DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY
VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE

POWER TO ARREST UNDER THE GOODS AND SERVICE TAX ACT

SUBJECT

LAW OF TAXATION II (GST ACT)

NAME OF THE FACULTY

PROF. VISHNU KUMAR

NAME OF THE STUDENT

HARSHA S. AMMINENI

ROLL NO & SEMESTER

2015039 & Semester-7

Acknowledgement

I would sincerely like to put forward my heartfelt appreciation to our respected LAW
OF TAXATION II (GST ACT) Faculty, Prof. Vishnu Kumar sir for giving me a
golden opportunity to take up this project regarding – Power to Arrest under Goods
and Services Tax Act. I have tried my best to collect information about the project in
various possible ways to depict clear picture about the given project topic.
AIMS AND OBJECTIVES OF STUDY:

The objective of the study is to make a clear analysis of the Provisions of Arrest and Offences
that lead to a person’s arrest under GST Act.

SCOPE OF STUDY:

The scope of the study is to analyse the Power to Arrest under GST Act with the analysis of
case laws.

SIGNIFICANCE AND BENEFIT OF STUDY:

This project and analysis on the Power to Arrest under GST Act gives a clear cut idea on
what circumstances the arrest can be done, the requirements for the arrest to take place and
who under what laws can perform an Arrest.

RESEARCH METHODOLOGY:

Researcher is going to limit him through doctrinal type of research only and using online
websites like Taxman, Manupatra, Westlaw and Indian kanoon access.

HYPOTHESIS:

On one side an evader should be met with strictest punishment but on the other side an
innocent should not be punished without affording an opportunity. A fine balance needs to be
maintained and it is hoped that the Supreme Court will maintain the same when they decide
the cases.
SI. No. TOPIC
01 AIM AND OBJECTIVE
02 SCOPE OF THE STUDY
03 SIGNIFICANCE AND BENEFIT OF THE DTUDY
04 RESEARCH METHODOOGY
05 HYPOTHESIS
06 ABSTRACT
07 INTRODUCTION
08 WHICH OFFENCES MUST BE DONE DURING THE TIME OF ARREST
09 PROCESS AND PROCEDURE OF ARREST
10 SCOPE OF POWER OF GST OFFICER
11 CIRCUMSTANCES WHEN ARREST CAN BE DONE
12 WHICH LAW APPLIES IN CASE OF ARREST UNDER GST
13 RWLWVANT PROVISIONS UNDER CR.P.C
14 CONFLICTS IN VIEWS OF HIGH COURTS
15 CASE ANALYSIS
16 LARGER ISSUES TO BE COVERED BY THE SUPREME COURT
17 CONCLUSION
ABSTRACT:

Goods and Services Tax (GST) officers are empowered to arrest persons accused of offences
specified under Section 132 of the CGST Act. Section 132 provides that specified offences
involving tax evasion in excess of INR 50,000,000 (Indian Rupees Fifty million) will be
cognizable and non-bailable, and that officials can proceed with arrest as per the procedure
laid out under Section 69 of the CGST Act.

In the recent past, several transactions (similar to the impugned proceedings) were brought
under the scanner wherein there was a supply of goods made without an actual movement of
goods. This is commonly known as circular trading. The GST officials believe that such
circular trading does not involve supply of goods even though applicable tax has been paid by
each supplier in the chain. Further, it was often found that the GST officials were not able to
make out a prima facie case in terms of the amount involved in the proceedings to justify
arrest proceedings under the said provisions. Additionally, the need for filing of an FIR under
Section 154 of the Code for Criminal Procedure 1908 was also discussed during the
proceedings even though the specified offences are declared as cognizable offences under the
CGST Act.

On reading section 132 with arrest provisions, it essentially stands that a person can be
arrested only where the tax evasion is more than 100 lakhs rupees or where a person has
earlier been convicted of an offence u/s 132.

The researcher will critically analyze on “Power to Arrest” and all other theoretical,
procedural and legal aspects on this topic. The final draft will be submitted after taking
suggestions and recommendations from the Project Guide. The project includes legal
provisions, authorities, Central and State rules and precedents involved & recent
developments.
INTRODUCTION:

If the Commissioner of CGST/SGST believes a person has committed an offence u/s 132, he
can be arrested by any authorised CGST/SGST officer. The arrested person will be informed
about the grounds of his arrest. He will appear before the magistrate within 24 hours in case
of cognizable offence.

