AVAILABILITY OF GOOD FAITH CLAUSE IN SECTION 157 OF THE GST ACT TO THE OFFICERS OF THE STATE

[Mr. M. GOVINDARAJAN]

Section 157 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that 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.  Likewise, 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.

In THE STATE OF GUJARAT AND ANR. VERSUS PARESH NATHALAL CHAUHAN - 2024 (4) TMI 528 - SUPREME COURT, the present civil appeal has been filed by the State of Gujarat before the Supreme Court with a prayer to expunge a portion from the interim order of the High Court.  The appellant further informed that the respondent is not interested to initiate action against the officers. A writ petition was filed by the respondent seeking a direction for protection from arrest under section 69 read with section 132 of the Act. In the impugned order the High Court held that the good faith clause in Section 157 of the Act, may not be available to the officers of the State as their conduct, according to the High Court, “may not” justify protection.   The High Court further held that 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.

The Supreme Court observed that a good faith clause, explained in the vocabulary of the rights and duties regime, can be said to be a provision of immunity to a statutory functionary.  Such provisions are in recognition of public interest in protecting a statutory functionary against prosecution or legal proceedings. This immunity is limited.  It is confined to acts done honestly and in furtherance of achieving the statutory purpose and objective.

The Supreme Court relied on the judgment in GOONDLA VENKATESWARLU VERSUS STATE OF A.P. AND ORS. - 2008 (8) TMI 1028 - SUPREME COURT.  In this case it was held that a good faith clause in a statute will be a defense. If successfully pleaded, it not only legitimises the action but also protects the statutory functionary from any legal action. If a statutory functionary invokes the defence of good faith in a suit, prosecution or other legal proceedings initiated against him, it is for the court or a judicial body to consider, adjudicate, and determine whether the claim that the action was done in good faith is made out or not. Such a scrutiny, enquiry, or examination is done only in a proceeding against the statutory functionary. It was further  held that the scrutiny whether the act is done in good faith or not would depend upon the facts and circumstances of each case. 

The Supreme Court examined the observations made by the High Court with reference to the observations in ‘Goondla Venkateswarlu’ (supra).  The Supreme Court observed that The High Court was not conducting a suit, prosecution, or other legal proceeding against a statutory functionary.   the High Court was conscious of the principles governing good faith clauses and therefore couched its displeasure and distress by stating that such officials “may not” be protected or that it “may be difficult” to accept the contention of good faith.   The Supreme Court was of the opinion that the observations of the High Court are in the nature of advance rulings because even before the initiation of a suit, prosecution or legal proceeding, the High Court expressed a tentative opinion. The Supreme Court further observed that If such observations remain, they will affect the integrity and independence of that adjudication, compromising the prosecution and the defence equally.

The Supreme Court held 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 defense of good faith. It is for the court to adjudicate and decide.

The Supreme Court expunged the impugned observation of the High Court.