Supreme Court Seeks Data Of GST Arrests, Says Citizens' Harassment Won't Be Allowed Due To Any Ambiguity In Arrest Provisions

While hearing a batch of petitions challenging penal provisions of GST Act, Customs Act, etc. as non-compatible with the CrPC and the Constitution, the Supreme Court on Thursday (May 2) expressed concerns about the ambiguity in Section 69 of the GST Act (dealing with power with arrest) and conveyed that it would interpret the law to "strengthen" liberty, if need be, but not allow citizens to be harassed.The Bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi asked Additional Solicitor General SV Raju (appearing for Revenue) to furnish data regarding the number of notices issued under the Central Goods and Services Tax Act, 2017 (in past 3 years) with respect to amounts exceeding Rs. 1 crore and Rs. 5 crores, as well as the number of arrests made during the time.The matter, a batch of 281 petitions, was last listed yesterday, when the court heard issues raised with respect to the Customs Act. A report on the said proceedings can be read here.Today, Senior Advocate Siddharth Luthra led arguments (for the petitioners) in the context of the GST Act, contrasting the provisions thereof with those under the Customs Act.Arrest should be preceded by adjudication : Siddharth LuthraLuthra began by asserting that arrest under the GST Act is to be preceded by adjudication of the amount considered due and payable on the part of a taxpayer. It was submitted that the primary question to be considered is whether the liberty of an individual can be trifled with until material particulars of the offence are made out.In response, J Khanna said, "what you are arguing...till the assessment is made and the amount is quantified, no arrest can be made because of the provisions...may be difficult to accept". Luthra, however, asserted that there is an entire mechanism to determine what amount has been retained: "Till this determination takes place, it would be a fallacy to assume that the test of reason to believe is met in terms of Section 69".Citizen's harassment and fake casesNext, Luthra pointed out that sometimes arrests are not made, but people are harassed with notices, threatening arrest. Considering the same, Khanna J turned to ASG Raju and raised concern, "What happens is the harassment...which the citizens suffer. We will not permit that. If there is, if we find there is ambiguity, if we have to strengthen, we will interpret the law as strengthens liberty".Subsequently during the hearing, the bench observed that there can be cases of fraud (such as those involving fake bills) and thus, genuine cases need to be distinguished insofar as question of arrest is concerned. In this regard, Raju claimed that authorities were not making arrests in genuine cases, but the same was met with opposition from Luthra.Distinguishing "ability to investigate" from "power to arrest", Luthra submitted that there are two modes of material collection available to authorities - one, the returns filed before them, and two, they can call for information under the Act. However, that does not entail moving to the stage of arrest.The senior counsel gave example of Flipkart to say that the platform's management was arrested and required to move for anticipatory bail on the ground that there was a "mismatch" three levels down (in connection with a service provider), even though returns of GST were shown.The exchange led the court to ask Raju to furnish data on the number of notices issued under GST Act in the last 3 years for amount exceeding 1 crore and 5 crores. The ASG was asked to apprise as to how many prosecutions were initiated, compared to how many arrests were made.Are officers under GST Act 'police officers'?To contend that officers under the Customs/GST Act are police officers, and therefore, the provisions under Chapter XII CrPC apply, Luthra was heard citing the judgment in State of Punjab v. Barkat Ram (1961). He recapitulated the position under erstwhile Sea and Land Customs Act that acts of officers exercising power under the Customs Act are not in the nature of criminal prosecution. They are in the nature of determination of liability and therefore, such officers do not act as Police Officers, he said.Luthra added that while the officers may have similar powers, they are not people who file report under Section 173(2) CrPC. Notably, in Barkat Ram's case, Justice Subba Rao had dissented and equated a customs officer to a police officer. Moving on, Luthra referred to the decisions in Raja Ram Jaiswal v. State of Bihar (1963) (where a view contrary to that in Barkat Ram was taken) and the Constitutional Bench decision in Romesh Chandra Mehta v. State of West Bengal (1968).Ultimately, he drew the court's attention to Tofan Singh v. State of Tamil Nadu (2020), which was in the context of a statement under Section 67 of Narcotic Drugs and Psychotropic Substances Act. By a 2:1 majority, the bench in Tofan Singh had held that officers of the Central & State agencies appointed under NDPS Act are police officers and therefore the...

Supreme Court Seeks Data Of GST Arrests, Says Citizens' Harassment Won't Be Allowed Due To Any Ambiguity In Arrest Provisions

Debby Jain

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