Arrest Under GST Act: Supreme Court Clarifies Law Protecting Human Dignity

Arrest of a person is not only violative of Article 21 of the Constitution which affirms the right to life and liberty but is also a loss of human dignity in the family and society. Courts have held that the power of arrest should be used with great circumspection and not casually. The Hon'ble Supreme Court in Radhika Agarwal V. Union of India and Others, Writ Petition (Criminal) No. 336 OF 2018 has stipulated sufficient safeguards so that no arrests are made arbitrarily in GST cases.How an arrest is made under the GST ActSection 69 of the GST Act explains when the Commissioner can authorize any officer of Central or State tax to arrest such a person. The Section further provides that a person arrested must be informed of the grounds of arrest and must be produced before the Magistrate within 24 hours. Section 132: punishment of offencesThe Hon'ble Apex Court has explained that Section 132 of the GST Act deals with punishment of offences. This section is vital because no arrest can be made until the Commissioner is able to show and satisfy on the basis of material and evidence that the conditions stipulated under Section 132 are satisfied. Section 132 (1) consists of nine clauses, offences under the said clauses are further graded depending upon the amount of tax evaded, the amount of input tax wrongly availed or utilized, or the amount of refund wrongly taken. When the amount of tax evaded exceeds Rs. 500 lakhs, the punishment may extend to imprisonment for five years and with fine; where the amount of tax evaded is less than Rs. 500 lakhs but exceeds Rs. 200 lakhs, the punishment may extend to imprisonment for three years with fine. Where the amount of tax evaded is less than Rs. 200 lakhs but exceeds Rs. 100 lakh, the punishment may extend imprisonment for one year and with fine. Section 132 further deals with cases where the accused commits or abets the commission of an offence of falsifying or substituting financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax and provides a punishment which may extend to imprisonment for six months, with or without fine. It also deals with repeat offenders. It also states that the minimum term of imprisonment for some offences in the absence of special and adequate reasons to the contrary to be recorded by the Court, shall not be for less than six months. Bailable and non-bailable offences under Section 132:The Hon'ble Apex Court has brought a distinction that Section 132 sets out two categories of offences. One set of offence is non-cognizable and bailable; another set of offence is cognizable and bailable. The Central/State officers of Revenue in cases of bailable and non-cognizable offences do not make arrests. Arrests are made only when the offence is non-bailable and cognizable.The following set of offences with punishment falls into the category of non-bailable and cognizable, clauses (a) to (d) of sub-section (1) to Section 132: (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due.Punishment for aforesaid offences, clause (i) of sub-section (1) to Section 132:(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine.Relevant Circulars:The Hon'ble Apex Court has further mentioned the various circulars of the GST-Investigation wing. Firstly, circular dated 17.08.2022 refers to the procedure of arrest and that the Principal Commissioner/Commissioner has to record on the file, after considering the nature of the offence, the role of the person involved, the evidence available and that he has reason to believe that the person has committed an offence under Section 132. Secondly, circular dated 23.12.2019 provides the format of arrest. The arrest memo should indicate the relevant sections of the GST Act and other laws. Thirdly, circular dated 13.01.2025 stated that the grounds of arrest must be explained to the arrested person and noted in the arrest memo. The acknowledgement of the same should be taken from the arrested person at the time of service of the arrest memo. Fourthly, circular dated 17.08.2022 lays down that a person nominated or authorised...

Arrest Under GST Act: Supreme Court Clarifies Law Protecting Human Dignity

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Arrest Under GST Act: Supreme Court Clarifies Law Protecting Human Dignity

Prachi Pallavi

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INR 1099+GST

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Prachi Pallavi

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