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The Supreme Court has issued notice to the Central Government in a petition challenging the provision related to the power to arrest & summon under GST laws. Meanwhile, it has also directed no coercive action against the petitioner as an interim measure.
CGST Act has various provisions to take action in case of tax evasion, fraudulent use of Input Tax Credit (ITC), creating fake identities for GST registration, beside other illegal activities. Accordingly, Section 67(1) prescribes power of inspection, search and seizure. Section 69 gives power to arrest. Section 70(1) deals with the power to summon persons to give evidence and produce evidence. Section 132 talks about punishment including imprisonment. Section 135 is related with the presumption of culpable mental state and section 170 defines offences by companies.
All these sections have been challenged. The petitioner primarily submitted that sections 69 and 70 of the CGST Act were unconstitutional as being provisions of a criminal nature, and could not have been enacted under Article 246A of the Constitution of India. It also mentioned that powers to arrest and prosecute are not ancillary and/or incidental to the power to levy and collect GST. Further, CGST officers are not police officers.
It was also said that no protection under Article 20(3) of the Constitution is available to the summoned persons, thereby causing immense prejudice to petitioner. The said article says: “No person accused of any offence shall be compelled to be a witness against himself.”
Sandeep Sehgal, Partner- Tax, AKM Global says this judicial scrutiny is a step towards recalibrating the delicate equilibrium between robust tax enforcement and safeguarding individual liberties. The legal ambiguities surrounding these sections have been a long-standing concern for the taxpayer community. “It is expected that the Court’s intervention will inject much-needed clarity and fairness into the GST landscape, testing these provisions to ensure that the fundamental rights of taxpayers are duly respected and protected,” he said.
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