The offences under section 132 where arrest provisions become applicable:

1. A taxable person supplies any goods/services without any invoice or issues a false
invoice

2. He issues any invoice or bill without supply of goods/services in violation of the

provisions of GST

3. He collects any GST but does not submit it to the government within 3 months

4. Even if he collects any GST in contravention of provisions, he still has to deposit it to

the government within 3 months. Failure to do so will be an offense under GST

5. He has already been convicted of an earlier u/s 132 i.e., this is his 2nd offense

On reading section 132 with arrest provisions, it essentially stands that a person can be
arrested only where the tax evasion is more than 100 lakhs rupees or where a person has
earlier been convicted of an offence u/s 132.

DIFFERENCE BETWEEN COGNIZABLE AND NON COGNIZABLE OFFENCES:

Cognizable offenses are those where the police can arrest a person without any arrest warrant.
They are serious crimes like murder robbery, counterfeiting. Non-cognizable offenses are
those, where a police officer cannot arrest a person without a warrant issued by competent
authority. They are less serious crimes like public nuisance, assault.
COGNIZANCE OFFENCES UNDER GST:

A court cannot take cognizance of any offense punishable without the prior permission of the
designated authority. Only a Magistrate of the First Class (and above) can try such an
offense.

For non-cognizable and bailable offenses, the arrested person can be released on bail.

The proper officer can summon any person to give evidence or produce a document. Any
person summoned, has to attend on his own or through an authorized representative. They
will appear under oath.

The Joint Commissioner of CGST/SGST will authorise a CGST/SGST officer to have access
to any place of business of a registered taxable person. The officer can inspect books of
account, documents, computers and other required things to carry out any audit, verification
in the interest of revenue.

WHICH OFFICERS MUST BE PRESENT DURING THE TIME OF THE ARREST:

Police, Railways, Customs, State/Central Government officers engaged in collection of GST,

Officers collecting land revenue, Village officers, etc. are required to assist the CGST/SGST
officers.

The Commissioner of CGST/SGST can also require any other class of officers to assist the
CGST/SGST officers.

The provisions of seizure and arrest seem rather harsh as GST is an economic legislation, i.e.,
a tax law and not a criminal legislation. The Commissioner has the power to arrest on the
basis of reasons to believe. The wording is subjective (i.e., depending on the opinion). An
honest taxpayer who, for example, did not pay GST because he genuinely believed GST was
not applicable to him might get his goods seized and get arrested. It could be a case of wrong
interpretation of the law for which penalty might apply but arrest seems too harsh. GST law
should have more clarity on the occasions when a person can be arrested considering that it is
a new law and there are bound to be genuine errors.

Goods and Services Tax (GST) officers are empowered to arrest persons accused of offences
specified under Section 132 of the CGST Act. Section 132 provides that specified offences
involving tax evasion in excess of INR 50,000,000 (Indian Rupees Fifty million) will be
cognizable and non-bailable, and that officials can proceed with arrest as per the procedure
laid out under Section 69 of the CGST Act.

In the recent past, several transactions (similar to the impugned proceedings) were brought
under the scanner wherein there was a supply of goods made without an actual movement of
goods. This is commonly known as circular trading. The GST officials believe that such
circular trading does not involve supply of goods even though applicable tax has been paid by
each supplier in the chain. Further, it was often found that the GST officials were not able to
make out a prima facie case in terms of the amount involved in the proceedings to justify
arrest proceedings under the said provisions. Additionally, the need for filing of an FIR under
Section 154 of the Code for Criminal Procedure 1908 was also discussed during the
proceedings even though the specified offences are declared as cognizable offences under the
CGST Act.

On reading section 132 with arrest provisions, it essentially stands that a person can be
arrested only where the tax evasion is more than 100 lakhs rupees or where a person has
earlier been convicted of an offence u/s 132.

The researcher will critically analyze on “Power to Arrest” and all other theoretical,
procedural and legal aspects on this topic. The final draft will be submitted after taking
suggestions and recommendations from the Project Guide. The project includes legal
provisions, authorities, Central and State rules and precedents involved & recent
developments.

PROVISIONS AND PROCEDURE FOR ARREST UNDER GST LAW:-

GST tax laws provide powers to GST officials to arrest a person under certain circumstances.
These powers are granted to check revenue leakage and fraudulent practice. It is proven fact
that power comes along with responsibility. Power of arrest has to be exercised with utmost
cautious and judicially so that no innocent is harassed. The power to arrest with the GST
officer has been a contentious issue.

