A significant turning point in India's taxation system took place in 2017 with the implementation of the Goods and Services Tax Act, 2016 (GST Act hereinafter), which was enacted to streamline the indirect taxation system and to prevent tax evasion. The clarity, consistency, and compatibility of any legislation with the already-existing legal framework, in addition to its initial goals, determine whether it is effective or not. However, due to some inconsistency in the act, Section 69 of the Central Goods and Services Tax(CGST Act hereinafter) has become a cause of concern.
Section 69 of the CGST Act, which deals with the authority to make arrests for alleged offences or non-compliances, is one such provision. The intricacies of Section 69 and the implications of its ambit on the taxpayer’s rights have been discussed in the recent Supreme Court ruling in the case of State of Gujarat v. Choodamani Parmeshwaran.
The authority's ability to detain people suspected of committing offences related to GST evasion or violations is covered in Section 69 of the CGST Act, 2017. It grants the Commissioner the authority to order any central tax officer to place a person under arrest, if there are grounds to suspect that the person has committed certain offences listed in section 132 of the CGST Act. Within 24 hours, the detained person must appear before a Magistrate. Depending on the offences, the person may be released on bail or kept in the judicial custody. The Deputy Commissioner or Assistant Commissioner may release the arrested person on bail for non-cognizable offences or may take other appropriate action in accordance with the Code of Criminal Procedure, 1973 (Cr.P.C hereinafter).
The main issue which this article intends to bring to the fore is the lack of clarity surrounding the types of offences covered by Section 69 of the CGST. While section 69(1) expressly permits the arrest of those charged with cognizable but non-bailable offences, whereas section 69(3) deals with bail for those charged with cognizable but bailable offences. Interpretation and application have become questionable as a result of this contradiction.
In contrast to section 69(3) of Section 69, subsections (1) and (2) make no specific mention of the powers of arrest under Cr.P.C. This discrepancy raises concerns about whether the protections provided by Sections 41 and 41A of the Criminal Procedure Code, which permit notice before arrest, apply to GST arrests. Further complicating the situation is the contradiction between Section 69's subsections (1) and (3) and Section 67(10) of the CGST Act, which refers to Cr.P.C.'s provisions. To ensure uniformity in handling arrests and granting bail, this incongruity needs to be resolved.
Due to these contradictions in Section 69 of the CGST Act, which have sparked discussions in the legal community, a thorough analysis of the provision is required to ensure consistency and openness in its application. Harmonizing the requirements with appropriate references to the Code of Criminal Procedure will be essential to safeguard taxpayers' rights while facilitating efficient enforcement of tax authority.
The recent case i.e., State of Gujarat v. Choodamani Parmeshwaran, revolves around the fact that the respondents who were served with summons pursuant to Section 145 of the Central Excise Act, 1944, for the purpose of questioning in relation to an alleged Goods and Service Tax (GST) liability evasion and violation of the Finance Act of 1994 as well as the CGST Act of 2017. When the summons was served, the respondents assumed they would be arrested, so moved the Gujarat High Court, praying for protection under the writ jurisdiction under Article 226 of the Constitution of India. The High Court ordered the respondents to appear before the authorities for questioning, and it directed them to complete the adjudicatory process in eight weeks. Aggrieved by the order the State of Gujarat filed an appeal before the Supreme Court. After hearing both the parties at length the SC comprising Justices J. B. Pardiwala and Prashant Kumar Mishra made the following observations:
- Non-applicability of Section 438 of the CrPC - The Court made it clear that a person cannot request anticipatory bail under the terms of Section 438 of the CrPC if they have been summoned under Section 69 of the CGST Act in order to record their statement. This conclusion is justified by the observation that no First Information Report (FIR) is filed prior to the use of the arrest authority provided by Section 69(1) of the CGST Act.
- High Court jurisdiction under Article 226 - The Court made it clear that in these situations, the respondent’s only option for obtaining protection from pre-trial detention is to apply to the High Court in accordance with Article 226 of the Constitution. The respondents had specifically pursued this route by submitting two criminal applications under Article 226 to the High Court in order to obtain a directive to stop their arrest pursuant to Section 69(1) of the CGST Act.
- Disposal of the Matter by the High Court - The Supreme Court expressed dissatisfaction with the High Court's handling of the case, which included ordering the respondents to argue their case in front of the authorities. According to the Court, the respondents should have complied with the summons and shown up before of the authorities for questioning.
The Apex Court overruled the High Court's ruling and gave the respondents one more chance to appear in front of the authorities so that their statements could be recorded. The court ordered that if the respondents do not show up, the relevant authority should continue according to the law. Therefore, if the respondents want to be protected from arrest, they must file a writ petition with the High Court in accordance with Article 226.
Conclusion
From the conspectus of the aforementioned Section 69 of the CGST Act is essential for ensuring tax compliance and preventing tax evasion. The most recent case makes it clear how the CGST Act summons’ interact with the potential for anticipatory bail under Section 438 of the CrPC. The accused cannot file anticipatory bail at the summons stage, in this regard the Court ruled, that the accused must instead apply to the High Court having the necessary jurisdiction for protection from pre-trial detention under Article 226. This judgement emphasizes the value of prompt cooperation with the authorities which will surely aid the people who are handling GST-related inquiries effectively. The court interminably balanced the need for enforcement of law and the rights of taxpayers, ensuring that the object of the GST Act is achieved and its true import is interpreted.
The Author is a 5th year B.B.A., LL.B. Hons. student at UPES, Dehradun
[The opinions expressed in this article are those of the author. Verdictum does not assume any responsibility or liability for the contents of the article.]