Gujarat High Court has ruled that the GST Commissioner can invoke power to arrest prior to the issuance of showcause notice or completion of adjudication/assessment and determination of the liability.
However, this will be possible in case the officer has ‘reason to believe’ that the person has committed offence which is cognisable and bailable.
Experts feel this ruling is slightly opposite to that from other high courts on similar matter.
“We are of the opinion that the power to arrest as provided under Section 69 of the CGST Act can be invoked if the Commissioner has reason to believe that the person has committed offences as provided under the clauses (a), (b), (c) or (d) of sub-section (1) of Section 132 of the CGST Act, which are punishable under the clause (i) or clause (ii) of sub-section (1) or sub-section (2) of the section 132 of the CGST Act without there being any adjudication for the assessment as provided under the provisions of the Chapter VIII of the CGST Act,” a division Bench said while disposing of six petitions.
Section 132 of CGST Act list offences (sub section 1) and punishment (sub section 1 and 2). Here offences, as mentioned in the order, include supply of good or services without any invoice with the intention of evading tax, issuing invoice or bill without supply of goods or services, leading to wrongful availment or utilisation of input tax credit (ITC) or refund of tax, availing ITC on the basis of fake bill and collecting tax, but not depositing with the government even after three months. Penalty here would be the amount of tax evaded and jail term up to five years.
Misuse of power
Commenting on the decision, Tarun Gulati, Senior Supreme Court advocate, said while the High Court has reiterated several safeguards before the power of arrest can be exercised, the judgment seems to overlook the practical considerations where powers of arrest can be brazenly misused by authorities and are used as a coercive measure of effecting recoveries of tax.
“The Delhi High Court view in MakeMyTrip's case in the service tax regime, where it had been held that arrests can be made only after adjudication was upheld by the Supreme Court and ought not to have been departed from. It provided an important safeguard to assessees that their explanation would be considered before such drastic action is taken. Without these safeguards, they can be subjected to unwarranted threats of deprivation of personal liberty which should not be allowed,” he said.
According to Harpreet Singh, Partner at KPMG, while the High Court has held that the Commissioner has the power to arrest the person under Section 69, prior to completion of adjudication/assessment and determination of liability, one hopes that the rationale would be applied by officers in substance and entirety by exercising extreme caution “Also, emphasis needs to be given to Court’s conclusion that Commissioner’s action to arrest must be based on a reason to belief, established on some credible material/information. The learned judges have rightly held that such power should be used sparingly and only on substantive weighty grounds and reasons, instead of based on mere suspicion of complicity in an offence,” he said.