Innocent persons cannot be arrested or harassed during the GST Proceedings: Delhi HC

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Shivani Bhati | Dec 3, 2021 | Views 237868

Innocent persons cannot be arrested or harassed during the GST Proceedings: Delhi HC

Innocent persons cannot be arrested or harassed during the GST Proceedings: Delhi HC


While the CM No. 32276/2020 has been filed by the Petitioner in W.P.(C.) No. 10130/2020 seeking interim protection, CM No. 28105/2020 has been filed by Respondent nos. 2 and 3 in W.P.(C.) No. 5454/2020 seeking vacation of interim protection granted vide order dated 20th August, 2020.

Subsequently upon an application being filed by the respondents for vacation of the interim protection on the ground that the interim order in W.P.(Crl.) No. 184/2020 had been vacated by the Supreme Court vide order dated 31st August, 2020, this Court had issued notice vide order dated 06th November, 2020.

CM No. 344/2021 in W.P.(C.) No. 10130/2020 was filed by the Petitioner seeking permission to bring on record the rejoinder to the Counter affidavit filed by Respondent Nos. 2 and 3 in the interim application being CM No. 32276/2020. The aforementioned application was allowed vide order dated 06.01.2021 and the matter was re-heard in light of the rejoinder filed.


  • Petitioner submitted that Sections 69 and 132 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) are unconstitutional as being provisions of criminal nature, they could not have been enacted under Article 246A of the Constitution of India, 1950. They emphasized that the power to arrest and prosecute are not ancillary and/or incidental to the power to levy and collect goods and services tax.
  • They stated that the Respondents have erroneously claimed that since they are not the police officers and CGST Act is a special act containing provisions for arrest, search and seizure etc., Respondents are not bound by Chapter XII or any provision of the Code of Criminal Procedure, 1973 (for short ‘Cr.P.C.’) governing commencement of investigation, maintaining case diary, etc.
  • Respondents submitted that Article 246A contains special provisions for making laws with respect to goods and services tax. According to him, Sections 69 and 132 are in respect of goods and services tax and the power to legislate on this subject is conferred by Article 246A. He emphasized that Article 246A contains the subject matter as well as the distribution of powers between the Parliament and the State legislatures. Therefore, he submitted that it was not necessary to ascertain the source of power to enact the offences under the CGST Act within any of the legislative entries in the seventh schedule.


Laws are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is a remote possibility of abuse of power. In fact, it must be presumed, unless the contrary is proved, that administration and application of a particular law would be done “not with an evil eye and unequal hand”.

This Court is of the prima facie opinion that the Goods and Service Tax is a unique tax, inasmuch as the power as well as field of legislation are to be found in a single Article, i.e., Article 246A. Further, the scope of Article 246A is significantly wide as it not only empowers both Parliament and State Legislatures to levy and/or enact GST Act, but it also grants the power to make all laws ‘with respect to‟ Goods and Service Tax.

The power of arrest conferred by Section 69 of the Act is not a general power of arrest, but is restricted to certain offences which are specified under Section 69 of the Act namely some of the offences covered under Section 132 of the Act and the offences so specified are all offences relating to goods and service tax.


Delhi HC held that the allegation that a tax collection mechanism has been converted into a disbursement mechanism most certainly requires investigation. Accordingly, this Court is not inclined to interfere with the investigation at this stage and that too in writ proceedings. At the same time, innocent persons cannot be arrested or harassed. This Court has no doubt that the trial court, while considering the bail or remand or cancellation of bail application, ‘will separate the wheat from the chaff’ and will ensure that no innocent person against whom baseless allegations have been made is remanded to police/judicial custody.

Consequently, with the aforesaid observations and liberty, the CM No.32276/2020 in WP(C) 10130/2020 for interim relief as well as the prayer for interim relief in WP(C) 5454/2020 are dismissed with liberty to the petitioners to avail the statutory remedies and the CM No. 28105/2020 filed by respondent nos. 2 and 3 in WP(C) 5454/2020 is allowed and the interim order dated 20th August, 2020 passed in W.P.(C) 5454/2020 is vacated.

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