TaxTMI 
TaxTMI 
TaxTMI 
“The taxpayer is the only person in our country who works for the Government without having to pass a Civil Service examination. — Ronald Reagan
1.In any business venture, courage and confidence are the driving forces. Nothing should come in the way of that propelling energy, for enterprise flourishes only where legal certainty, fairness, and predictability prevail. Yet a growing concern frequently expressed within industry circles today is the atmosphere of fear, uncertainty, and lack of clarity faced by businesses navigating the GST regime. Compliance thrives in an environment of trust, not anxiety; when ambiguity or disproportionate enforcement dominates, entrepreneurial energy inevitably recedes.
2.This conversation, therefore, is not merely about technical provisions of tax law. It reflects stages of a larger journey — from mastering statutes, compliance frameworks, and litigation to understanding the human experience behind every business venture. Law does not operate in abstraction. Behind every notice, investigation, or enforcement action stands an entrepreneur, employees, families, and aspirations. Recognising this human dimension does not weaken enforcement; rather, it disciplines it with fairness, proportionality, and purpose, ensuring that regulation strengthens enterprise instead of stifling it.
3. Occasional references to “tax terrorism” in public discourse, whether rhetorical or grounded in real experiences, underline a deeper institutional challenge. The State unquestionably has both authority and obligation to curb tax evasion, but enforcement perceived as excessive risks undermining voluntary compliance and business confidence. The real objective is not diluted enforcement but refined enforcement — firm against evasion while respectful of liberty, institutional trust, and economic vitality. The tax system must protect the golden goose rather than jeopardise it through overzealous action.
4.The GST framework itself rests fundamentally on the mother concept of “supply,” the taxable event from which liability, compliance obligations, and enforcement measures arise. If this foundational element is interpreted expansively without statutory discipline, downstream enforcement risks legal fragility. Penal consequences, particularly criminal prosecution and arrest under the CGST framework, must therefore be invoked with careful regard to legislative thresholds, evidentiary requirements, and statutory intent. Civil penalties, criminal prosecution, and arrest powers were designed to operate in calibrated stages, not as interchangeable tools of administrative convenience.
5.This legislative calibration becomes clearer when contrasted with other statutory regimes. Under the Companies Act, investigation reports of the Serious Fraud Investigation Office [SFIO] are expressly treated as equivalent to police reports under criminal procedure law, thereby conferring defined evidentiary status. The absence of any comparable deeming fiction within the GST framework is significant. Judicial pronouncements, including those relating to investigation reports under criminal procedure law (now reflected in the Bharatiya Nagarik Suraksha Sanhita replacing the CrPC), clarify that investigative opinions themselves do not constitute legal evidence; adjudication of evidence remains the exclusive domain of courts. GST investigative findings or departmental opinions, therefore, cannot by themselves justify coercive criminal measures without appropriate judicial evaluation.
6.Equally well settled is the principle that the legislature enacts statutes with full awareness of existing legal frameworks. The absence of certain evidentiary presumptions in GST, despite their presence in other statutes, indicates deliberate legislative restraint. This reinforces the need to interpret penalty provisions, prosecution provisions, and arrest powers within their intended statutory boundaries rather than expanding them through administrative practice.
7.Judicial interpretation consistently cautions that no statutory provision should be rendered redundant or purposeless. Distinctions carefully embedded by Parliament — between civil penalties and criminal prosecution, between suspicion and legally sustainable belief, between investigation and adjudication — must be preserved. Otherwise, statutory safeguards risk becoming dead letters, fostering legal uncertainty and institutional distrust.
8. Recent bail jurisprudence under the GST framework also reflects this balanced judicial approach. Courts have recognised that offences carrying imprisonment up to five years remain triable by Magistrates and that the presumption of innocence continues until conviction. Cooperation with investigation, absence of criminal antecedents, and proportionality of detention remain relevant considerations. Such rulings reaffirm that fiscal enforcement cannot override foundational criminal law protections.
9.Arrest under fiscal statutes carries consequences far beyond tax liability. It affects reputation, business continuity, psychological well-being, and economic stability. Taxes can be recovered through multiple statutory mechanisms, but the erosion of confidence, dignity, or mental peace is far harder to restore. Where statutory authority is exercised without good faith, accountability mechanisms must operate, for public power carries inherent responsibility.
10.Calls for stronger enforcement must therefore be understood in context. Strong enforcement alone does not curb abuse; disciplined enforcement does. Much of the present anxiety among businesses stems not from enforcement per se but from perceived inconsistency, opacity, and disproportionate coercive action. Effective enforcement must remain anchored in transparency, proportionality, accountability, and statutory fidelity. Power without proportion invites arbitrariness; proportionate exercise of power inspires compliance. In that equilibrium lies the true strength of a modern tax regime.
11.Taxpayers confronted with disputes should also resist extreme stressful reactions driven by apprehension of enforcement action. The legal system provides structured remedies, appellate forums, judicial oversight, and the assistance of experienced professionals capable of resolving disputes within the framework of law. Confidence in due process, rather than fear of enforcement, sustains both compliance and economic stability.
