Arrest of GST Evaders: Supreme Court Upholds Telangana HC Order [Read Order]

Debit Notes - Revisional Jurisdiction - GST - Rule 8D

In a significant ruling, the Supreme Court has upheld the order of the Telangana High Court where the Court given a green signal to the GST officials to arrest the tax evaders.

The Petitioners challenged the summons issued by the Hyderabad GST officials and the searches conducted by the latter at their respective offices.

While upholding the arrest, a Division Bench of the High Court comprising of Justice V. Ramasubramanian and Justice P. Keshava Rao rejected the technical objections raised by the petitioners over the powers and reasons of the GST officials to arrest them.

The bench observed that despite the petitions being maintainable and incongruities within some provisions of the Central Goods and Service Tax (CGST) Act-2017, the relief could not be granted to the companies due to the ‘special circumstances’ of the case.

The state had submitted before the High Court that the petitioners before it were allegedly involved in incorporating several partnership firms and had claimed input tax credit on the basis of certain invoices, without there being any actual physical receipt of goods. It had alleged that the fraudulent input tax credit claimed by them was to the tune of Rs 224.05 crore.

The counsels for the petitioners said the maximum punishment under Section 132 of the CGST Act was five years apart from fine. They contended that under sections 41 and 41A of the Criminal Procedure Code a person cannot be arrested as long as he or she complies with the notice for appearance. The GST regime is at its nascent stage. The law is yet to reach its second anniversary.

“The complaints against the petitioners constitute a threat to the very implementation of law within a short duration of its inception,” the High Court bench observed.

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