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The suspense over tax officials’ power to arrest alleged Goods & Services Tax (GST) evaders may continue for some time as the Supreme Court on Wednesday refused to interfere in the matter at this stage. The apex court, however, agreed to examine the issue in detail.
“As different High Courts of the country have taken divergent views in the matter, we are of the view that the position in law should be clarified by this Court,” a vacation Bench comprising Chief Justice Ranjan Gogoi and Justice Aniruddha Bose said. Now, a three-member Bench of the apex court will hear all similar matters.
The court has issued notices to the government and the parties concerned.
Also, the vacation Bench explicitly mentioned in its order the order passed on May 27 that upheld the decision of the Telangana High Court that denied anticipatory bail to one of the accused and said the other high courts dealing with such matters should keep this in mind. This means that the new petitions may have an extra challenge.
According to Ranjeet Mahtani, Partner, Dhruva Advisors, various cases of investigation into alleged circular trading have been initiated by the GST Department. These cases also involve inflated input tax credit (ITC) claims, depriving the exchequer tax revenues.
In such scenarios, while the Telangana High Court offered no protection to traders against arrest by GST authorities, the Bombay High Court, through two separate orders, said that no coercive action should be taken against the traders and no arrests should be made.
Keeping in mind the contradictory orders, the Centre approached the apex court with a special leave petition.
Interestingly, the apex court, on May 27, upheld the judgment passed by the Telangana High Court, and on Wednesday, declined to interfere with the April 11 order (against arrest) passed by the Bombay High Court.
“As a corollary, the favourable interim relief granted by the Bombay High Court will continue to protect the taxpayers until the matter is finally decided by a three-Judge Bench. However, the apex court order means that the problem will continue in case there is a negative order of the High Court,” Abhishek A Rastogi, partner at Khaitan & Co, said.
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