The Gujarat High Court in its recent ruling while rejecting the petition has held that the Commissioner was empowered to authorize ‘arrest’ prior to completion of the assessment subject to fulfilling of pre conditions mandated under Section 69 of the CGST Act,2017.
Facts of the case / plea of petitioner:
- The petitioner is the proprietor of a M/s Heugo Metal engaged in the business of trading and supply of the stainless steel and scrap and was using the godown.
- The Respondent authority along with the other officials of the Government of Gujarat Goods and Service Tax Department had come to visit the residential premises of the petitioner in connection with the investigation of the business transactions of M/s Heugo Metal.
- The Respondent authority had sealed a drawer in which the files, diary, mobile and laptop of the petitioner were stored and left the premises asking the petitioner to appear before the respondent authority with the provisional balance sheet of M/s Heugo Metal.
- The petitioner was unable to remain present along with the documents and the provisional balance sheet, the petitioner through his advocate addressed a letter to the respondent authority and requested to give one week time.
- The petitioners strongly apprehend their arrest when the petitioners would appear before the
respondent no.2 pursuant to the summons issued under section 70 the CGST Act.
- The petitioner prayed before the court to direct the respondents authority not to take any actions against the petitioner being proprietor of the Heugo Metal exercising powers under Section 69 read with Section 132 without following due procedure of law of assessment and adjudication of alleged evasion of GST as contemplated under Section 61, Section 73 of under Section 74 of the CGST Act, 2017.
Order of Gujarat High Court: Deliberations and Ruling:
- 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 of section 132(1) 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.
- While producing the person arrested under Section 69 of the CGST Act, the importance of valid, proper and exhaustive arrest memo should not be undermined. Every authorized officer under the Act, 2017 carrying out arrest must be clear that the preparation of an arrest memo is mandatory.
- The safeguards mandated through the Supreme guidelines, particularly the requirement to prepare an arrest memo, are directed towards “transparency and accountability” in the powers to arrest and detain. These safeguards flow from the fundamental rights guaranteed in Articles 21 and 22 respectively of the Constitution of India. The life and liberty of a person is secured under Article 21 and supplemented by Article 22 that provides key protection against the arbitrary arrest or detention to every arrested person.
- The mode of exercise powers of arrest under the GST Law as the power of arrest specified in Section 69 of the CGST Act undoubtedly displeases the corresponding powers of arrest vested in a police officer under the Code of Criminal Procedure.
- Section 69 of the CGST Act requires certain preconditions to be fulfilled prior to the arrest. In particular, the reasons to believe have to be recorded in writing in the file.
- The second aspect of Section 69 of the GST Act is the communication of the grounds of arrest. Although, Section 69 uses the word “inform” in the context in which it appears, yet a mere communication of the grounds would not be sufficient.
In view of the foregoing reasons, observations and directions, the two member bench of Justice J.B. Pardiwala and Justice Bhargav D. Karia ordered the petitions to be rejected. It was also held that the Ad interim relief granted earlier stands vacated.
In other words the Court held that the Commissioner was empowered to authorize ‘arrest’ prior to completion of the assessment subject to fulfilling of pre conditions mandated under Section 69 of the CGST Act,2017.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
