The Kerala High Court has emphasized that officials are empowered to exercise arrest authority under Section 69 of the Kerala State Goods and Services Act, 2017, if there is a reasonable belief that an offense under Section 132 has been committed, and custodial interrogation is deemed necessary, while rejecting the bail plea of of an individual accused of evasion of tax to the tune of Rs. 6.4 Crore.
Section 132(1) prescribes penalties for specific offenses under the Act. The accused, a GST dealer, faced allegations of supplying goods without issuing invoices, leading to substantial tax evasion amounting to an estimated 6.4 crores from 2018 onward.
Justice Mohammed Nias C.P. affirmed that the accused could be arrested to prevent tampering with evidence, intimidation of witnesses, and to ensure a thorough investigation. The power to arrest under Section 69 is invoked when the Commissioner reasonably believes that the person committed offenses punishable under Section 132 of the CGST Act, 2017. While the reference to Section 132 in Section 69 indicates the nature of offenses, the Commissioner must assess if the offender should be arrested once the offense’s elements are established.
Justice Nias, rejecting bail for the accused, emphasized the alleged tax evasion exceeding 6.5 crores and the necessity for a comprehensive investigation.
In a cognizable, non-bailable offense under Section 132(1), the petitioner, a wholesale distributor of mobile accessories and electronic items, argued being wrongly accused, citing separate GST registrations for his brothers. The defense contended that a raid had already taken place, documents seized, and custodial interrogation was unwarranted. Relying on legal precedents, it argued that the power of arrest should follow an assessment.
The Special Government Pleader for Taxes opposed the bail application, highlighting the need for an extensive investigation and the discovery of significant tax evasion.
The Kerala High Court observed the potential to tamper with evidence and influence witnesses, noting the preliminary stage of the investigation. In effect, the bench rejected the notion that arrest could only occur post-assessment, stating the offenses under Section 132(1) lacked correlation with assessment. The petitioner’s failure to compound the offense, pay applicable taxes, or admit liability led the court to affirm the necessity of continued custody for a proper investigation under Section 132(1).
In light of ongoing investigations, the court dismissed the bail application, disregarding contrary views from other high courts and emphasizing that arrest power could be invoked when all conditions precedent in Section 132 of the Kerala Goods and Services Tax Act, 2017 were met.
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