Arrest Under GST Act Cannot Be Made Merely To Investigate If Cognizable & Non-Bailable Offence Has Been Committed : Supreme Court

An arrest under the Goods and Services Act cannot be carried out merely on the basis of suspicion, the Supreme Court stated. Such an arrest cannot be carried out merely to investigate if a cognizable and non-bailable offence has been committed.The Court held that the arrest must proceed on the belief supported by reasons relying on material that the conditions specified in sub-section (5) of Section 132 are satisfied. This means that there has to be a satisfaction that a cognizable and non-bailable offence has been committed.The Supreme Court held that an arrest carried out under the Goods and Services Act, 2017 would be illegal if the order of arrest was passed without recording reasons to believe that the person has committed a non-bailable offence and that the pre-conditions of sub-section (5) to Section 132 of the Act are satisfied."To pass an order of arrest in case of cognizable and non-cognizable offences, the Commissioner must satisfactorily show, vide the reasons to believe recorded by him, that the person to be arrested has committed a non-bailable offence and that the pre-conditions of sub-section (5) to Section 132 of the Act are satisfied. Failure to do so would result in an illegal arrest," the Court observed.The Court further observed that while recording the reasons to believe, the Commissioner should state his satisfaction and refer to the 'material' forming the basis of his finding regarding the commission of a non-bailable offence specified in clauses (a) to (d) of sub-section (1) to Section 132. The computation of the tax involved in terms of the monetary limits under clause (i) of sub-section (1), which make the offence cognizable and non-bailable, should be supported by referring to relevant and sufficient material.The Court made these observations after noting that only when the offence falls under the limited categories specified in clauses (a) to (d) of sub-section (1) to Section 132, and, when the amount of tax evaded, amount of input tax credit wrongly availed or utilised, or the amount of refund wrongly taken exceeds Rs.500 lakhs, that the offence is non-bailable and cognizable. As per Section 132(5), the offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.A bench comprising Chief Justice of India Sanjiv Khanna, Justice MM Sundresh and Justice Bela Trivedi observed :"With regard to the submission made on behalf of the Revenue that arrests are not made in case of bailable offences, in our considered view, the Commissioner, in our considered view, the Commissioner, while recording the reasons to believe should state his satisfaction and refer to the 'material' forming the basis of his finding regarding the commission of a non-bailable offence specified in clauses (a) to (d) of sub-section (1) to Section 132. The computation of the tax involved in terms of the monetary limits under clause (i) of sub-section (1), which make the offence cognizable and non-bailable, should be supported by referring to relevant and sufficient material."Arrest not on suspicion aloneThe judgment authored by CJI Khanna further stated :"The arrest must proceed on the belief supported by reasons relying on material that the conditions specified in sub-section (5) of Section 132 are satisfied, and not on suspicion alone. An arrest cannot be made to merely investigate whether the conditions are being met. The arrest is to be made on the formulation of the opinion by the Commissioner, which is to be duly recorded in the reasons to believe. The reasons to believe must be based on the evidence establishing – to the satisfaction of the Commissioner – that the requirements of sub-section (5) to Section 132 of the GST Act are met."The judgment further directed that the circulars issued by the Central Board of Indirect Taxes and Customs (GST-Investigation Wing) on 17.08.2022 and 13.01.2025 regarding the conditions of arrest and its procedure must be strictly adhered to by the officials.The arrest memo should indicate the relevant section(s) of the GST Act and other laws. In addition, the grounds of arrest must be explained to the arrested person and noted in the arrest memo. Circular dated 13.01.2025 mandates that the grounds of arrest must be explained to the arrested person and also be furnished to him in writing as an Annexure to the arrest memo. The acknowledgement of the same should be taken from the arrested person at the time of service of the arrest memo.Instruction 02/2022-23 GST (Investigation) dated 17.08.2022 further lays down that a person nominated or authorised by the arrested person should be informed immediately, and this fact must be recorded in the arrest memo. The date and time of the arrest should also be mentioned in the arrest memo. Lastly, a copy of the arrest memo should be given to the person arrested under proper acknowledgement. The circular also makes other...

Arrest Under GST Act Cannot Be Made Merely To Investigate If Cognizable & Non-Bailable Offence Has Been Committed : Supreme Court

LIVELAW NEWS NETWORK

An order of arrest must be passed recording reasons to believe that the accused has committed a cognizable and non-bailable offence.

Tags