HSNS Cess Act | Allahabad High Court Sets Aside Arrest After Finding Authorisation Was Issued A Day Later

The court also held that the arrest memo did not show that any family member or nominee of the arrested man had been informed of his arrest, or that he had been told of his right to legal assistance from an advocate of his choice.

Section 26(1) of the Act permits a proper officer not below the rank of Commissioner, who has reasons to believe that a person has committed an offence specified in clauses (a) to (d) of sub-section (1) of Section 18, to authorise by order any other proper officer below him to arrest such person.

The bench of Justice Siddharth and Justice Vinai Kumar Dwivedi held,

“At the time of arrest, the grounds of arrest must be communicated to the arrestee with full particulars. An arrest memo must be prepared, detailing the exact time, place, and reasons for the arrest, and the same must be signed by witnesses, preferably a family member of the arrested person. The information regarding the arrest shall be furnished to the family members of the arrestee or to a person nominated by him. The arrested person shall be informed of his right to consult a lawyer of his choice during interrogation, and free legal aid shall be provided to those who cannot afford to engage a lawyer.”

The corpus, Sanchit Seth, whose firm holds registration with the G.S.T. Department, was arrested during the night of 22.05.2026 at the instance of the Anti Evasion Department of the GST Commissionerate. The grounds of arrest annexed to the arrest memo alleged clandestine manufacture of tobacco and pan masala products in undeclared packing machines and evasion of tax, and recorded that the arrest was being made for custodial interrogation and to prevent tampering with evidence and influencing of witnesses.

It was argued on his behalf that the grounds of arrest supplied to him were incomplete, that the Commissioner had recorded no reasons to believe as required by Section 26 of the Act, and that no family member or nominee had been told of the arrest.

Reliance was placed on the decision of the Supreme Court in Mihir Rajesh Shah vs. State of Maharashtra and Another, in which it was held that the reasons to believe must be communicated in writing to the arrestee at least two hours before he is produced before the Remand Magistrate, and that non-compliance renders the arrest and the subsequent remand illegal. It was further argued that the offences under the Act carry a maximum sentence of five years and that on the principles laid down in Satendra Kumar Antil vs. C.B.I. arrest could not be effected as a matter of course.

The respondents submitted that the grounds of arrest had been furnished along with the arrest memo bearing a DIN number, that the reasons to believe were apparent from the letter of authorisation for arrest dated 23.05.2026, and that evasion of government revenue of over Rs. 17.88 crores was alleged against the corpus. It was also submitted that the habeas corpus petition was not maintainable, the bail application of the corpus having already been rejected by the Special C.J.M., Meerut, with a further application pending before the District and Sessions Judge.

Perusing the scheme of the Health Security Se National Security Cess Act, 2025, the Court observed that the cess is levied in addition to other duties and taxes on machines installed or processes undertaken by a taxable person for the manufacture of specified goods, and is payable every month and not later than the 7th day of the month.

It observed that computing the cess monthly is an onerous exercise for a taxable person and that any delay attracts penalty. The Act provides for civil liability under Chapter V and criminal liability under Chapter VI. The Court held that the Act says nothing about informing manufacturers that it applies to their business concerns from any particular date.

Since the maximum punishment under Chapter VI is five years, and the offences are capable of being compounded under Section 23, the Court held that the provisions of the B.N.S.S. governing arrest applied. It observed that Section 35 of the B.N.S.S. requires reasons to be recorded justifying why an arrest is absolutely necessary where the offence carries a punishment of under seven years.

The Court found that the arrest memo and the grounds of arrest had been furnished to the corpus, but to no one else. The memo carried no indication that a copy had gone to any relative or nominee, and did not name the person informed of the arrest. All the witnesses named in it appeared to be strangers to the corpus. Paragraph 3 of the memo, placed immediately above the arrestee's signature, showed that no family member or relative had been informed at all.

The Court further found that although the corpus was arrested during the night of May 22,2026  and his statement was recorded on the intervening night of 22/23.05.2026, the letter authorising his arrest was issued by the Commissioner, CGST & Central Excise, Commissionerate, Ghaziabad only on 23.05.2026. The authorisation for search had been issued on May 22,2026, but the authorisation for arrest came a day later.

“The arrest memo also does not contains any recital indicating that the petitioner was informed of his right to avail legal assistance from an advocate of his choice. It merely records that one Praveen Seth had been informed about his arrest. However, the signature of Praveen Seth is absent, and only his name has been mentioned in capital letters.”

Holding that the offence in any event carries a maximum sentence which may extend to five years only, the Court held that on the principles laid down by the Supreme Court in Satender Kumar Antil vs. C.B.I., the arrest of the petitioner did not appear to be justified.

The Court also questioned the basis of the figure of evasion alleged against the corpus.

“We further find that evasion of revenue of Rs. 17.88 crores have been alleged against the corpus. The basis of this figure is not based on any audit and assessment under Chapter V of the Act.”

Holding that the arrest, remand and detention of the petitioner did not seem to be in accordance with law, the Court set them aside and directed that he be released forthwith. The habeas corpus writ petition was allowed.

For Petitioner: Advocates Amit Singh, Ayank Mishra

For Respondent: Advocates Dhananjay Awasthi, G.A.