Sections 69 and 132 of CGST Act upheld as constitutionally valid for arrest and punishment powers under Article 246A

The HC dismissed challenges to the vires of Sections 69 and 132 of the CGST Act, 2017, concerning the power to arrest and punishment, holding these provisions constitutionally valid. The court relied on the SC's decision in Radhika Agarwal v. Union of India, which upheld the legislative competence under Article 246A of the Constitution and affirmed the validity of these sections as measures against tax evasion. Consequently, the writ petitions contesting these provisions were disposed of in favor of the revenue.

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ISSUES:

Whether Sections 69 and 132 of the Central Goods and Services Tax Act, 2017 (CGST Act) are constitutionally valid and within legislative competence.Whether Sections 69 and 132 of the CGST Act violate Articles 14, 20, and 21 of the Constitution of India.The scope and conditions under which the power of arrest under Section 132(5) of the CGST Act can be exercised.Whether an arrest under Section 132(5) of the CGST Act can be made prior to completion of assessment proceedings under Section 73 of the CGST Act.

RULINGS / HOLDINGS:

The constitutional validity of Sections 69 and 132 of the CGST Act is upheld as these provisions fall within the legislative competence under Article 246A of the Constitution. The Court held that "Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies."The provisions do not violate Articles 14, 20, or 21, as the powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect GST and prevent tax evasion.An order of arrest under Section 132(5) of the CGST Act requires the Commissioner to record "reasons to believe" that the person has committed a "non-bailable offence" with reference to "material" forming the basis of such belief; arrest cannot be based on "mere ipse dixit without foundational reasoning and material."The power of arrest under Section 132(5) may be exercised even before completion of assessment proceedings under Section 73, provided the Commissioner has "a sufficient degree of certainty" and records explicit reasons supported by material that the offence is non-bailable and the amount of tax evaded falls within the specified limits.

RATIONALE:

The Court applied the constitutional framework under Article 246A, which grants Parliament and State Legislatures legislative power over GST, including ancillary powers necessary for effective tax collection and prevention of evasion.Precedents emphasizing a broad and liberal interpretation of legislative competence entries were relied upon, including the principle that "the most liberal construction should be put on the words so that they may have effect in their widest amplitude."The Court referred extensively to the Supreme Court's judgment in Radhika Agarwal Vs. Union of India, which upheld the vires of Sections 69 and 132 and clarified procedural safeguards and conditions for arrest under the GST Acts.The Court emphasized procedural safeguards requiring the Commissioner to record reasons to believe based on evidence, not suspicion, and the necessity of compliance with rights of the accused in arrest and detention, paralleling principles under the Customs Act.No dissent or doctrinal shift was noted; the judgment follows binding Supreme Court authority and clarifies the application of arrest powers under the CGST Act.

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