In a recent judgment, the Supreme Court of India affirmed that the concerned Commissioner of the Goods and Services Tax (GST) Department may authorize the arrest of an individual booked for offences under specific provisions of Section 132 of the Income Tax Act, 1961 without a formal assessment Order, provided that the relevant reasons and evidences have been established to a ‘degree of certainty’.
The decision was rendered by the Supreme Court while delivering the judgment in a Batch of Criminal Appeals and allied Writ Petitions (Criminal) filed by Radhika Agarwal following investigative procedures undertaken by the GST department that the Petitioner had made fraudulent claims over input tax credit (ITC).
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The Apex Court observed that the GST AAct is not a complete code when it comes to provisions of search, seizure and arrest and propounded that Section 69 of the GST Act permits a Commissioner to authorise any officer of central or state tax to arrest any person who is believed to have committed any offence specified in clauses (a) to (d) of Section 132(1), which is punishable under clauses (i) or (ii) of Section 132(1) or Section 132(2) of the Act.
Seemingly, the Revenue authorities invoked the provisions of Section 69 of the GST Act and arrested the Petitioner under Section 132 of the GST Act despite no formal assessment order being passed against the Petitioner.
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Gautam Awasthi representing the Petitioner argued that such an arrest in the absence of an adjudication order and without admissible evidence was illegal, premature and an abuse of power.
Meanwhile Mukesh Kumar Maroria, among others appearing for the Respondents contended that the power to detain an individual under Section 132 was not contingent upon the prior determination of outstanding tax dues but rather on the existence of “reasons to believe” that an office had been committed.
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A Bench constituted by Chief Justice Sanjiv Khanna, Justice MM Sundresh, and Justice Bela M Trivedi examined the scope of powers exercisable by officers under the GST regime.
The Bench observed that while tax assessment proceedings usually quantify the amount of tax evaded, there are cases where the authorities can ascertain offences under clauses (a) to (d) of Section 132(1) of the GST Act and where the disputed amount falls within the parameters of Section 132(1)(i); in such matters the Commissioner may authorise arrest when he is able to ascertain with explicit reasons and evidence to a ‘degree of certainty’ that the non-bailable offence has been committed.
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Distinguishing from the decision of the Delhi High Court in Makemytrip (India) Private Limited and Another v. Union of India and Others (2016) where the High Court asserted that the prerequisite steps under Section 73A(3) and (4) of the Finance Act, 1994 are to be fulfilled prior to exercising power of arrest.
However, in the present matter the Supreme Court acknowledged that while procedural safeguards are necessary, it does not hold as a broad principle that an assessment order must always precede an arrest. Instead, it reiterated that arrests must not be based on mere suspicion and must satisfy the requirements of Section 132(5) of the GST Act.
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Dismissing the petition, the Supreme Court held that Agarwal’s arrest was legally sustainable, given the Commissioner’s satisfaction that a cognizable offence had been committed. However, it emphasized that such arrests must not be made arbitrarily and must be backed by clear and compelling reasons recorded in writing.
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