SCOPE OF POWER OF GST OFFICERS:

The Supreme Court, on the government approaching it for clarification, has referred the
matter to a three-judge bench on May 29, 2019, on the ground that different high courts have
expressed conflicting views on such powers. Previously, a two-judge bench of Supreme
Court had vide its order dated May 27, 2019, affirmed the judgement dated April 18, 2019. of
the Telangana High Court in P.V. Ramana Reddy versus Union of India1 - Telangana And
Andhra Pradesh High Court case, wherein powers of GST officers were succinctly explained.

GST law lays down circumstances and instances under which a person can be arrested but no
guidelines have been given in relation to procedural aspect of arrest. In such situation,
reference has to be made to Code of Criminal Procedures (CrPC) and settled case laws. In
this article, procedural aspect of making arrest under GST law have been capsulated.

CIRCUMSTANCES WHEN ARREST CAN BE DONE:-

As per section 69(1) of CGST Act, “Where the commissioner has reason to believe that a
person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause
(d) of sub-section (1) of Section 132 which is punishable under clause (i) or (ii) of sub-
section (1), or sub-section (2) of the said section, he may. by order authorise, any officer of
central tax to arrest such person.” Therefore, there are three primary conditions which are
required to be fulfilled:

1. Commissioner must have a “Reason to Believe”.

2. Offence as specified in Section 132 (clauses (a), (b), (c) or (d)) of the CGST Act.

3. Commissioner may authorize any officer under the Central Tax to arrest.

1
2019 (4) TMI 1320
A. COMMISSIONER HAS ‘REASON TO BELIEVE:

In section 69(1) of CGST Act, phrase ‘reason to believe’ holds utmost importance. As per
Indian Penal Code, Sec. 26, “A person is said to have ‘reason to believe’ a thing, if he has
sufficient cause to believe that thing, but not otherwise.”

Reason to believe is very subjective phrase and may vary in the circumstances of each case.
In many cases, the meaning of the phrase ‘reason to believe’ has been discussed in length.
Specifically, under Section 147 of Income tax Act, which deals with income escaping
assessment, this phrase had been deciphered by various courts. The findings under various
case laws under Income Tax Act will squarely apply in the case of GST as well. Some of the
important findings under various case laws are as under:

1. Reason to believe consists of two words “reason” and “to believe”. The word “reason”
means cause or justification and the word “believe” means to accept as true or to have faith in
it. Therefore, there must be a justification for it and belief is the result of the mental exercise
based on information received.

2. The “Reason to believe” is different from “Reason to suspect” or from “to have an
opinion”. It has been held by the courts that the reason to believe can be said to exist only
when the Assessing Officer comes into possession or “discovers” “some material” or, “gets a
new insight” subsequent to the conclusion of the original proceedings.

3. Reason to believe, does not mean a purely subjective satisfaction. The belief must be held
in good faith. It cannot be merely a pretence. It is open to the court to examine whether the
reasons for the belief have a rational connection or a relevant bearing to the formation of the
belief and are not extraneous or irrelevant to the purpose of the section.

4. The words ‘reason to believe’ contemplate an objective determination based on intelligent

care and deliberation involving judicial review as distinguished from a purely subjective
consideration.

B. OFFENCES AS SPECIFIED IN SECTION 132 (CLAUSES (A), (B), (C) AND (D))
OF THE CGST ACT. WHICH ARE PUNISHABLE UNDER SUB-SECTION (I) AND
(II) OF SECTION 132(1) AND SECTION 132(2):
Accordingly, as per the said clauses of Section 132, offences where the arrest can be made
are the following: -

1. Supply of any goods or services or both without issue of an invoice with the intention to
evade tax.

2. Issue of any invoice or bill without supply of goods or services or both.

3. Availing of input tax credit using such invoice or bill referred to above.

4. Collection of any amount as tax but failing to pay the same to the Government beyond a
period of three months from the date on which such payment becomes due.

Section 132(1)(i) and Section 132(1)(ii) also specifies that in case the amount evaded or ITC
wrongly availed or utilized or the amount of refund wrongly taken exceeds five crores then
imprisonment may extend for a term upto five years and fine and in case evasion is above
two crores but below five crores, imprisonment may be for a term upto three years and fine.

C. COMMISSIONER MAY AUTHORIZE ANY OFFICER UNDER THE CENTRAL

TAX TO ARREST.

