Bail granted to GST accused as arrest without issuing notice under Section 35(3) BNSS (41A CrPC) was held illegal

Case Title: Viral Narendra Gosalia v. Senior Intelligence Officer, DGGI, Bangalore Zonal Unit
Court: High Court of Karnataka, Bengaluru
Petition No.: Writ Petition No. 6016 of 2025 (GM-RES)
Category: Arrest and Bail under GST (Input Tax Credit – fake invoices)
Date of Judgment: 12 March 2025
Relevant Sections:

• Section 69(1), 132(1)(a), 132(1)(b), 132(1)(i), and 132(5) of the CGST Act, 2017

• Section 35(3), 528 of BNSS, 2023 (corresponding to Sections 41-A, 482 of CrPC, 1973)

• Articles 226 and 227 of the Constitution of India

Facts (Paras 2–4):

The petitioner, a Mumbai-based businessman and proprietor of two entities—M/s JMG Enterprises and M/s Heena International—was accused by the Directorate General of GST Intelligence (DGGI) of availing and passing on fake Input Tax Credit (ITC) worth ₹5.10 crore by generating fabricated invoices without actual movement of Fast-Moving Consumer Goods (FMCG). The DGGI alleged that he diverted goods in the open market without invoices and influenced witnesses to give false statements, besides deleting WhatsApp evidence. He was arrested on 31 January 2025 and remained in custody for over 40 days. The petitioner challenged his arrest and remand on the ground that no notice under Section 35(3) of BNSS, 2023 (formerly Section 41-A CrPC) was issued prior to his arrest.

Questions before the Court (Para 7):

1. Whether the petition under Section 528 of BNSS (Section 482 CrPC) is maintainable to challenge arrest under CGST?

2. Whether CGST Act is a self-contained code excluding BNSS/CrPC?

3. Whether summons issued under Section 70 of CGST Act can be treated as notice under Section 35(3) BNSS?

4. Whether arrest without such notice is vitiated in cases punishable up to seven years?

Observations (Paras 9–24):

Justice Hemant Chandangoudar observed that arrest legality must be tested on the principle of proportionality between individual liberty and state interest. The Court referred to Arnesh Kumar v. State of Bihar (2014) 8 SCC 273 and Satender Kumar Antil v. CBI (2022) 10 SCC 51, reaffirming that for offences punishable up to seven years, arrest without a prior notice of appearance is impermissible.

It was held that BNSS (2023) provisions apply to CGST offences, as the CrPC/BNSS is a “parent statute” governing criminal procedure unless the special Act provides otherwise (Ashok Munilal Jain v. AD, ED (2018) 16 SCC; Radhika Agarwal v. Union of India (2025) SCC OnLine SC 449).

The Court rejected the DGGI’s argument that Section 70 summons sufficed as notice, holding that inquiry summons cannot replace investigative notice under Section 35(3) BNSS since they serve different purposes. The former gathers evidence, while the latter safeguards liberty prior to arrest.

Since the petitioner had complied with the summons, his arrest without a Section 35(3) notice was held illegal. The Court emphasized that for economic offences under Section 132(1)(a)–(i) CGST, punishable up to five years, arrest must follow failure to comply with such notice.

Judgment (Paras 24–31):

The Court partly allowed the writ petition. While not quashing the proceedings, it granted bail to the petitioner on the ground that arrest violated Section 35(3) BNSS. The petitioner was ordered to be released on bail upon executing a ₹1 lakh bond with surety and adhering to conditions of non-interference and cooperation with investigation.

Summary of Cases Referred:

Between Fine Lines (Trade Takeaway):

This ruling reinforces that GST officers must follow procedural safeguards before arresting any person accused of tax evasion below seven years’ punishment. Summons under Section 70 CGST are not substitutes for BNSS notice. Businesses can rely on this precedent to contest arbitrary arrests and demand adherence to due process, ensuring that tax enforcement respects the right to liberty under Article 21.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”