Businesses Question Validity of Arrest in Top Court
Shambhavi Sharma / 2021-04-29 11:58:32

Companies also argued in the Supreme Court that the arrest clauses of the goods and services tax (GST) laws in their current form are unconstitutional. On Tuesday, the court heard arguments on the issue of arrest clauses and the applicability of the Criminal Procedure Code (CrPC) to the Customs Act, GST, the Prevention of Money Laundering Act (PMLA), and other allied rules.
Abhishek Rastogi, a lawyer for the firms, said in court that the sheer number of GST arrests taking place in the country raises a number of concerns.
There are legitimate concerns regarding revenue leakage, but there are also concerns about whether well-accepted, judicially checked, fair, and proper arrest procedures are followed. Rastogi, a partner at Khaitan & Co., believes that
Arguments held up in the Court Room
  • As a result, it is important for the judiciary to intervene to ensure that citizens' basic constitutional rights are not violated during such arrests. In the absence of strict supervision of CrPC provisions regulating GST arrests, courts must provide guidelines for officers to obey, failing which people can seek reasonable relief from jurisdictional courts.
  • Assessees have challenged whether they should be labelled as suspects even before an investigation is completed, and whether an offence can be listed as non-bailable without going through the proper quantification procedure for assessing the allegedly evaded duty.
  • As a result, they say, arrests cannot come before the process of determining responsibility during the adjudication process.
  • The GST commissioners have the authority under Section 69 of the Central GST Act to detain an individual if they have "reasons to believe" that the person has alleged fraudulent ITC. A commissioner may order a person's detention for up to five years if he has reason to believe they are making false claims.
  • As per Rastogi, Only after the crime has been quantified and undergone due process will an arrest be made. Provisions were argued particularly in light of the term "reasons to believe" used in Section 69 of the CGST Act, which was conspicuously absent in the Summons Notices or Arrest Warrants issued in the cases before the Supreme Court.        
  • The court heard complaints about the concepts of'supply' and 'deemed supply' in relation to such offences, which is the basis for the arrests.
  • The ITC section of the CGST Act explicitly states that the movement of goods is not needed for the delivery of goods. According to Rastogi, this is clearly stated in the clarification to section 16 (2) of the CGST Act.
  • If the goods are supplied by the seller to a purchaser or any other person on the direction of that registered person, whether acting as an agent or otherwise, it is considered that the registered person has obtained the goods before or during the movement of items, whether by way of transfer of documents of title to goods or otherwise.
  • If goods are lying in Kolkata and a company in Mumbai asks a dealer in Delhi to supply them, the goods may not leave Kolkata, but the supply will take place if the individual pays the dealer and receives invoices. If that is not the case, no GST should be charged on production, but Rastogi claims that this is not the case.
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