Rajeev Kumar VS Directorate General of GST Intelligence and another

GST update /2026-27/0011

Petition No. & Citation: WRIT PETITION No. - 256 of 2026

Hon’ble Judge(s)	HON'BLE SIDDHARTH, J & HON'BLE VINAI KUMAR DWIVEDI, J.
Date of Order	April 03, 2026
Outcome	Petition allowed in favor of appellant

Brief Facts of the Case

The petitioner was engaged in the business of importing, assembling and selling unbranded televisions since the year 2010 and was stated to have paid substantial GST amounting to approximately Rs. 57 crore over the years. During investigation conducted by DGGI, Meerut, the petitioner was informed that the department suspected tax evasion primarily on account of clandestine removal of goods involving tax implication of around Rs. 11 crore. In the course of investigation and with a view to avoid coercive action, the petitioner deposited Rs. 10 crore believing that the alleged offence would be considered for compounding. However, despite the petitioner’s cooperation and deposit, DGGI arrested him on 11.02.2026 under Section 132(1)(a) of the CGST Act. In the first remand application filed before the Magistrate, the department bifurcated the alleged tax evasion into two separate components, namely clandestine removal amounting to Rs. 11.83 crore and undervaluation amounting to Rs. 16.15 crore. however, in the subsequent remand application this distinction was intentionally removed and both allegations were merged together in an apparent attempt to justify criminal prosecution under Section 132. Aggreievd, the petitioner approached the High Court by way of Habeas Corpus petition seeking quashing of the arrest, detention, remand order.

Relevant Section / Rule / Notification

Section 138 of CGST Act
Section 132 (1)(a) of the CGST Act
Section 122 (1)(i) CGST Act
Section 35(3) of the BNSS

Question before Hon’ble Court / Authority

Whether the DGGI could club allegations of undervaluation covered under Section 122 and clandestine removal for purposes of arrest under Section 132?
Whether the arrest not complying with constitutional and procedural safeguards valid ?

Brief Arguments by Petitioner

Undervaluation and clandestine removal are distinct statutory violations and cannot be merged.

It was argued that clandestine removal may at best attract prosecution under Section 132(1)(a), whereas undervaluation is separately covered under Section 122(1)(i) and its tax implication can only be quantified through adjudication proceedings under Section 74. Therefore, without determination of undervaluation through statutory adjudication, the same could not have been imported into criminal arrest proceedings.

Department manipulated remand applications to overcome legal defects.

The petitioner specifically highlighted that in the first remand application, the department itself treated clandestine removal and undervaluation as two separate heads. Later, in the second remand application, this bifurcation was intentionally obliterated and both offences were mixed together merely to sustain the arrest under Section 132.

Mandatory notice under Section 35(3) BNSS was not issued prior to arrest.

Since the alleged offence was punishable up to seven years, the investigating agency was under obligation to issue notice of appearance before arrest in terms of the law laid down by the Supreme Court in Satender Kumar Antil. No such notice was ever served.

Grounds of arrest were not supplied in the legally prescribed manner.

The petitioner submitted that the grounds of arrest were handed over separately and not as an annexure to the arrest memo, contrary to CBIC Instruction No. 01/2025-GST and the Supreme Court mandate requiring communication of proper arrest grounds.

No proper procedures were followed regarding arrest.

Neither copy of arrest memo nor grounds of arrest was furnished to any family member or friend, violating settled arrest jurisprudence. In addition, Arrest memo did not even disclose the place of arrest. This was a direct infraction of the safeguards laid down in D.K. Basu. Grounds of arrest did not bear Document Identification Number (DIN). In terms of CBIC Circular No. 128/47/2019-GST, every communication is required to bear DIN. In absence thereof, the document is to be treated as non est in law.

Brief Arguments by Respondent

Undervaluation and clandestine removal were interconnected

According to the department, both allegations formed part of a single tax evasion design and hence could not be viewed separately. They both are interconnected and hence clubbing of both the allegations can not be taken as a ground.

Arrest Procedures were duly followed

It was contended that the grounds of arrest formed part of the arrest memo itself, and therefore separate DIN was not required. Further, the petitioner was permitted to speak to his son telephonically and thus arrest intimation requirement stood complied with.

Partial payment of Rs. 10 crore does not wipe out criminal liability

The department argued that total tax evasion was approximately Rs. 39.50 crore and therefore serious economic offence was made out. mere deposit during investigation does not mitigate the gravity of economic offences. The department submitted that offences affecting government revenue require stricter treatment and coercive action.

Cases Relied Upon

Case Law	Citation
Satender Kumar Antil v. Central Bureau of Investigation	(2026) SCC Online 162
Radhika Agarwal Vs. Union of India	2025 6 SCC 545
Vihaan Kumar Vs. State of Haryana and another	(2025)5 Scc 799
D.K. Basu v. State of West Bengal	(1997) 1 SCC 416

Findings and Judgement

Illegal Clubbing of Distinct Allegations Vitiated the Basis of Arrest
The High Court found that the respondents had failed to justify how the allegation of “undervaluation of goods” could be clubbed with “clandestine removal of goods” and treated as one composite offence for the purpose of invoking Section 132 of the CGST Act. The Court noted that in the first remand application both allegations were shown separately, whereas in the second remand application they were merged together without any legal basis. This contradictory stand clearly indicated that the department was attempting to artificially combine separate contraventions only to sustain the criminal proceedings, which the Court did not approve. The Court accepted the petitioner’s contention that undervaluation is specifically covered under Section 122(1)(i) of the CGST Act and determination of its tax implication necessarily requires recourse to adjudication under Section 74. In absence of such statutory determination, the respondents could not directly import the allegation of undervaluation into prosecution proceedings under Section 132.

Mandatory Arrest Safeguards Were Not Followed by the Department

The High Court further observed that the respondents failed to comply with several mandatory safeguards governing arrest. The mandate of Satender Kumar Antil regarding arrest procedure was not shown to be inapplicable merely because the matter involved an economic offence. Further, the respondents could not satisfactorily explain non-compliance of CBIC instructions relating to proper communication of grounds of arrest and DIN requirements. Therefore, arrest had not been carried out in accordance with law.

Mechanical Remand by Magistrate Was Strongly Disapproved

The Court made serious observations against the remand proceedings and held that the magistrate had mechanically granted remand without examining the legal objections raised by the petitioner and without scrutinizing whether the arrest itself was sustainable in law. The High Court observed that remand orders were being passed without proper application of mind and in disregard of the settled legal principles governing arrest and detention, which further vitiated the continued custody of the petitioner.
In view of the above, the High Court held that the detention, arrest, remand and subsequent custody of the petitioner were wholly illegal. Consequently, the remand order and all consequential proceedings were quashed, while granting liberty to the department to proceed afresh in accordance with law.

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GST update /2026-27/0011

Brief Facts of the Case

Relevant Section / Rule / Notification

Question before Hon’ble Court / Authority

Brief Arguments by Petitioner

Brief Arguments by Respondent

Cases Relied Upon

Findings and Judgement

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