According to section 69(1) CGST Act, Commissioner can authorise any officer of central tax
to arrest. However, according to circular No. 171/6/2013-ST dated 17.09.2013, issued under
The Central Excise and Custom Act, officer not below the rank of Superintendent could be
authorised by Commissioner for making arrest. Accordingly, under the erstwhile Laws any
officer below the rank of Superintendent was not authorized to arrest. However, under GST
laws there is no such clarification issued and therefore, any central tax officer can be
authorised by the Commissioner to arrest.

WHICH LAW WILL APPLY IN CASE OF ARREST UNDER GST:

There is no provision under CGST Act 2017, specifically providing any procedure for
investigation, inquiry or trial of an offence under Section 132 of the CGST Act. Section 132
of the Act indicates the offences and consequences / punishment for committing such
offences, where an offence is proved and a person is found guilty. However, there is no
procedure laid down in CGST Act in regard to Warrant, Bail, etc. Therefore, in the absence
of such procedures, all such offences are to be investigated, inquired and tried as per the
procedures provided under the CrPC. Hence, after arrest of the person, as per Section 69(1) of
CGST Act, for further procedure CrPC provisions shall be followed. In regard to above,
Section 4 of the CrPC can be referred which enumerates the procedure for trial of offences
under the IPC and other Laws.

RELEVANT PROCEDURES UNDER CRPC ARE AS FOLLOWS:

1. THE AUTHORIZED OFFICER MUST BE HAVING A WARRANT TO ARREST

A PERSON:
As per Section 155 of the CrPC, the officer arresting a person must be having a
warrant with him. However, Section 41 of CrPC enumerates circumstances when
arrest can be made without a warrant. As per said Section 41, for cognizable offences
warrant is not required. Therefore, in case of cognizable offences, warrant is not
required whereas in case of non-cognizable offence warrant is required.
Further, as per Section 132(5) of the CGST Law, where the tax evasion is above 7 5
Cr. and the offence falling either under clauses (a), (b), (c) or (d) of section 132 (1),
the same shall be a cognizable and non-bailable and accordingly, warrant is not
required. Further, as per Section 132(4) of the CGST Act, all other offences are
bailable and non-cognizable and in such cases warrant is required. In regard to above,
reference can also be made to the decision of Apex Court in case of Om Prakash And
Choith Nanikram Harchandani Vs. Union Of India2 in which case it has been held that
no arrest can be made in case of non- cognizable and bailable offence.

2. PROCEDURAL ASPECT OF THE ARREST:

As stated above, GST Law does not define the procedural aspect of the Arrest,
therefore, the same is to be taken from Section 46 of The CrPC Act.
As per the said section, the police officer shall not touch or confine the body of other
person if there is submission to the custody by word or action.

2
2011 (9) TMI 65 - SUPREME COURT
 If such person forcibly resists his arrest, or attempts to evade, police officer or other
person may use all means to effect the arrest.

3. WHO CAN BE ARRESTED IN CASE OF A COMPANY:

Section 137 of CGST Act provides that if the person who commits the offence is a
company, the person who was in-charge and responsible for the conduct of business
of the company shall be deemed to be guilty of the offence and punished accordingly.
Although, such person shall not be liable to any punishments provided in this Act if
he proves that the offence was committed without his knowledge or that he had
exercised all due diligence to prevent the commission of such offence.
Further, sub-section (2) provides that in case of company where the offence has been
committed and it is proved that it is committed with the consent or due to negligence
of any director, manager, secretary or other officer of the company, such person shall
be liable to be proceeded against and punished accordingly.

4. GRANT OF BAIL UNDER GST LAW:

As stated earlier, Section 132(5) provides that where the tax evasion is above % 5 Cr.
and offence is falling under any of the Causes (a), (b), (c) or (d) of Section 132(1) of
the CGST Act, same would be Non-Bailable and Cognizable. Other offences under
GST would be Bailable and Non-cognizable. Section 69(2) of CGST Act is dealing
with the Non-Bailable or cognizable offence and states that where a person is arrested
for non bailable or cognizable offence, the officer authorised to arrest shall inform
such person of the grounds of arrest and produce him before a Magistrate within 24
hours.
However, as per section 69 (3) of CGST Act, where a person is arrested for bailable
or non-cognizable offence, he shall be admitted to bail or in default of bail, forwarded
to the custody of the Magistrate. In such cases, Assistant Commissioner shall, for the
purpose of releasing an arrested person on bail or otherwise shall have the same
powers and be subject to same provisions as an officer-in-charge of a
police station.
 Therefore, if the offence is bailable, grant of bail is automatic and can be given by
police officer in charge of police station or by court, on bond or even without bond.
There is no discretion with the Court / Police Officer (Assistant Commissioner in the
case of GST) in the matter for not granting bail. In the cases of Vaman Narain Ghiya
Versus State Of Rajasthan3 and Sultan Kamruddin Dharani v. UOl4, it has been held
that in case of bailable Offence, there is no discretion to refuse the bail if the accused
is prepared to furnish surety. It has further been held that there is no discretion even to
impose any condition except demanding of security with sureties.

