GST: Commissioner empowered to authorize ‘arrest’ prior to Completion of Assessment, rules Gujarat High Court [Read Judgment]

The Gujarat High Court held that the Commissioner was empowered to authorize ‘arrest’ prior to completion of the assessment.

The petitioner is the proprietor of a M/s Heugo Metal engaged in the business of trading and supply of the stainless steel and scrap and was using the godown.

The Respondent authority along with the other officials of the Government of Gujarat Goods and Service Tax Department had come to visit the residential premises of the petitioner in connection with the investigation of the business transactions of M/s Heugo Metal.

The Respondent authority had sealed a drawer in which the files, diary, mobile and laptop of the petitioner were stored and left the premises asking the petitioner to appear before the respondent authority with the provisional balance sheet of M/s Heugo Metal.

The petitioner was unable to remain present along with the documents and the provisional balance sheet, the petitioner through his advocate addressed a letter to the respondent authority and requested to give one week time.

The petitioner prayed before the court to direct the respondents authority not to take any actions against the petitioner being proprietor of the Heugo Metal exercising powers under Section 69 read with Section 132 without following due procedure of law of assessment and adjudication of alleged evasion of GST as contemplated under Section 61, Section 73 of under Section 74 of the Central Goods and Service Tax Act, 2017.

The two member bench of Justice J.B. Pardiwala and Justice Bhargav D. Karia opined that  the power to arrest as provided under section 69 of the CGST Act can be invoked if the Commissioner has reason to believe that the person has committed offences as provided under the clauses (a), (b), (c) or (d) of of section 132(1)  of the CGST Act, which are punishable under the clause (i) or clause (ii) of sub-section (1) or sub-section (2) of the section 132 of the CGST Act without there being any adjudication for the assessment as provided under the provisions of the Chapter VIII of the CGST Act.

The court emphasised the mode of exercise powers of arrest under the GST Law as the power of arrest specified in Section 69 of the CGST Act undoubtedly displeases the corresponding powers of arrest vested in a police officer under the Code of Criminal Procedure.

Section 69 of the CGST Act requires certain preconditions to be fulfilled prior to the arrest. In particular, the reasons to believe have to be recorded in writing in the file. The second aspect of Section 69 of the GST Act is the communication of the grounds of arrest. Although, Section 69 uses the word “inform” in the context in which it appears, yet a mere communication of the grounds would not be sufficient.

“In view of the foregoing reasons, observations and directions, the petitions are accordingly ordered to be rejected. Ad interim relief granted earlier stands vacated. Rule is discharged with no order as to costs. Civil Applications, if any, stand disposed off,” the court said.