12.Ultimately, a mature fiscal system recognises taxpayers not as adversaries but as partners in national development. Enforcement must remain firm against evasion yet fair, proportionate, and legally grounded. Protecting the golden goose is not merely a metaphor but an economic necessity. Balanced enforcement safeguards revenue while preserving liberty, trust, and entrepreneurial vitality. Only such disciplined administration can ensure that the GST regime remains effective, equitable, and worthy of public confidence — securing revenue while sustaining the confidence that fuels legitimate enterprise.
13.The principles laid down by the Hon’ble Supreme Court’ judgement dated 15/01/ 2026 in Satender Kumar Antil Versus Central Bureau Of Investigation And Anr. - 2026 (2) TMI 466 - Supreme Court provide important jurisprudential guidance while examining arrest powers under Section 35(6) read with Section 35(1)(b) of the BNSS, 2023, pursuant to a notice issued under Section 35(3) of the BNSS, 2023. The Court emphasised that arrest for an offence punishable with imprisonment up to seven years, cannot be justified merely because it is lawful; necessity, proportionality, and objective justification must guide the exercise of such power. Investigation, the Court clarified, can ordinarily proceed without arrest, which remains only a statutory discretion to facilitate evidence collection rather than a mandatory step.
14. When these principles are read into the GST framework, the Commissioner’s ‘reasons to believe’ under Section 69 must reflect genuine investigative necessity and not administrative convenience or anticipatory coercion. Since offences under Section 132 often carry punishmentup tofive years [ being less than seven years] and involve primarily documentary evidence, arrest should ordinarily remain an exception, invoked only where custodial interrogation is demonstrably indispensable, there is risk of evasion of process, or likelihood of evidence tampering. This approach preserves the legislative balance between revenue protection and personal liberty while ensuring that enforcement remains fair, proportionate, and consistent with constitutional criminal jurisprudence. The following conclusions were drawn by the Hon’ble Apex Court:
A.An arrest by a police officer is a mere statutory discretion which facilitates him to conduct proper investigation, in the form of collection of evidence and, therefore, shall not be termed as mandatory.
b. Consequently, the police officer shall ask himself the question as to whether an arrest is a necessity or not, before undertaking the said exercise.
c. For effecting an arrest, qua an offence punishable with imprisonment up to 7 years, the mandate of Section 35(1)(b)(i) of the BNSS, 2023 along with any one of the conditions mentioned in Section 35(1)(b)(ii) of the BNSS, 2023 must be in existence.
d. A notice under Section 35(3) of the BNSS, 2023 to an accused or any individual concerned, qua offences punishable with imprisonment up to 7 years, is the rule.
e. Even if the circumstances warranting an arrest of a person are available in terms of the conditions mentioned under Section 35(1)(b) of the BNSS, 2023, the arrest shall not be undertaken, unless it absolutely warranted.
f. Power of arrest under Section 35(6) read with Section 35(1)(b) of the BNSS, 2023, pursuant to a notice issued under Section 35(3) of the BNSS, 2023 is not a matter of routine, but an exception, and the police officer is expected to be circumspect and slow in exercising the said power.
15.The relevant provisions of Section 35 of the BNSS Act, 2023 are reproduced here under:
35. (1) Any police officer may without an order from a Magistrate and without a warrant, arrest any person—
(a) who commits, in the presence of a police officer, a cognizable offence; or
(b) against whom a reasonable complaint has been made, or credible information has been received, or a reasonable suspicion exists that he has committed a cognizable offence punishable with imprisonment for a term which may be less than seven yearsor which may extend to seven years whether with or without fine, if the following conditions are satisfied,
(2) XXXX
(3) The police officer shall, in all cases where the arrest of a person is not required under sub-section (1) issue a notice directing the person against whom a reasonable complaint has been made, or credible information has been received, or a reasonable suspicion exists that he has committed a cognizable offence, to appear before him or at such other place as may be specified in the notice.
(4) Where such a notice is issued to any person, it shall be the duty of that person to comply with the terms of the notice.
(5) Where such person complies and continues to comply with the notice, he shall not be arrested in respect of the offence referred to in the notice unless, for reasons to be recorded, the police officer is of the opinion that he ought to be arrested.
(6) Where such person, at any time, fails to comply with the terms of the notice or is unwilling to identify himself, the police officer may, subject to such orders as may have been passed by a competent Court in this behalf, arrest him for the offence mentioned in the notice.
(7) No arrest shall be made without prior permission of an officer not below the rank of Deputy Superintendent of Police in case of an offence which is punishable for imprisonment of less than three years and such person is infirm or is above sixty years of age.
