The Telangana High Court has held that pre-arrest custody cannot be justified where GST summons fail to disclose the nature of the allegations and the alleged offence carries a maximum punishment of less than seven years’ imprisonment, while granting anticipatory bail to a Hyderabad-based businessman in a case involving alleged evasion of nearly ₹12 crore under the Health Security & National Security Cess (HSNS) Act, 2025.
The bench of Justice N. Tukaramji observed that the summons merely directed the petitioner to appear without specifying the subject matter of the inquiry, the allegations against him, or his alleged role, and reiterated that arrest cannot be resorted to mechanically unless custodial interrogation is demonstrably necessary, in line with the principles laid down by the Supreme Court in Arnesh Kumar v. State of Bihar.
The petitioner, engaged in the real estate business through Cyber Towers and Sanali Housing Projects Private Limited, approached the High Court under Section 482 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), seeking pre-arrest bail after receiving summons under Section 13 of the HSNS Act.
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According to the petitioner, the summons neither disclosed the nature of the inquiry nor specified the allegations against him or the documents required to be produced. He argued that despite not being informed of any offence, he had a genuine apprehension of arrest during the investigation. He further submitted that he was a permanent resident of Hyderabad, had established business interests, and was willing to cooperate with the investigating authorities.
The petitioner also contended that custodial interrogation was wholly unnecessary and that vague summons deprived him of an effective opportunity to respond to the investigation.
The CBIC, opposing the anticipatory bail plea, submitted that the Anti-Evasion Wing had uncovered an organised syndicate clandestinely manufacturing Kalakaar Pan Masala using unregistered packing machines without obtaining registration under the HSNS Act and without payment of the applicable cess.
Search operations allegedly resulted in the seizure of four unregistered packing machines, large quantities of pan masala, raw materials, and packing materials. The department claimed that the investigation had revealed HSNS Cess evasion of nearly ₹12 crore, attracting Section 19(1)(a) of the HSNS Act, which treats such offences as cognizable and non-bailable where evasion exceeds ₹5 crore.
The authorities further alleged that a co-accused had identified the petitioner as the mastermind, financier, and supervisor of the illegal operations. According to the department, the petitioner had invested around ₹5 crore in the illegal business, and bank records and financial transactions supported his involvement.
The respondent also alleged that despite three summons, the petitioner failed to appear, produced misleading medical certificates, and travelled to Dubai during the relevant period to evade the investigation. It was argued that custodial interrogation was essential for tracing financial transactions, identifying beneficiaries, examining electronic evidence, and unearthing the wider conspiracy.
The High Court examined the statutory framework of the HSNS Act and observed that Section 13 empowers officers to summon any person for giving evidence or producing documents during an inquiry, while Section 26 authorises arrest where there are reasonable grounds to believe that a person has committed a cognizable and non-bailable offence.
The Court noted that although the respondent claimed the petitioner was the principal accused and mastermind, the summons merely directed him to appear without revealing the allegations, the subject matter of the inquiry, or his alleged role. This created ambiguity regarding the status in which his attendance was being sought.
Justice Tukaramji relied upon the Supreme Court’s judgments in Siddharam Satlingappa Mhetre v. State of Maharashtra and Arnesh Kumar v. State of Bihar, reiterating that courts considering anticipatory bail should not conduct a mini-trial or assess the merits of the evidence at the investigation stage.
The Court emphasized that although the offence carried a maximum punishment of five years’ imprisonment, the principles laid down in Arnesh Kumar continue to apply. Since the maximum sentence did not exceed seven years, arrest should ordinarily not be resorted to unless the statutory conditions justifying such arrest were satisfied.
A key observation of the Court was that the investigating agency had initially chosen to issue summons rather than invoke its statutory power of arrest. According to the Court, this itself indicated that custodial interrogation was not considered indispensable at the initial stage.
The Court observed that arrest cannot be employed as a punitive measure before guilt is established. It further cautioned that investigators cannot obtain statements under the constant threat of arrest and later characterize them as voluntary disclosures, as such an approach would undermine the constitutional guarantees contained in Articles 20(3) and 21.
The High Court also noted that the investigating agency had already seized the alleged machinery, manufactured goods, raw materials, and other incriminating articles.
The remaining investigation, involving bank accounts, financial transactions, electronic records, and digital evidence, was largely documentary in nature and could effectively continue without taking the petitioner into custody, provided he cooperated fully with the investigation.
Balancing the interests of a fair investigation with the petitioner’s right to personal liberty, the Court granted anticipatory bail subject to stringent safeguards.
The petitioner was directed to surrender before the Superintendent (Anti-Evasion), Central Tax, Hyderabad GST Commissionerate, on or before 6 August 2026. Upon surrender or arrest, he is to be released on furnishing a personal bond of ₹5 lakh with two sureties of the like amount.
The Court further directed him to appear before the investigating officer every Tuesday and Thursday for ten weeks, remain available whenever required, furnish his residential address and contact details, refrain from leaving India without prior permission, and avoid influencing witnesses or tampering with evidence. Any breach of these conditions would entitle the authorities to seek cancellation of bail.
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