2020 (6) TMI 728 - HC - GST

High Court finds merit in challenge to Punjab GST Act sections, directs Trial Court for further consideration

The High Court, after considering the petitioner's arguments challenging the vires of Sections 69 and 132 of The Punjab Goods and Service Tax Act, 2017, ... Constitutional validity of penal provisions in a fiscal statute - power to legislate under the Constitution - arrest under a tax statute - criminal prosecution for alleged misuse of Input Tax Credit - adjournment of trial on a prima facie constitutional challengeConstitutional validity of penal provisions in a fiscal statute - power to legislate under the Constitution - arrest under a tax statute - Challenge to the vires of Sections 69 and 132 of the Punjab Goods and Services Tax Act, 2017 was raised and considered prima facie. - HELD THAT: - The petitioner, proprietor of a trading concern, challenged the constitutional competence of the State to provide for arrest and criminal penalties under the PGST Act, 2017, contending that power to legislate punitive provisions must have independent constitutional backing and is not necessarily incidental to taxation powers. The High Court found considerable force in the legal submissions presented on these aspects and treated the matter as raising a substantial constitutional question warranting adjudication. The Court did not decide the merit of the challenge on the merits but directed that the respondents be put on notice and that the criminal proceedings be deferred to permit fuller consideration of the constitutional contentions in the pending petition.Notice issued on the constitutional challenge; trial court directed to adjourn the case beyond the date fixed by this Court.Final Conclusion: Petition raising a substantial constitutional challenge to Sections 69 and 132 of the PGST Act, 2017 was entertained; notice has been issued and the trial court directed to adjourn proceedings pending decision of the petition. Issues: Challenge to the vires of Section 69 and 132 of The Punjab Goods and Service Tax Act, 2017.Analysis:The petitioner, engaged in the business of Trading in Iron and Steel products, was arrested under Section 69 of the PGST Act 2017 and a complaint was filed under Section 132 of the same Act. The petitioner sought bail, which was granted, and the trial is at the pre-charge evidence stage. The challenge is laid to the vires of Section 69 and 132 of the PGST Act, 2017. It is contended that the power to levy tax includes the power to make law with respect to ancillary and incidental matters, but the power of arrest and prescription of sentence are not covered under such matters. The petitioner argues that the criminal trial for the offences under Section 132 of the PGST Act, 2017 and the arrest under Section 69 are without jurisdiction and lack constitutional backing.The petitioner's submission is based on the constitutional provisions related to the power to legislate. It is argued that the power of arrest and prescription of sentence are not ancillary or incidental matters to the power to levy tax. The petitioner cites various constitutional provisions, including Schedule VII, Article 246-A, Entry 93 of Union List, Article 323-B, Article 35, and Article 369, to support the contention that the power to legislate regarding offences is not an incidental power. The argument is made that the provisions for arrest and sentencing for an offence must be explicitly permitted by the Constitution to be valid. The petitioner contends that the arrest and criminal trial in this case are without jurisdiction as they do not have the necessary constitutional backing.The High Court, after considering the submissions made by the petitioner's advocate, finds considerable force in the arguments presented. The Court directs the Trial Court to adjourn the case beyond the date fixed by the High Court. The Additional Advocate General accepts notices on behalf of the respondents, and the matter is scheduled for further consideration on a specified date.