Facts of the Case

The petitioner, Deepak Garg, was arrested on 20.08.2025 by the Directorate General of GST Intelligence (DGGI), Guwahati Zonal Unit, in connection with an investigation into a syndicate allegedly issuing fake invoices to coal suppliers, enabling movement of coal from Assam to Bihar without payment of GST and Coal Cess through non-existent firms, with alleged tax evasion of Rs. 6.93 crore between December 2022 and July 2025. Arrested under Section 69 of the CGST Act for an offence under Section 132(1)(b), punishable under Section 132(1)(i), the petitioner sought bail before the Gauhati High Court, contending the arrest itself was illegal for want of the mandatory notice and recorded reasons under Section 35 of the BNSS, 2023.

Issues Involved

  1. Whether arrest for a CGST Act offence punishable with imprisonment up to five years required prior notice and recorded reasons under Section 35(1)(b)(ii) of the BNSS, 2023, per the Arnesh Kumar guidelines.
  2. Whether mechanical reproduction of the statutory grounds for arrest, without demonstrable basis, satisfies the requirement of recording reasons in writing.
  3. Whether the petitioner's cooperation with the investigation and the economic-offence characterisation of the case affected the outcome.

Petitioner's Arguments

  • Since the offence was punishable with imprisonment extending to five years, the Arnesh Kumar guidelines applied, requiring the arresting authority to issue notice under Section 35(3) BNSS or record in writing its satisfaction as to any of the conditions in Section 35(1)(b)(ii).
  • No such notice was issued, nor were reasons independently recorded for believing the petitioner would abscond, disobey summons, or tamper with evidence, rendering the arrest illegal per CBIC's own 2022 arrest guidelines.
  • The petitioner had voluntarily appeared and cooperated pursuant to summons under Section 70, undermining any claim of non-cooperation justifying arrest.

Respondent's Arguments

  • The Department argued the arrest followed due procedure, since the Additional Director General had authorised arrest based on a reason to believe the petitioner would influence witnesses and tamper with evidence, as required under Section 69.
  • Given the enormity of the alleged evasion and ongoing investigation at a crucial stage, custodial interrogation was necessary and the case, being an economic offence causing loss to public funds, warranted a stricter approach to bail per Serious Fraud Investigation Office v. Aditya Sarda.

Court Order / Findings

  • The Court found that while the arrest memo stated the possibility of the petitioner influencing witnesses, it did not disclose any material basis for arriving at that satisfaction, amounting to mechanical reproduction of statutory language rather than genuine recorded reasons.
  • Where an offence under the CGST Act attracts imprisonment of seven years or less, the arresting authority must independently justify the necessity of arrest under Section 35(1)(b)(ii) of the BNSS in writing, and failure to do so, per the Arnesh Kumar guidelines, itself entitles the accused to bail regardless of the scale of the alleged evasion.
  • Noting the petitioner's compliance with summons and cooperation in the investigation, the Court held that the mandatory procedural safeguard had been violated and granted bail.
  • Bail was granted on a bond of Rs. 1,00,000 with two sureties of like amount, subject to conditions including cooperation with investigation, surrender of identity documents, and a restriction on leaving Assam without permission.

Important Clarification

  • The Arnesh Kumar guidelines on arrest for offences punishable up to seven years' imprisonment apply equally to arrests made under Section 69 of the CGST Act for GST evasion offences.
  • Existence of the statutory power to arrest under Section 69 is distinct from justification for exercising it; the arresting authority must record case-specific reasons, not merely reproduce the statutory grounds verbatim.
  • Even in large-value economic offences, courts will grant bail where the mandatory procedural safeguards attending arrest have been violated, treating this as an independent and sufficient ground.

Sections Involved

  • Section 69, CGST Act, 2017 – empowers the Commissioner to authorise arrest for specified offences under Section 132.
  • Section 132(1)(b) and (i), CGST Act, 2017 – penal provision for issuing invoices without actual supply, leading to wrongful ITC availment or refund.
  • Section 35, BNSS, 2023 – prescribes conditions and safeguards for arrest in offences punishable up to seven years, incorporating the Arnesh Kumar guidelines.
  • Section 70, CGST Act, 2017 – power to summon persons for evidence or documents during investigation.

Decision – In Favour of

The decision favours the accused. Bail was granted on the ground that the arrest violated the mandatory procedural safeguards under Section 35 BNSS, independent of the merits of the underlying evasion allegations.

Case Details

Gauhati High Court (Assam, Nagaland, Mizoram and Arunachal Pradesh); Bail Appln./2836/2025; Deepak Garg vs Union of India and Others; Coram: Justice Mridul Kumar Kalita; Order dated 08.09.2025.

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.