The power to arrest an assessee is prescribed under Section 69 of the CGST Act. However, without assessing the actual liability of an assessee, the arrest is onerous and must always be avoided.
The options of Inspection, Search, Seizure and Arrest are exercised, only in exceptional circumstances and as a last resort, to protect the Government Revenue. Therefore, to ensure that these provisions are used properly, effectively and the rights of taxpayers are also protected, the CGST Act stipulates that Inspection, Search or Seizure can only be carried out when an officer, of the rank of Joint Commissioner or above, has reasons to believe the existence of such exceptional circumstances. However, in case of arrests the same can be carried out only where the person is accused of offences specified for this purpose and the tax amount involved is more than specified limit.
Inspection is a softer provision than search which enables officers to access any place of business or of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown. Inspection can be carried out by an officer of CGST/SGST only upon a written authorization given by an officer of the rank of Joint Commissioner or above. A Joint Commissioner or an officer higher in rank can give such authorization only if he has reasons to believe that the person concerned has done one of the following actions:
Inspection can also be done of the conveyance, carrying a consignment of value exceeding specified limit. The person in charge of the conveyance has to produce documents/devices for verification and allow inspection. Inspection during transit can be done even without authorization of the Joint Commissioner.
The provisions of search and seizure also provides enough safeguards and the GST Law stipulates that search of any place of business etc. can be carried out only under authorisation from an officer not below the rank of Joint Commissioner and if he has a reason to believe that the person concerned has done at least one of the following:
Section 132 of the CGST Act lists out the offences under the CGST Act which can lead to an arrest:
A person can be arrested under Section 69 of the CGST Act even before the completion of the assessment proceedings.
Such an arrest can be carried out only if there are reasonable grounds to believe that one of the offences detailed under Section 69 has been committed. However, the reasons to believe need not be stated on the authorization for the arrest itself. It is sufficient if these reasons have been recorded separately in a file.
Keeping in mind Section 69 and 132 of CGST Act which empower Proper Officer to arrest a person who has committed any offense involving evasion of tax more than Rs. 5 crore and prescribed maximum sentence of 5 years, the High Court of Punjab and Haryana in the case of Akhil Krishan Maggu v. DGGI had prescribed the exceptional circumstances for arrest stating that power of arrest should not be exercised at the whims and caprices of any officer or for the sake of recovery or terrorising any businessman or create an atmosphere of fear, whereas it should be exercised in exceptional circumstances during investigation:
In the case of Jayachandran Alloys Pvt. Ltd. v. Superintendent of GST & Central Excise, the Madras High Court had held that determining excess credit provided under Section 73 and Section 74 of the CGST Act is one of the requirements for recovery. A recovery like that can be initiated once the amount of excess credit has been quantified and determined in an assessment. The Court finally held that the power to punish as prescribed under Section 132 of the CGST Act would only come into play once it is established that an assessee has actually â€˜committedâ€™ an offence.
Section 438 of CrPC provides for grant of anticipatory bail, which is a statutory right. This provision is, however, not available in those states where it has been statutorily omitted or for those offences where some special enactment under which a person is prosecuted ousts the application of this provision.
The Telangana High Courts in the case of P.V. Ramana Reddy v. Union of India widely discussed the grant of anticipatory bail and its challenges. The Court in this case had held that since the power of arrest under Section 69 of CGST Act is exercised before an FIR is registered, Section 438 of CrPC cannot be invoked. The Court also observed that until a prosecution is launched, by way of a private complaint with the previous sanction of the Commissioner, no criminal proceedings can be taken to commence.
Since arrest under Section 69 of the CGST Act is done before prosecution, it would not come within the purview of criminal proceedings. Consequently, Section 438 will not apply and no anticipatory bail can be granted.
The observations regarding the nature of offences also find mention in other proceedings of similar nature where Courts have refused to grant anticipatory bail because of the serious economic offence involved.
The Supreme Court in the case of P.V. Ramana Reddy v. Union of India had held that a remedy can be availed under Article 226 of the Constitution. The petitioners in the case had approached the High Court under Article 226 seeking directions to be issued to the respondent Authorities to not arrest the petitioners as provided under Section 69(1) of CGST Act. In essence, the petitioners indirectly prayed for grant of anticipatory bail.
The Court refused to grant protection against arrest because of the nature of the offence involved. The Court also observed that while offences under the CGST Act are compoundable, as per the proviso to Section 138(1), compounding can be allowed only after making payment of tax, interest and penalty involved in such cases.
Section 138 of the CGST Act provides for Compounding of offences. Compounding generally refers to the process where the person/entity committing the offence submits to having committed default so that the same is condoned. Under the CGST provisions, the accused can be discharged on payment of compounding fee which cannot be more than the maximum fine leviable under the relevant provisions. Compounding will be allowed only after payment of all taxes, interest and penalty dues. The amount payable for compounding of offences must be 50% of the tax involved subject to a minimum INR 10,000 and the maximum amount for compounding is set to be 150% of the tax or INR 30,000, whichever is higher.
On payment of the compounding amount, no further proceedings can be initiated against the accused person for the same offence and any criminal proceedings, if already initiated, will be abated. Compounding will not be available for-