5. RIGHT OF PERSON ARRESTED:

In this regard, reference can be made to Article 22 of the Constitution of India which
provides the following fundamental rights to every arrested person:
a. Right to be informed, as soon as may be, of the grounds for such arrest:
b. Right to consult and to be defended by a legal practitioner of his choice:
c. Right to be produced before the nearest Magistrate within twenty-four hours of his
arrest excluding the time necessary for the journey from the place of arrest to court of
Magistrate.
d. Right to not be detained in police custody beyond the period of twenty-four hours
without the authority of the Magistrate.
Further, a detailed discussion in regard to Rights of the person Arrested is done in the
Apex Court's Decision of D.K. Basu v. State of West Bengal5.
In conclusion, it can be stated that arrest can be made by a GST Officer subject to
conditions and circumstances specified in the law and person arrested has a right to
know grounds of arrest and also to get bail or to be produced before the Magistrate
within the specified time.

WAS THERE A CONFLICT IN VIEWS OF THE HIGH COURTS?

I) THE JUDGEMENT OF TELANGANA HIGH COURT:

3
2008 (12) TMI 446 – SUPREME COURT.
4
2008 (9) TMI 373 - BOMBAY HIGH COURT
5
1996 (12) TMI 350 - SUPREME COURT
The taxpayer approached the Telangana High Court for anticipatory bail. The issue arose that
whether a taxpayer can be given protection from arrest who has been summoned under
section 70 of the CGST Act for enquiry and investigation for an offence under section 132 of
the CGST Act.

The Telangana High Court in P.V. Ramana Reddy versus Union of India held that person
who is summoned under section 70(1) and person whose arrest is authorised under section
69(1) is not to be treated as the one accused of any offence until a prosecution is launched by
way of a private complaint with the previous sanction of the commissioner.

In other words, no criminal proceedings can be initiated until a prosecution is launched, by

way of a private complaint with the previous sanction of the commissioner. Accordingly, the
provisions of the Code of Criminal Procedure, 1973 providing for anticipatory bail would not
be applicable.

However, the remedy in such cases is to file a writ before the High Court seeking protection
from arrest. Nonetheless, based on the facts of this case, no relief from arrest was granted. It
was further held that the GST officer can initiate prosecution even before the completion of
assessment or quantification of tax evaded and that the list of offences included in sub-section
(1) of section 132 of CGST Act, 2017 has no correlation with assessment. The prosecutions
for these offences do not depend upon the completion of the assessment.

II) THE JUDGEMENT OF MADRAS HIGH COURT:

This position conflicted with a judgement dated April 4, 2019, of Madras High Court in
Jayachandran Alloys (P.) Ltd. versus Superintendent of GST & Central Excise6, held that the
power to punish set out in section 132 of the CGST Act would stand triggered only if it is
established that an assessee has 'committed' an offence that has to be necessarily post-
determination of demand due from an assessee, that itself has to necessarily follow process of
an assessment. The high court relied on the judgement dated January 23, 2019, of the
Supreme Court in the case of Union of India & Ors versus Make My Trip (India) Pvt. Ltd.7

6
writ petition number 5501 of 2019
7
in civil appeal number of 8080 of 2018
III) BOMBAY HIGH COURT'S POSITION:

Similar issues are pending before the Bombay High Court as well. In one such case, the
Bombay High Court vide its interim order has given protection to the taxpayer from arrest
until it hears arguments on merit. It may also be noted that the apex court has not interfered in
the previous interim order dated April 11, 2019, of the Bombay High Court. However, it has
advised all the high courts to take note of its order dated May 27, 2019, whereby the order of
the Telangana High Court was affirmed.

