GST arrest authorisation under Section 69 must be communicated before arrest; courts cannot grant protection after rejecting pre-arrest bail, Supreme Court rules

The Directorate General of GST Intelligence was investigating M/s Alphaneon Techsolutions Pvt. Ltd. and its group entities for allegedly wrongful availment and passing of input tax credit, circular invoicing, and non-payment of GST on import of services.

The respondent was present during inspection of the registered premises and was issued three summonses under Section 70 of the Central Goods and Services Tax Act, 2017 (“CGST Act”). He sought adjournments instead of appearing and thereafter applied for anticipatory bail before the Sessions Court, which rejected the application. Pursuant to interim directions of the Bombay High Court, he appeared before the Department and his statement was recorded.

Before the High Court, the Department stated that no authorisation order under Section 69 of the CGST Act had been passed because the investigation was at a nascent stage.

The High Court rejected the application for anticipatory bail on the ground that, in the absence of a Section 69 order, there could be no apprehension of arrest; however, it directed that the respondent should not be arrested for one week from intimation of any order subsequently passed under Section 69.

The respondent did not challenge the rejection of anticipatory bail before the Supreme Court.

1. Whether a High Court or Sessions Court, while dismissing an application for pre-arrest or anticipatory bail as not maintainable, can nevertheless grant protection from arrest for a specified period.

2. Whether an order authorising arrest under Section 69(1) of the CGST Act is a prerequisite for maintaining an application for anticipatory bail.

3. Whether the Commissioner’s order under Section 69 of the CGST Act must be communicated to the person sought to be arrested before arrest can be effected.

Section 70 of the CGST Act authorises the issuance of summons for evidence or production of documents during an inquiry, but a person summoned is not, merely by reason of the summons, an accused.

Section 69(1) requires the Commissioner to form “reasons to believe,” based on relevant material and application of mind, before authorising arrest for specified offences under Section 132.

Applying State of Orissa v. Madan Gopal Rungta, the Court held that interim relief can only be ancillary to, and in aid of, a substantive relief that is maintainable; once the principal proceeding is dismissed, protective interim relief cannot survive.

Relying on Hema Mishra v. State of U.P., the Court extended this principle to applications for pre-arrest bail.

Radhika Agarwal v. Union of India established that mere issuance of summons under Section 70 does not make the summoned person an accused.

The Court further relied on Gurbaksh Singh Sibbia v. State of Punjab and Sushila Aggarwal v. State (NCT of Delhi) to protect the constitutional value of personal liberty and the right to seek anticipatory bail.

Consequently, an order under Section 69 must be communicated to the person concerned before arrest, including through electronic and other legally permissible modes, with reference to Rule 8 of the CGST Rules.

The respondent had only been summoned under Section 70 and no Section 69 arrest authorisation existed when he sought anticipatory bail.

In view of Radhika Agarwal, the summons did not make him an accused or create a legally cognisable apprehension of arrest; therefore, the High Court correctly rejected the anticipatory-bail application, and that part of the order remained undisturbed.

However, having dismissed the application, the High Court could not grant an independent one-week restraint on arrest.

Under Madan Gopal Rungta and Hema Mishra, such protection was not ancillary to any surviving substantive relief and effectively operated as interim relief after dismissal of the application.

The Court further reasoned that because a Section 69 order is the basis on which the person becomes liable to arrest and may seek anticipatory bail, non-communication of that order would unfairly prevent the person from knowing or challenging the basis of the proposed arrest.

Communication would not impede the investigation and was necessary to preserve the person’s right to seek judicial protection.

Accordingly, the Commissioner was required to communicate the Section 69 order before arrest could take place.

The protection granted by the Bombay High Court was therefore set aside.

The Court further directed that any order passed under Section 69 of the CGST Act must be communicated to the respondent through electronic means and other permissible modes, and reiterated that, without such communication, the question of arrest would not arise.

The investigation was permitted to continue uninfluenced by the Court’s observations.