2020 (6) TMI 729 - HC - GST

Court upholds challenge to CGST Act sections, stresses constitutional adherence. Interim bail extended.

The Court found merit in the petitioner's challenge to the vires of Sections 69 and 132 of the CGST Act, 2017, emphasizing the need for adherence to ... Constitutional validity of criminal provisions - vires of Section 69 and Section 132 of the CGST Act, 2017 - interim bail - extension of interim bail - cognizance and sanction under Section 134 of the CGST Act, 2017 - Article 21 - right to life and personal libertyInterim bail - extension of interim bail - Article 21 - right to life and personal liberty - Extension of the interim bail granted to Petitioner No.2 and issuance of notice in respect of the constitutional challenge - HELD THAT: - Petitioner No.2 had been granted interim bail by the learned Magistrate on account of the COVID-19 pandemic, originally subject to surrender on specified dates. Upon hearing the petition by video conferencing, the High Court noted the submission challenging the vires of provisions of the CGST Act, 2017 but did not finally adjudicate those constitutional contentions. The Court recorded that it found considerable force in the submissions made on behalf of the petitioners, directed that notice be issued to the respondents and extended the interim bail earlier granted to the petitioner on pandemic grounds until further orders. The order preserves the trial proceedings before the criminal court and does not decide the merits of the constitutional challenge to Sections 69, 132 or the scheme of sanction under Section 134; those matters remain pending for adjudication after issuance of notice.Interim bail extended until further orders and notice issued to respondents; constitutional contentions left for adjudication on notice.Final Conclusion: The High Court extended the interim bail previously granted to the accused (Petitioner No.2) until further orders and issued notice on the petition challenging the vires of specified provisions of the CGST Act, 2017, without deciding the constitutional challenges on merits. Issues involved:Challenge to the vires of Section 69 and 132 of the Central Goods and Service Tax Act, 2017.Detailed Analysis:1. Challenge to the vires of Section 69 and 132 of the CGST Act, 2017:The petitioners challenged the constitutional validity of Section 69 and 132 of the CGST Act, 2017. They argued that the power to legislate flows from Schedule VII read with Article 246 and specific Articles like Article 35, Article 323B, and Article 369. They contended that the power to arrest and prescribe sentences are not covered under ancillary or incidental matters. The petitioners highlighted that the power to levy tax includes the power to make laws related to ancillary and incidental matters but not for arrest or sentencing. They cited various constitutional provisions and entries in Schedule VII to support their argument that the criminal trial for offenses under Section 132 and arrest under Section 69 are without jurisdiction and lack constitutional backing.2. Procedural Fairness and Arbitrary Arrest:The petitioners further argued that the arrest and prosecution procedures under the CGST Act do not adhere to the principles of justice, fairness, and rights guaranteed under Article 21 of the Constitution of India. They criticized the discretionary power given to the Executive in deciding the stage of arrest and prosecution, highlighting that the demand of GST, which forms the basis of criminal liability, can be dropped during adjudication. The petitioners contended that the arrest under Section 69 before issuing a show cause notice under Section 74 of the CGST Act is arbitrary, fanciful, and oppressive. They emphasized the lack of provisions in the Act for filing a complaint after arrest and completion of investigation, pointing out the absence of an appointed officer competent to file a complaint despite Section 134 of the CGST Act mandating previous sanction from the Commissioner.3. Judicial Observation and Next Steps:The Court found merit in the submissions made by the petitioner's counsel, Mr. Jagmohan Bansal, Advocate. The matter was scheduled for further hearing on 30.07.2020. The Additional Solicitor General of India and other counsels representing the respondents accepted the notice. The interim bail granted to the petitioner due to the COVID-19 pandemic was extended until further orders.In conclusion, the judgment highlighted the constitutional challenges to specific sections of the CGST Act, emphasizing the need for adherence to constitutional provisions, procedural fairness, and the protection of individual rights during arrest and prosecution under tax laws.