IV) SUPREME COURT IN MAKEMYTRIP CASE:

The Supreme Court had in Make My Trip(India) Pvt. Ltd. (supra), upheld the judgement
dated September 1, 2016, of the Delhi High Court in Make My Trip (India)(P.) Ltd. versus
Union of India8, which examined the power to arrest the tax officer under the erstwhile
service tax law.

It held that prosecution should normally be launched only after the adjudication is complete.
The court further relied on Central Board of Indirect Taxes and Customs' (erstwhile Central
Board of Excise and Customs) Circular No. 1009/16/2015-CX, dated 23-10-2015. The said
circular provided that for the launch of prosecution there has to be a determination that a
person is a habitual offender.

A TAXPAYER IS TREATED AS A HABITUAL OFFENDER IF:

- The amount of tax involved is more than Rs 1 crore in the past five years and

- He has been involved in three or more cases of confirmed demand (at the first appellate
level or above) of Central Excise duty/ Service Tax/ due to misuse of Cenvat Credit and due
to fraud, suppression of facts etc.

8
[2016] 96 VST 3 (Delhi)
CASE ANALYSIS:

1. MAKE MY TRIP VS. UNION OF INDIA

CITATION: [2019] 104 TAXMANN.COM 245 (SC)

FACTS:
In the case of Make My Trip, the order for arrest of Mr. M.K. Pallai, Vice- President
(Finance) of MMT, was issued on 8th January 2016 and the arrest was made on that
date itself. Searches were undertaken of the premises of Make My Trip office and the
person was immediately arrested. But, the arrest made was not as per the provisions
and the proceeding that are to be followed.

ISSUES:
The issue is as to whether the power of arrest under section 91 of the Finance Act,
1994 ('the said Act') can be exercised without following the procedure as set out in
section 73A(3) and (4) of the said Act.

REASONING:
The court observed that the decision to arrest a person must not be taken on whimsical
grounds; it must be based on credible material. The constitutional safeguards laid out
in D K. Basu's case (supra) in the context of the powers of police officers under the Cr
PC and of officers of central excise, customs and enforcement directorates, are
applicable to the exercise of powers under the FA in equal measure. An officer
whether of the Central Excise department or another agency like the DGCEI,
authorised to exercise powers under the CE Act and/or the FA will have to be
conscious of the constitutional limitations on the exercise of such power.

HELD:
 The High Court has decided, after detailed discussion, that it is mandatory to follow
the procedure contained is section 73A(3) and (4) of the said Act before going ahead
with the arrest of a person under sections 90 and 91. We are in agreement with the
aforesaid conclusion and see no reason to deviate from it. Accordingly, these appeals
are dismissed.
2. JAYACHANDRAN ALLOYS (P.) LTD. VERSUS SUPERINTENDENT OF GST &
CENTRAL EXCISE
CITATION: [2019] 105 TAXMANN.COM 245 (MADRAS)

FACTS:
The petitioner was an assessee before respondent authorities in terms of Central
Goods and Services Tax Act, 2017. It had been filing regular monthly returns. There
was an investigation initiated by respondents in premises of Assessee Company
wherein voluminous documents and records had been seized. The assessee had also
been called upon to furnish various records which it had done. Further, statements had
been recorded from various persons including the Managing Director of Assessee
Company on various dates in course of proceedings.
While this was so and process of investigation was ongoing, the assessee sought
copies of statements recorded from it as well as other materials seized, with no
response forthcoming from the department.
Hence, assessee filed Writ Petition praying for a mandamus directing the respondents
to provide copies of documents and records seized during inspection as well as copies
of statements recorded by the inspecting authorities, to grant opportunity to assessee
and to pass an order of assessment in accordance with law.
A miscellaneous petition was also filed seeking the grant of an interim injunction
restraining the respondents from proceeding coercively against the assessee and their
staff including arresting them by invoking the provisions of section 69, pending
disposal of the writ petition.

ISSUES:
The following issues arise, in my view, for resolution:
Whether the petitioner is entitled to a mandamus as prayed for in regard to supply of
the documents and statements sought for by it in the light of the provisions of the Act?
 Whether the interim protection sought for to prevent the respondents from invoking
the powers under Section 69 of the Act read with Section 132 thereof in respect of the
petitioner is liable to be granted?
Whether the petitioner's request for a direction to the respondents to complete
adjudication and make an assessment after following the due process of law is liable
to be accepted?
REASONING:
In pari materia with the provisions of Section 281B of the income Tax Act, 1961 that
also provides for a provisional attachment of property of an assessee pending
adjudication and assessment/re-assessment proceedings where the Income Tax
Department believes that such attachment is necessary to protect the interests of the
Revenue. The provision is extracted below for the sake of completion and to
demonstrate that the provisions of Section 83 have been framed along identical lines
as Section 281B.