16.What emerges from the above ruling is that ‘arrest” should follow a mandatory issuance notice under Section 35(3) of BNSS,2023 and the accused or other person must be heard. This also squarely applies to Section 69 which empowers arrest where specified offences under Section 132 are believed to have been committed or under the Income Tax Act as well. However, the spirit of the Supreme Court’s reasoning suggests demonstrable necessity and credible establishment of offence, not precede it as a method of exploratory investigation. The power exists to secure justice, not to shortcut evidentiary discipline. This becomes another classic reminder that statutory powers under Section 69 must not be invoked unless a notice is issued under Section 35(3) of the BNSS Act, 2023[supra].This reflects the Constitutional principle that personal liberty under Article 21 cannot be curtailed mechanically or routinely. In case arrests are made under Section 69 of the CGST Act without issuing mandatory notice under Section 35[3] of BNSS Act, 2023, they are questionable in the court of law and likely to collapse on lack of such necessity. Such judicial perspectives do not weaken enforcement; they legitimise it. When businesses perceive that enforcement actions are grounded in necessity, transparency and fairness, compliance becomes collaborative rather than adversarial. Revenue improves not only through detection of evasion but through sustained voluntary adherence.
17. Investigation, in its true legal sense, signifies the systematic collection of credible evidence relating to the commission of an offence. When this principle is applied to the scheme of the CGST Act, particularly Section 69 read with Section 132, it becomes evident that the power of arrest is not intended to precede or substitute investigation, but rather to complement a properly grounded evidentiary exercise. The proper officer is undoubtedly empowered to summon persons, record statements, inspect premises, and gather documentary or electronic evidence to ascertain whether offences enumerated under Section 132 have in fact been committed. Searches, inspections, and seizures under the statutory framework serve the limited but crucial purpose of securing material that establishes culpability, not merely suspicion.
18.The legislative design therefore makes it clear that the formation of a reasonable belief regarding the commission of a cognizable GST offence must rest on tangible material collected during investigation. The ultimate object is to establish the offence through credible evidence, not to initiate coercive measures in the hope that evidence may subsequently emerge. Arrest under Section 69 is thus consequential to, and not a substitute for, the evidentiary foundation contemplated under Section 132.
19. The existence of the power to arrest is one thing. The justification for the exercise of it is quite another. An investigation can go on even without an arrest. Consequently, preliminary or discreet enquiries, anonymous inputs, intelligence alerts, or unverified allegations cannot by themselves constitute “investigation” nor justify invocation of arrest powers under Section 69. Such exercises may at best trigger further verification, but they fall short of the evidentiary threshold required for forming the statutory “reasons to believe” that an offence punishable under Section 132 has been committed. To treat mere suspicion as investigation would invert the statutory safeguards and expose taxpayers to arbitrary exercise of power, a consequence the GST framework, read in light of constitutional protections of personal liberty, clearly intends to avoid.
20.One uncomfortable unfairness within the GST framework deserves frank acknowledgment. Section 157 of the CGST Act grants statutory immunity to officers for acts done in good faith — a protection undoubtedly necessary to enable fearless discharge of statutory functions. But the corresponding question, often left unasked, is this: what comparable institutional assurance protects the honest taxpayer acting with equal bona fides? If enforcement agencies are shielded against second-guessing when acting in good faith, what is the guarantee that genuine taxpayers will not face precipitous unlawful demands, reputational harm, or prolonged litigation despite eventual vindication? Protection cannot be a one-way street. Both safeguards must travel together if the truth of facts is to emerge fairly. Otherwise, immunity risks being perceived not as a facilitator of justice but as insulation from accountability, and enforcement risks drifting from lawful vigilance to avoidable intimidation. A credible tax administration must therefore guard the “golden goose” without compromising the confidence, dignity, and security which alone generates humongous revenue for nation building — for compliance grows from trust, not fear.
21. Every case must depend upon its own facts. So a person who is merely a nominal or “dummy” figure cannot be legitimately subjected to arrest or prosecution under Section 69 read with Section 132 of the CGST Act without credible material showing conscious beneficiary and culpable intent in the alleged offence. Since Section 132 is penal in nature, liability cannot rest on mere association or designation. In this context, Section 35(3) of the BNSS, 2023 serves as an important procedural safeguard, ensuring that arrest powers are exercised cautiously, on recorded reasons and genuine necessity, thereby protecting personal liberty under Article 21 and preventing misuse of coercive statutory authority.
22. The mandatory notice under Section 35(3) of the BNSS Act instils confidence by assuring a fair, transparent approach and safeguarding against mechanical or arbitrary arrests. Such statutory protection helps ease fear, stress, and anxiety among taxpayers, reminding them that the law ultimately seeks balance, not intimidation. Thus, Section 35(3) stands as a beacon of hope in this regard. In moments of pressure or uncertainty, it is vital to remain composed — no legal proceeding, allegation, or dispute is worth more than “life” itself. Challenges pass, remedies exist, and dignity endures; life, once shaken beyond repair, does not. Hence, let calmness prevail, for life remains the most precious asset above all else.
23.The government must remember that without the taxpayer’s willingness to pay, the entire social contract collapses. Therefore, the state should treat the taxpayer not as a lemon to be squeezed, but as the primary patron of the Republic.
