The Bombay High Court clarified that summons under Section 70 are meant for inquiry and statement recording, not detention, resolving long-standing confusion in GST investigations. It further ruled that no seven-day prior notice is required before issuing such summons.
MUMBAI : A recent ruling by the Bombay High Court has clarified this ambiguous area, making a clear distinction between being called for questioning and being taken into custody.
In a judgment that could influence GST investigations nationwide, the Bombay High Court ruled that summons issued under Section 70 of the GST law are intended for inquiry and recording statements and do not constitute detention. Additionally, there is no legal obligation to provide a seven-day advance notice before issuing such summons.
For many taxpayers and business owners, a summons from the GST department can be daunting, often raising concerns about arrest or unlawful detention.
This decision addresses a common worry among individuals and small businesses whether appearing before GST officials for questioning equates to arrest, and whether prior notice is necessary before someone is summoned. By resolving these issues, the court has provided essential clarity for both taxpayers and enforcement authorities.
The ruling also restricts the grounds on which GST investigations can be contested on procedural bases, particularly in instances of alleged fake input tax credit (ITC) or tax evasion.
The ruling arose from the case Kanhaiya Nilambar Jha vs Union of India & Ors, where the petitioner sought Rs 10 lakh in compensation, claiming he was unlawfully detained by GST officials for four days during an investigation into a fake ITC case involving M/s Kabsan Services Pvt. Ltd.
The petitioner contended that he was effectively detained from June 17 to June 20, 2025, without a formal arrest. He argued that the GST officers failed to provide a seven-day notice before summoning him, violating his constitutional rights under Articles 21 and 22.
To bolster his argument, the petitioner referenced provisions of the Code of Civil Procedure (CPC), asserting that, in the absence of a specific timeframe under Section 70 of the GST law, a minimum notice period should be applicable.
Issues:
(1) Whether the petitioner’s detention from 17.06.2025 to 20.06.2025 amounted to illegal detention?
(2) Whether a 7-day notice is required before issuing summons under Section 70 of the CGST Act. (3) Whether Section 69 and 70 of the GST Acts are constitutionally valid?
Analysis of the Court: Distinction between Inquiry and Arrest
The High Court leaned heavily on the Supreme Court’s judgment in Radhika Agarwal vs Union of India, which upheld the constitutional legitimacy of the GST department’s powers to summon and arrest.
The court reiterated that a person summoned under Section 70 is not automatically deemed an accused, and constitutional protections related to arrest do not apply during the inquiry phase. Safeguards against arrest are only applicable when Section 69 is invoked.
In reviewing the facts, the court found no evidence of unlawful detention. It noted that the petitioner acknowledged the summons over multiple days, appeared at the GST office without objections at that time, was allowed to use mobile phones, and remained at the GST office at his own request. He was formally arrested only on June 21, 2025, after the establishment of charges, and was presented before a magistrate that same day.
Court Decision
Dismissing the criminal writ petition, the Bombay High Court (Aurangabad Bench) determined that Section 70 of the Central Goods and Services Tax Act does not require a mandatory notice period prior to issuing summons.
The court clarified that while Section 70 states that summons should be issued “in the same manner as a civil court,” it does not imply that timelines applicable in court proceedings are applicable to tax investigations.
Specifically, the court rejected the reliance on Order XVI of the CPC, stating that it pertains to summoning witnesses after a trial starts, not during the inquiry phase.
Most importantly, the court emphasized that summoning an individual for inquiry and recording statements does not equate to detention or arrest.
Consequently, the court ruled that no compensation was justified.
Opinions of Tax Exports and Impact:
Commenting on the ruling, a tax expert remarked that the decision provides crucial clarity on how the powers of summons within the GST framework are meant to function.
He stated,
“The Bombay High Court has clearly indicated that a summons issued under Section 70 for inquiry and statement recording cannot, by itself, be treated as detention, and that there is no legal requirement for a seven-day prior notice,”
At the same time, he noted that the court has reaffirmed constitutional protections.
He added,
“By distinguishing between lawful inquiry and custodial restraint, the Court has aimed to balance the need for effective tax enforcement with the safeguarding of individual rights. While tax authorities are empowered to act decisively in cases of suspected evasion, such powers must adhere strictly to the law,”
This ruling is likely to assist both taxpayers and authorities in navigating GST investigations moving forward.
For taxpayers and small businesses, the judgment clarifies that receiving a GST summons does not imply arrest and that immediate appearance may be required. However, it also emphasizes the importance of understanding one’s rights once formal arrest conditions are activated.
For tax authorities, the ruling enhances investigative powers by affirming that prompt summons during inquiries are legally valid while cautioning against the misuse of authority.
For professionals and advisors, the decision limits opportunities for procedural challenges and shifts the focus toward substantive compliance during investigations.
Case Title: Kanhaiya Nilambar Jha vs Union of India & Ors
Read Attachment: