Mere Omission of BNSS Section Headings in Arrest Memo Not Enough to Grant Bail — Gauhati High Court Reverses Bail in ₹16 Crore ITC Fraud Case

“Arrest cannot be faulted merely for want of headings under Sections 47 and 48 BNSS when the substance of statutory compliance is fulfilled”,  In a significant ruling Gauhati High Court decisively set aside the bail granted to two businessmen accused of fraudulently availing Input Tax Credit (ITC) worth ₹16.53 crores under the Central Goods and Services Tax Act, 2017, holding that minor procedural lapses such as non-mentioning of section headings in arrest documents do not vitiate arrest when statutory compliance is otherwise met.

In a criminal revision petition filed by the Directorate General of GST Intelligence (DGGI) challenged the bail granted by the Chief Judicial Magistrate, Kamrup (M), Guwahati, on 07.06.2025. The bail had been granted on the ground that the arrest memos and notices to the relatives of the accused did not mention the specific headings of Sections 47 and 48 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

The Court observed that such “technical defects” cannot override the constitutional and statutory validity of the arrest when no prejudice is demonstrated.

“Prejudice-Oriented Test Must Prevail over Hyper-Formalism” — Arrest Held Legal Despite Procedural Lapse in Section Heading

Opening the judgment with a strong reiteration of the purpose of the law, Justice Anjan Moni Kalita held:

“Mere absence of the headings of Sections 47 and 48 of the BNSS in the arrest memo and the notice to the relatives does not, ipso facto, render the arrest illegal when the contents of those provisions have been substantially complied with.”

Addressing the key argument that the respondents’ relatives were not furnished with the “grounds of arrest in writing”, the Court clarified:

“The relatives were duly served with intimation of arrest containing the essential grounds — including the nature of the offence, statutory provisions involved, and date and place of arrest — immediately after the respondents were apprehended.”

The Court ruled that the prejudice test laid down by the Supreme Court in Sri Darshan v. State of Karnataka and Vihaan Kumar v. State of Haryana was squarely applicable.

“There was no demonstrable prejudice caused to the respondents. They were represented by legal counsel at all stages and immediately moved for bail before two courts — this evidences their knowledge of the grounds and the legality of the arrest.”

“Judicial Review Must Not Frustrate the Objectives of Special Fiscal Statutes” — High Court Follows Radhika Agarwal Doctrine

Reinforcing the principle that liberal construction of procedural safeguards under special laws like the CGST Act could defeat their very purpose, the Court leaned heavily on the recent Supreme Court ruling in Radhika Agarwal v. Union of India. Quoting from the concurring opinion of Justice Bela M. Trivedi, the High Court underlined:

“Special Acts are enacted to achieve specific purposes... Any liberal approach in construing the stringent provisions of the Special Acts may frustrate the very purpose and objective of the Acts.”

“Minor procedural lapse on the part of authorized officers may not be seen with magnifying glass... Such offences are against the society and against the nation at large, and cannot be compared with ordinary offences.”

Applying this reasoning, the Court noted that the GST fraud alleged in the present case — involving fictitious invoices and ITC worth over ₹16 crores — had grave economic ramifications.

“Section 528 BNSS Authorizes High Court to Set Aside Legally Unsustainable Bail Orders” — Court Distinguishes Between Setting Aside and Cancellation

The respondents argued that the DGGI could not seek bail cancellation through a criminal revision. The Court firmly rejected this objection, clarifying:

“This Court is not exercising jurisdiction to cancel bail due to post-bail conduct. This is a revision petition seeking to set aside a legally unsustainable bail order passed on a misinterpretation of law.”

Citing Ranjit Singh v. State of MP and Puran v. Rambilas, the High Court held: “There is a clear distinction between cancellation of bail and setting aside of an illegal or perverse bail order. The High Court can annul such an order under its revisional powers when it is found contrary to settled law.”

Arrest Found Substantially Compliant with CGST Act and CBIC Guidelines

The Court noted that the Authorization to Arrest, Grounds of Arrest, and Arrest Memos served to the accused contained all requisite details:

• Admission by both accused of having availed ineligible ITC worth ₹8.27 crore and ₹8.26 crore respectively.

• Detailed references to Section 132(1)(c), 132(5), and 69 of CGST Act.

• Mention of violations under Section 16(2)(c) CGST — failure of inward supplies to suffer tax.

Justice Kalita observed: “The arresting officer has recorded a clear ‘reason to believe’ supported by documentary evidence. The ‘grounds of arrest’ were adequately explained and acknowledged by both respondents.”

Referring to the CBIC Circular dated 17.08.2022, which requires that arrests be based on credible material and not made in a mechanical manner, the Court held:

“The Commissioner’s satisfaction, based on investigation and statements, was not arbitrary. There existed sufficient material to justify arrest without requiring prior adjudication.”

“Grounds Were Known, Representation Was Prompt — Where’s the Prejudice?”

The respondents had contended that their relatives were not given written grounds of arrest, relying on Vihaan Kumar. The Court reconciled this with Sri Darshan, stating:

“The ratio of Vihaan Kumar complements, not contradicts, Sri Darshan. The test is whether the omission caused real prejudice. In the present case, the respondents’ mother — who received the notice — was also the wife of one accused. Notices were signed and acknowledged. Both accused applied for bail within hours.”

“The records reflect complete awareness, legal representation, and judicial access. No prejudice can be alleged in such circumstances.”

Bail Set Aside, Liberty to Reapply Before Competent Forum

Holding that the CJM’s bail order was based on a misreading of law, the Court set it aside with the following declaration:

“The learned CJM, Kamrup (M), Guwahati, committed an error in construing Sections 47 and 48 of the BNSS as having been violated. The arrest was valid and legally sustainable.”

Accordingly: “The impugned bail order dated 07.06.2025 is quashed. The bail bonds are cancelled. The respondents are, however, at liberty to apply for bail before the appropriate forum, on such grounds as they may deem fit.”

A Verdict on Procedural Realism in Economic Offences

This ruling sends a strong signal that technical lapses in form cannot be weaponized to defeat substantive compliance with statutory protections, especially in cases involving grave economic offences. It fortifies the state’s enforcement machinery while keeping constitutional safeguards intact through the lens of prejudice, purpose, and public interest.

Date of Decision: 24 September 2025