Safeguards Against Arrest Necessary, No Provision For Pre-Payment Before Adjudication: Supreme Court On Challenge To GST Penal Provisions

While hearing the batch of petitions challenging penal provisions of CGST Act, etc. as non-compatible with CrPC and the Constitution, the Supreme Court yesterday expressed that safeguards against arrest are necessary. It also noted that there is no provision under the CGST Act for pre-payment prior to adjudication.The Bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi asked Additional Solicitor General SV Raju (appearing for Revenue) to take instructions on various aspects, including which are the cases where arrests are not intended to be made and/or are non-cognizable.Key aspects of the hearing are reproduced hereunder.Previous sanction/permission for cognizance under GST Act required from Magistrate : Sr Adv S. NagamuthuLeading arguments for petitioner(s), Senior Advocate Nagamuthu submitted that the procedure contemplated under Customs Act cannot be imported in the GST Act. Distinguishing the two legislations, he said:"[In Customs Act], the offences are triable only by a Special Court, which is deemed to be a Sessions Court...insofar as GST is concerned, [...] only by a Magistrate. There is no Special Court...Under Customs Act, cognizance can be taken only on a complaint...insofar as GST is concerned, that is not the position. [Section 190 (1) CrPC] has not been dispensed with...cognizance can be taken on a police report as well".He also argued that under the Customs Act, all offenses are now cognizable. However, under GST Act, some are bailable, some are non-bailable, some are cognizable, and some are non-cognizable.Referring to Section 134 of GST Act, the senior counsel highlighted that for taking cognizance of an offense, "previous sanction" is required from the "Commissioner" and only a Magistrate of the First Class can try the offence. Relying on Section 132(6), it was pressed that the sanction is required prior to registration of the case by the police, and in that sense, the powers under Section 134 are restricted.Hearing Nagamuthu's submission, Justice Khanna pointed out that Section 132(6) does not make out a distinction between "cognizable" and "non-cognizable". The judge also remarked that if Section 132(6) of the GST Act and Sections 2(d) (defining complaint) and 155 of CrPC (requiring permission of Magistrate for investigation of a non-cognizable case) are read jointly and harmoniously, application of Section 155 CrPC is excluded by implication."Previous sanction is required from the Commissioner...permission of the Magistrate is done away with", said Khanna J.The senior counsel however maintained that Section 132(6), GST Act does not preclude the application of Section 155, CrPC and even the judgement in Om Prakash v. Union of India (2011) deals with it.At this point, Justice Khanna asked the Revenue's stance on the aspect from ASG Raju, while clarifying that the question does not necessarily arise in the present case: "are you taking sanction/permission of Magistrate under Section 155?". Raju replied, "Magistrate...we are not required, I'll point out that there are basic fundamental flaws even so far as Om Prakash is concerned...".Justice Khanna, however, was quick to observe that prima facie, the bench is not going to re-examine Om Prakash. Nagamuthu thereafter made submissions on the aspect of an accused being given access to documents and statements relied upon by the prosecution (both pre-cognizance and post-cognizance).Arrests being made at the drop of a hat, threat and coercion part of Dept's modus operandi : Sr Adv Sujit GhoshAddressing arguments only on legal aspects of the matter, Senior Advocate Ghosh drew attention of the court to the words "with respect to" in Article 246A of the Constitution. He referred to a two-Judge bench decision in Mohit Minerals, 2019 (2) SCC 599 to submit that the court has held: (i) that it is not a general power/entry, (ii) it can lead to an incidental encroachment, but cannot be a law onto themselves (relevant to the question as to whether offenses are a subject by themselves or incidental to tax collection) and (iii) that "with respect to" has to be read in an expansive manner.Referring to the pre-101st Constitutional Amendment era, Ghosh recapitulated that Entry 93 of Central List used to provide the power to legislative on offenses. He contended that if subject of arrest is incidental in nature, then there was no reason to provide Entry 93 or Entry 64 in State List. "If there was any need for Entry 93, the construct of the Constitution is, offenses will have to be dealt with as a separate subject matter, not incidental...one should not assume that Article 246A itself is wide enough to subsume matters relating to offenses merely because the word 'with respect to' have been used", said Ghosh.The senior counsel further alleged that the "mayhem in the industry" was owed to arrests being initiated at the drop of a hat. He contended that Section 70 summons are being issued for carrying out enquiry, and on the spot, arrests are carried out...

Safeguards Against Arrest Necessary, No Provision For Pre-Payment Before Adjudication: Supreme Court On Challenge To GST Penal Provisions

Debby Jain

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