening night of 11.12.2019 and 12.12.2019 is a routine thing. Prima-facie it amounts to deprivation of the liberty of the 2nd petitioner since he was forced to be present with the respondents 5 to 9 at that late hour on that night.

90. In our opinion, the respondents cannot contend that they will interrogate the persons suspected of committing any tax evasion as per their sweet will forceably keeping them in their custody for indefinite period. If it is done, it has to be construed as informal custody and the law relating to an accused in custody has to be expressly or impliedly applied. If accused can get all the benefits under Art.22 of the Constitution, a person in such informal custody can say that he is also entitled to get relief under Art.21 of the Constitution of India. This view has been taken by the Gujarat High Court in Jignesh Kishorbhai Bhajiawala v. State of Gujarat {2017 Crl.L.J. 1760 para 19 at pg. 1777} while dealing with similar actions of authorities under the Prevention of Money Laundering Act, 2002.

91. In view of the admitted fact that the search operations were continued well past midnight and summons were issued to 2nd petitioner to appear at 00:30 hrs on 12.12.2019, we do not accept the plea of the respondents that they did not act contrary to established procedure, that the search proceedings were carried out under proper and applicable law and procedure, and no harm or damage were made to any human/person or property and no sentiments were hurt.

23. Ultimately and on due consideration this Court allowed W.P.No.28268 of 2019 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 / 198 / 2019 / INV initiated against the 1st petitioner;

(b) the enquiry in the above proceedings against the 1st petitioner shall not be handled by the 5th respondent, and he shall not participate in such enquiry, and it shall be transferred to another official to be designated by the 2nd respondent;

(c) any interrogation of petitioner Nos.2 to 4 or their employees shall be between 10:30 a.m. and 05:00 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 shall be conducted at Hyderabad by the respondents; and

(e) the respondents shall adhere to the provisions of the CGST Act, 2017 in conducting search, investigation or enquiry in relation to the alleged tax evasion by the petitioners.

24. Insofar the direction contained in (b) as extracted above is concerned, the fifth respondent in the said proceedings was Mr.Ramdhan Dagar (IRS), Deputy Director, Directorate General of GST Intelligence, New Delhi. As already noted above, the above order of this Court dated 06.11.2020 has been accepted by the respondents and is thus binding on the respondents.

25. In the context of extreme bitterness between the parties as recorded by this Court in its order dated 06.11.2020, the apprehension of arrest expressed by the petitioners cannot be brushed aside. However respondents in their counter affidavit has made a categorical statement that there is no question of causing arrest of the petitioners since respondents are primarily concerned with recovery of revenue. That apart, it is the clear stand of the respondents that as on today, alleged GST evasion of the petitioners would be to the tune of approximately Rs.9.00 crores. We have also noted and recorded that till date petitioners have paid Rs.4.10 crores though not admitting any GST evasion.

26. From the affidavits filed by the respondents it is evident that investigation is on. Petitioners being taxable persons under GST are required to cooperate with the investigation which the petitioners state they are cooperating, though disputed by the respondents. While the respondents are empowered to investigate alleged GST evasion, however such investigation cannot be for an indefinite period. At one point of time it has to come to an end, whereafter if the materials/evidence demands, appropriate order is required to be passed by the adjudicating authority. That stage is yet to be reached.

27. Even assuming that Rs.9.00 crores may be adjudicated as the GST not paid or evaded by petitioners, petitioners have the right to file appeal under Section 107(1) 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.9.00 crores, petitioners have paid till date Rs.4.10 crores which is much higher than the statutory requirement of depositing 10 per cent in the event of filing of appeal. This view was taken by the Supreme Court in C.Pradeep (supra) when interim protection was granted subject to deposit of 10 per cent of the disputed liability which in that case was quantified at Rs.2.00 crores.

28. Thus having regard to the directions contained in the order dated 06.11.2020 which has attained finality and in view of the above admitted facts, we are of the view that while petitioners shall cooperate with the investigation and shall respond to any summons that may be issued by the respondents, the interim order passed by this Court on 04.03.2022 that no coercive steps should be taken by the respondents in the course of investigation shall continue till conclusion of the investigation. Ordered accordingly. This order we have passed having regard to the past history between the parties which is clearly brought out in the order dated 06.11.2020 which order has become final and binding on the respondents.

29. Writ Petition is accordingly disposed of.

Miscellaneous applications pending, if any, shall stand closed. However, there shall be no order as to costs.