ARREST PROVISIONS UNDER GST

[Dr. Sanjiv Agarwal]

Section 69 of CGST Act, 2017 provides for the power of arrest by the authorities arising from committing any offence which is punishable under sub-section (1) (i), (ii) or sub-section (2) of section 132.

In GST law, section 132 stipulates certain punishments which are punishable with imprisonment and / or fine. The arrest provisions are subject to provisions of Code of Criminal Procedure, 1973.

Provisions of Arrest at a glance

Section 69 empowers the Commissioner of CGST or SGST to arrest any person where he has reasons to believe that such person has committed an offence under section 132 (1) (a, b, c, d) and punishable under section 132(1) (i, ii) or 131 (2).

In the administration of taxation the provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders. To some these may appear very harsh but these are necessary for efficient tax administration and also act as a deterrent and instil a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorization from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit. The salient points of these provisions are:

1. Provisions for arrests are used in exceptional circumstance and only with prior authorization from the Commissioner.
2. The law lays down a stringent criteria and procedure to be followed for arresting a person. A person can be arrested only if the criteria stipulated under the law for this purpose is satisfied i.e. if he has committed specified offences (not any offence) and the tax amount is exceeding rupees 200 lakhs. However, the monetary limit shall not be applicable if the offences are committed again even after being convicted earlier i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount involved in the case.
3. Further, even though a person can be arrested for specified offences involving tax amount exceeding Rs. 200 lakhs, however, where the tax involved is less than Rs. 500 lakhs, the offences are classified as non-cognizable and bailable and all such arrested persons shall be released on Bail by Deputy/Assistant Commissioner. But in case of arrests for specified offences where the tax amount involved is more than Rs. 500 lakhs, the offence is classified as cognizable and non-bailable and in such cases the bail can be considered by a Judicial Magistrate only.

Arrest

Meaning of arrest

While the term ‘arrest’ has not been defined in GST law, based on judicial pronouncements, ‘arrest’ implies ‘the taking into custody of a person under some lawful command or authority’. In other words, a person is said to be arrested when he is taken into custody and restrained of his liberty, by power or colour of lawful warrant.

Power to arrest

In case of CGST, the Commissioner may authorize any officer of Central Tax to arrest any person who has committed punishable offences liable for arrest. Such authorization has to be by way of a written order and only to Central Tax officers.

The power to arrest comes with a very important rider that the Commissioner ordering or authorizing for arrest to any person should have ‘reason to believe’ that such person has committed specified offences under section 132 of CGST Act, 2017.

The Commissioner by order, can authorize any CGST officer to arrest any person, if he has reasons to believe that such person has committed an offence specified in clause (a) or (b) or (c) or (d) of section 132(1) which is punishable under clause (i) or (ii) of section 132(1) or section 132(2) of the Act. This essentially means that a person can be arrested only when the amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken exceeds Rs. 2 Crores or where a person has earlier been convicted for an offence under section 132 of the CGST Act, 2017.

Reason to believe

Reason to believe is to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person, knowing the same facts, to reasonably conclude the same thing. As per section 26 of the Indian Penal Code, 1860 (IPC), “A person is said to have ‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.”

‘Reason to believe’ contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration. It has to be and must be that of an honest and reasonable person based on relevant material and circumstances.

Offences punishable with arrest

In terms of section 69(2) of CGST Act, 2017, where a person is arrested for any cognizable offence, every officer authorised to arrest a person, shall inform such person, of the grounds of arrest and produce him before a magistrate within twenty four hours.

This section requires the following actions to be taken :

1. Arrest in case of cognizable offence under section 132(5) of the CGST Act, 2017
2. Officer to inform grounds of arrest to person being arrested (of course, before actual arrest),
3. Produce the arrested person before the Magistrate within twenty-four hours.

Under section 132(1), arrest provisions are attracted where an offence has been committed which is punishable under sub-section (1) [clauses (a) to (d)] or sub-section (2) of section 132 of the CGST Act, 2017. Accordingly, following offences attract arrest provisions:

1. Sub-section (1) lists the offences punishable with arrest subject to term of imprisonment linked to amount involved in the offence.
2. Sub-section (2) provides for arrest in case of a repeat offence ie second or subsequent offence, in cases where he was convicted for first such offence. Punishment for second or subsequent offence be imprisonment which may extend upto five years and with fine.

Safeguards under GST Act for arrested person

There are certain safeguards provided under section 69 for a person who is placed under arrest. These are:

1. If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest.
2. If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner of CGST/SGST can release him on bail and he will be subject to the same provisions as an officer in-charge of a police station under section 436 of the Code of Criminal Procedure, 1973; (CrPC)
3. All arrest must be in accordance with the provisions of the Code of Criminal Procedure, 1973 (CrPC) relating to arrest.

Rights of arrested person

Article 22 of the Constitution of India provides the following fundamental rights to every person :

(a)   Right to be informed, as soon as may be, of the grounds for such arrest;

(b)  Right to consult and to be defended by a legal practitioner of his choice;

(c)   Right to be produced before the nearest Magistrate within twenty four hours of his arrest excluding the time necessary for the journey from the place of arrest to court of Magistrate;

(d)  Right to not be detained in police custody beyond the period of twenty-four hours without the authority of the Magistrate.

Discussions to this article

[PARALIJAYAPALAN ANILKUMAR]

Despite provision for arrest under Sec 69 read with 132 of the GST Act, bail has to be granted even in the case of cognizable offences involving tax evasion exceeding 5 crore without establishing the offence (commission of offence) in view of Sec 132(1)(a) read with 132 (5). Mere reasons to believe that the assessee is evading tax will not suffice to arrest a person and deny right of bail if the main attribute of commission of offence is established by resort to the due process of law by actual quantification of the tax laibility. of course for such offences the person can be arrested but bail has to be granted by the tax authority without producing before the Magistrate.

[Dr. Sanjiv Agarwal]

Bail may be granted.