Delhi High Court Clarifies: Seven-Day Notice Before Coercive GST Action Is Not Blanket Anticipatory Bail

The Delhi High Court in Directorate General of GST Intelligence v. Girish Sachdeva has clarified a recurring controversy in GST enforcement: whether a direction requiring the Department to serve seven days’ advance notice prior to taking coercive steps, issued while rejecting anticipatory bail, effectively grants blanket pre-arrest protection.

The Court held that such a direction is purely procedural, meant to uphold principles of natural justice, and does not operate as an all-purpose shield against arrest or investigation. The Department’s statutory right to investigate and to arrest under the CGST Act remains fully intact, subject to compliance with law.

This ruling assumes importance against the backdrop of serious allegations of fraudulent Input Tax Credit (ITC) of more than ₹8 crore availed and passed on through circular trading, with GST returns not being filed despite issuance of multiple E-way Bills.

Background of Investigation and Enforcement Action

Initiation of Inquiry by DGGI

On 13 December 2018, the Directorate General of GST Intelligence (DGGI) initiated an inquiry against M/s Daak International Pvt. Ltd. based on intelligence inputs that:

  • The Company was generating high-value E-way Bills.
  • Despite these movements, no corresponding GST returns were being filed.

When the officers visited the registered address at Naurang House, K.G. Marg, New Delhi, they discovered:

  • The Company was not functioning from that location.
  • The premises actually belonged to another entity engaged in providing virtual office facilities.

Further investigation linked the Company to three individuals:

  • Mr. Girish Sachdeva
  • Mr. Harish Sachdeva
  • Mr. Abhinav Bardhan

All three were identified as Directors of the Company.

Operational Pattern and Alleged Tax Evasion

The material gathered during investigation indicated that:

  • The Company was incorporated in March 2018.
  • It remained operational only up to December 2018.
  • Filing of GST returns ceased from March 2019 onwards.

In this short operational span of around ten months, the Company allegedly:

  • Availed ineligible Input Tax Credit exceeding ₹8 crore.
  • Passed on such ITC through circular trading practices.
  • Used the network of E-way Bills and invoices without appropriate tax payment.

The allegations thus squarely fell within the framework of serious economic offences under the CGST Act involving fraudulent ITC.

Summons and Non-Appearance

To advance the inquiry, DGGI issued repeated Summons under:

  • Section 70 of the CGST Act
  • Section 174 of the CGST Act

However, the Respondents:

  • Did not appear in response to these Summons.
  • Did not fully cooperate at the initial stage, according to the Department.

Instead, they approached the criminal court seeking anticipatory bail under Section 438 of the CrPC.

Orders of the ASJ on Anticipatory Bail

The learned Additional Sessions Judge (ASJ):

  • Rejected the anticipatory bail applications of Mr. Girish Sachdeva and Mr. Harish Sachdeva on 08 July 2021.
  • Rejected the anticipatory bail application of Mr. Abhinav Bardhan on 13 April 2022.

However, while dismissing these applications, the ASJ issued a direction that:

The Department shall issue seven days’ prior notice to the Respondents before taking any coercive action, including arrest.

This limited notice condition triggered the present challenge before the Delhi High Court.

Department’s Challenge Before the Delhi High Court

Invoking Section 482 of the CrPC, the Department (DGGI) approached the Delhi High Court, challenging only the direction of seven days’ prior notice, not the rejection of anticipatory bail.

Core Submissions of the Department

The Department contended as follows:

  1. Contrary to Supreme Court rulings on blanket protection

    • Reliance was placed on:
      • Union of India v. Padam Narain Aggarwal [(2008) 13 SCC 305]
      • Sushila Aggarwal v. State (NCT of Delhi) [(2020) 5 SCC 1]
    • It was argued that directions like seven days’ prior notice effectively grant a “blanket” form of anticipatory bail, which the Supreme Court has consistently disapproved as a “passport to commit offences”.

  2. Seriousness of economic offences

    • Citing Nimmagadda Prasad v. CBI [(2013) 7 SCC 466], the Department emphasized that:
      • Economic offences with deep-rooted conspiracies and large-scale loss to the public exchequer are inherently grave.
      • The judicial approach to such offences must be stringent and cautious.