The Supreme Court expunged the tentative Opinion of the Gujarat High Court in its interim order on the good faith clause in Section 157 of the Goods and Services Tax ( GST ) Act may not be available to the officers of the State as their conduct.
Justices Pamidighantam Sri Narasimha and Aravind Kumar stated that “a citizen of this country has a right of accountability, for which he is entitled to initiate and adopt such legal remedies as are available to him, and in such proceedings the statutory functionary is equally entitled to take a defence of good faith. It is for the court to adjudicate and decide.”
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A Special Leave Petition ( SLP ) was filed by the State of Gujarat & Anr, against an interim order passed by the High Court of Gujarat in a writ petition filed by the respondent seeking a direction for protection from arrest under section 69 read with section 132 of the GST Act.
The High Court is still examining the writ petition, but by the interim order impugned herein, it criticised the prolonged stay of the search party at the residence of the respondents as unauthorised and illegal.
The high court observed that statutory protection should not be made available to the officers. The portion which the supreme court found not correct and expunged is “….An action taken may be said to be in good faith if the officer is otherwise so empowered and he exceeds the scope of his authority. However, in a case like the present one where the authorization was for search and seizure of goods liable to confiscation, documents, books or things and the concerned officer converted it into a search for a person and in investigation, which is not otherwise backed by any statutory provision, it may be difficult to accept that such action was in good faith. Protection of such action under section 157 of the GST Acts may unleash a regime of terror insofar as the taxable persons are concerned.”
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
Reading from the above-portion, the High Court viewed that the protection contemplated under section 157 of the GST Act, which is in the nature of a good faith clause, “may not” be available to the officers. This is the issue with which the Supreme Court is concerned.
The Section 157 of the GST Act states as follows:
“Protection of action taken under this Act.-
(1) No suit, prosecution or other legal proceedings shall lie against the President, State President, Members, officers or other employees of the Appellate Tribunal or any other person authorised by the said Appellate Tribunal for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.
(2) No suit, prosecution or other legal proceedings shall lie against any officer appointed or authorised under this Act for anything which is done or intended to be done in good faith under this Act or the rules made thereunder.
Further, the bench stated that the good faith clause in a statute serves as a defence for statutory functionaries. When successfully invoked, it legitimises their actions and shields them from legal proceedings.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
It was clarified that in cases where a statutory functionary relies on the defence of good faith in a suit, prosecution, or other legal actions, it is the responsibility of the judicial body to examine and determine the validity of the claim based on the specific facts and circumstances of each case. Such scrutiny occurs only during proceedings initiated against the functionary.
In addition it also noted that the High Court was not engaged in a suit, prosecution, or legal proceeding against a statutory functionary. Further observed that the High Court was aware of the principles surrounding good faith clauses and expressed its concerns cautiously, using phrases like “may not” be protected or “may be difficult” to accept the defence of good faith, rather than making definitive conclusions.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The apex court bench opined that the High Court’s observations amounted to advance rulings, as they were made even before any suit, prosecution, or legal proceeding was initiated.
The bench pressed that such tentative opinions, if left unaddressed, could undermine the fairness and impartiality of subsequent adjudications, adversely impacting both the prosecution and the defence.
Accordingly, the Supreme Court expunged the paragraph 22 of the High Court’s interim order and disposed of the appeal.
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