ARRESTS UNDER GOODS AND SERVICES TAX (PART-1)

Provisions of Arrest at a Glance

Section 69 empowers the Commissioner of CGST or SGST to arrest any person where he has reasons to believe that such person has committed an offence under section 132(1) (a, b, c, d) and punishable under section 132(1)(i, ii) or 131(2).

In the administration of taxation the provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders. To some these may appear very harsh but these are necessary for efficient tax administration and also act as a deterrent and instill a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorization from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit.

The salient features of these provisions are:

1. Provisions for arrests are used in exceptional circumstance and only with prior authorization from the Commissioner.
2. The law lays down a stringent criteria and procedure to be followed for arresting a person. A person can be arrested only if the criteria stipulated under the law for this purpose is satisfied i.e. if he has committed specified offences (not any offence) and the tax amount is exceeding Rs. 200 lakhs. However, the monetary limit shall not be applicable if the offences are committed again even after being convicted earlier i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount involved in the case.
3. Further, even though a person can be arrested for specified offences involving tax amount exceeding Rs.200 lakhs, however, where the tax involved is less than Rs.500 lakhs, the offences are classified as non-cognizable and bailable and all such arrested persons shall be released on Bail by Deputy/Assistant Commissioner. But in case of arrests for specified offences where the tax amount involved is more than Rs.500lakhs, the offence is classified as cognizable and non-bailable and in such cases the bail can be considered by a Judicial Magistrate only.

Meaning of arrest

While the term 'arrest' has not been defined in GST law, based on judicial pronouncements, 'arrest' implies 'the taking into custody of a person under some lawful command or authority'. In other words, a person is said to be arrested when he is taken into custody and restrained of his liberty, by power or colour of lawful warrant.

Power to arrest

In case of CGST, the Commissioner may authorize any officer of Central Tax to arrest any person who has committed punishable offences liable for arrest. Such authorization has to be by way of a written order and only to Central Tax officers.

The power to arrest comes with a very important rider that the Commissioner ordering or authorizing for arrest to any person should have 'reason to believe' that such person has committed specified offences under section 132 of CGST Act, 2017.

The Commissioner by order, can authorize any CGST officer to arrest any person, if he has reasons to believe that such person has committed an offence specified in clause (a) or (b) or (c) or (d) of section 132(1) which is punishable under clause (i) or (ii) of section 132(1) or section 132(2) of the Act. This essentially means that a person can be arrested only when the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 2 Crores or where a person has earlier been convicted for an offence under section 132 of the CGST Act, 2017.

It may be noted that courts in India are empowered to undertake a judicial review. Articles 32 and 226 of Constitution of India so as to protect fundamental rights of citizens. A person may be deprived of his fundamental right 'Right to Life & Personal Liberty' granted to him under Article 21 of the Constitution, provided the alleged detention or arrest shall be done strictly according to the Rule of law as provided under Article 22 of the Constitution. Whenever any detention or Arrest is challenged, the court takes into consideration the nature of right infringed, the scope and object of the specific legislation, the need to balance the rights and intrests of the individual as against those of the society, the circumstances under which and the persons by whom the jurisdiction is invoked etc. Power to arrest and prosecute are incidental provisions in relation to power to levy and collect GST and are not ultra vires the Constitution.

As per Article 21 of the Constitution, no person could be deprived of his life or personal liberty except according to procedure established by law. Since, the personal liberty of a person is deprived, when he is arrested the procedure laid down in the Statute while depriving his personal liberty, has to be followed. As per Article 22(1) of the Constitution, no person who is arrested, could be detained in custody without being informed, as soon as may be, of the grounds for such arrest. Thus, the grounds for such arrest have to be communicated to him as soon as may be after the arrest is made. There has to be due compliance of the Constitutional and Statutory mandates, whenever an arrest is made of a person under the Special Acts.

Reason to believe

'Reason to believe' is to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person, knowing the same facts, to reasonably conclude the same thing. As per section 26 of the Indian Penal Code, 1860 (IPC), "A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise."

'Reason to believe' contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration. It has to be and must be that of an honest and reasonable person based on relevant material and circumstances.

Offences punishable with arrest

In terms of section 69(2) of CGST Act, 2017, where a person is arrested for any cognizable offence, every officer authorised to arrest a person, shall inform such person, of the grounds of arrest and produce him before a magistrate within twenty-four hours.

This section requires the following actions to be taken:

1. Arrest in case of cognizable offence under section 132(5) of the CGST Act, 2017
2. Officer to inform grounds of arrest to person being arrested (of course, before actual arrest),
3. Produce the arrested person before the Magistrate within twenty-four hours.

Under section 132(1), arrest provisions are attracted where an offence has been committed which is punishable under sub-section (1) [clauses (a) to (d)] or sub-section (2) of section 132 of the CGST Act, 2017. Accordingly, following offences attract arrest provisions:

1. Sub-section (1) lists the offences punishable with arrest subject to term of imprisonment linked to amount involved in the offence.
2. Sub-section (2) provides for arrest in case of a repeat offence ie second or subsequent offence, in cases where he was convicted for first such offence. Punishment for second or subsequent offence be imprisonment which may extend upto five years and with fine.

*************