Not Necessary to Make Arrest in all GST Cases: SC to Centre

The Supreme Court of India advised the Centre on Wednesday that making arrests in all Goods and Services Tax (GST) cases is unnecessary and may only be done if there is convincing evidence and tangible material to prove guilt.

A bench of Justices of 3 persons – Sanjiv Khanna, MM Sundresh and Bela M Trivedi, which reserved its decision on a series of petitions challenging the constitutional validity and interpretation of provisions relating to the Customs Act and the Goods and Services Tax Act, stated that the power of arrest differs from the necessity of arrest.

“The legislation does not state that you must be arrested in order to complete the investigation. It is not the purpose of the legislation. It is not necessary for you to arrest in every case involving GST. It must be based on reliable facts and actual material,” the bench instructed Additional Solicitor General SV Raju.

The bench, which questioned Raju on arrest provisions under the GST law, stated that the legislation has placed liberty on a pedestal and should not be diminished.

Raju stated that arrests are typically made during the investigation because no arrests can be made after a case has been completed.

“The arrest is not based on mere suspicion, but when there are reasons to believe showing the commission of some serious offence,” he added, adding that the reasons to believe cannot be based just on the committing of the offence.

“Adjudication must precede arrest,” the bench stated, adding that it will look at the terms “reason to believe” and “grounds of arrest” under the Customs Act and the GST Act.

The Supreme Court stated that while there were instances of high-handedness by the GST authorities, there were also instances of wrongdoing on the part of taxpayers, and it will consider all of these factors when making its decision.

The petitioners who challenged certain provisions of the Customs Act and the GST Act claimed that both laws’ arrest provisions were being abused.

They claim that they are being threatened and forced into paying liabilities without pursuing proper legal procedures.

Section 69 of the GST Act covers arrest powers, but Section 104 of the Customs Act of 1962 authorizes an official to arrest someone if they have reasonable grounds to believe the individual has committed an offence.