GST Summons Cannot Trigger Anticipatory Bail Under Section 438 CrPC: Supreme Court Clarifies Law in State of Gujarat vs Choodamani Parmeshwaran Iyer
Background and Context
The Supreme Court of India recently delivered a significant ruling on the interplay between GST enforcement powers and the rights of persons summoned during an inquiry. The case — State of Gujarat Etc. Vs Choodamani Parmeshwaran Iyer & Anr. Etc. — arose from summons issued to certain respondents in connection with an investigation into alleged GST and service tax evasion by M/s. Iyer Enterprise Mundra Kutch.
The summons were issued on 31.10.2018 under Section 145 of the Central Excise Act, 1944, as made applicable to service tax via Section 83 of the Finance Act, 1994, and under Section 70 of the Central Goods and Service Tax Act, 2017 (CGST Act 2017). The purpose was to call the respondents for interrogation regarding alleged evasion of GST liability and contraventions of the Finance Act, 1994 and the CGST Act, 2017.
Apprehending arrest, the respondents filed two writ applications before the Gujarat High Court — Special Criminal Application Nos. 11010 of 2018 and 11076 of 2018. The High Court disposed of both applications by a common order dated 24.12.2018, effectively granting certain protections to the respondents and directing that the adjudicatory process be completed within eight weeks. Aggrieved, the State of Gujarat approached the Supreme Court.
What the Gujarat High Court Had Directed
The High Court's order, which was subsequently challenged before the Supreme Court, read as follows:
"7. Considering the voluntary nature of pleadings where the petitioners are desirous of getting themselves assisted by the adjudicatory process, let them represent their case before the concerned authority. The authority concerned shall complete the same in 8 weeks' time and if there is a need for any apprehension after once the adjudicatory process is completed, if they are not ready to fulfill their obligation, they may be given an opportunity of two more weeks for taking necessary steps. Petitioners shall appear on or before 11/01/2019 before the concerned Police Station. In view of the above, the present applications stand disposed of. Direct service is permitted."
The Supreme Court took up the matter on 29.04.2019 and, while issuing notice, stayed the High Court's direction requiring completion of the adjudicatory process within eight weeks.
Key Legal Issues Addressed by the Supreme Court
1. Can a Person Summoned Under the CGST Act Invoke Section 438 CrPC for Anticipatory Bail?
The Supreme Court answered this question with an emphatic no.
The Court held that when a person is summoned under Section 69 of the CGST Act, 2017 solely for the purpose of recording a statement, the provisions of Section 438 of the Code of Criminal Procedure, 1908 cannot be invoked. The reasoning is straightforward: since no First Information Report is registered prior to the exercise of the power of arrest under Section 69(1) of the CGST Act, 2017, there exists no legal basis for claiming anticipatory bail at that stage.
As the Court stated:
"...the position of law is that if any person is summoned under Section 69 of the CGST Act, 2017 for the purpose of recording of his statement, the provisions of Section 438 of Criminal Procedure Code, 1908 cannot be invoked. We say so as no First Information Report gets registered before the power of arrest under Section 69(1) of the CGST Act, 2017 is invoked and in such circumstances, the person summoned cannot invoke Section 438 of the Code of Criminal Procedure for anticipatory bail."
2. What Avenue Is Available for Pre-Arrest Protection at the Summons Stage?
The Court clarified that while Section 438 CrPC is unavailable, a summoned person is not entirely without remedy. The only constitutionally available route is to approach the High Court under Article 226 of the Constitution of India for appropriate relief. This is precisely what the respondents had done in the present case by filing criminal applications before the Gujarat High Court.
However, the Court made it clear that such jurisdiction under Article 226 is not a matter of right and must be exercised with considerable restraint.