HELD:
There is ammunition available in the arsenal of the department that can well be
utilised to protect its interests. In summary, this Writ Petition is allowed. Connected
WMP is closed, with no order as to costs.

3. P.V. RAMANA REDDY VERSUS UNION OF INDIA

CITATION: [2019] 104 TAXMANN.COM 407 (TELANGANA)/ [2019] 73 GST
727 (TELANGANA)

FACTS:
The assessees were Directors (Past and/or present) of a few Private Limited
Companies, a Chief Financial Officer of a company and the Partner of a Partnership
Firm of a Company. A search was conducted in the premises of the Companies by the
officials of the GST Commissionerate and summons were issued to the assessees
under section 70 of the CGST Act calling upon them to appear before Court, to give
evidence truthfully on the matters concerning the enquiry.
The assessees have challenged the above summons by way of instant petitions and
sought a direction to the GST Commissionerate officials not to arrest them and set
aside summons so issued.
 ISSUES:
The question here is whether or not, reasons to believe are enough to arrest a person
or the safeguards that are provided to him under the Criminal Procedure Code are to
be remembered?.
Another question arising here is, is the pre-arrest protection a statutory right?

REASONING:
The Supreme Court noted the decision of the Constitution Bench in Kartar
Singh v. State of Punjab9, wherein it was held that a claim for pre-arrest protection is
neither a statutory right nor a right guaranteed under articles 14, 19 and 21 of the
Constitution of India.
The court also observed that in any case, the moment the Commissioner has reasons
to believe that a person has committed a cognizable and non-bailable offence
warranting his arrest, then we think that the safeguards before arresting a person, as
provided in Sections 41 and 41A of Cr.P.C., may have to be kept in mind.

HELD:
Writ Petitions are dismissed. Consequently, miscellaneous petitions, if any pending,
shall stand dismissed. No order as to costs.

LARGER ISSUES TO BE CONSIDERED BY THE SUPREME COURT:

Above discussions hence brings us to a point wherein we will have to wait till the Supreme
Court has a say on the following larger issues:

a) Can a writ be entertained by the Court seeking prevention from arrest in all the cases or
only in certain exceptional cases? If it can be entertained only certain cases, what shall be the
factors that the Court must consider while deciding whether to admit or not ?

9
1994 (3) SCC 569
b) When can protection under sections 41 and 41-A of the Code of Criminal Procedure be
available to the petitioner? Whether the “reason to believe” should be beyond a reasonable
doubt or can even be circumstantial?

c) How to resolve incongruities between Sections 69 and 132 of the CGST Act, 2017? Can an
arrest be made only in cases where the offence is cognizable and non-bailable?

d) Can a person be arrested even without serving him with the notice to afford an opportunity
for hearing? Also can an arrest precede assessment?

e) Can an arrest be made if a person can make an application for compounding? Can an arrest
be made without rejecting an application for compounding, if made prior to arrest?

f) Apart from a hindrance in investigation, on what other grounds can an arrest be made?

g) What yardsticks must be considered by the department before invoking the power to arrest
so as to ensure that the said power does not become a tool to encourage corruption?

CONCLUSION:

It appears that transactions where the goods are supplied by delivery of documents of title
without actual movement, as in the case of warehoused goods (a common practice in
commodity trading) are not considered genuine transaction by the revenue authorities. Such
an interpretation may also outlaw in-bond transfer of customs bonded warehoused goods.
Further, these proceedings beg a larger question as to whether transactions are susceptible
even though applicable GST has been paid by the supplier. Accordingly, once the GST has
been paid, the buyer should be rightfully entitled to avail the credit upon receiving
constructive delivery of goods.

The provisions of seizure and arrest seem rather harsh as GST is an economic legislation, i.e.,
a tax law and not a criminal legislation. The Commissioner has the power to arrest on the
basis of reasons to believe. The wording is subjective (i.e., depending on the opinion). An
honest taxpayer who, for example, did not pay GST because he genuinely believed GST was
not applicable to him might get his goods seized and get arrested. It could be a case of wrong
interpretation of the law for which penalty might apply but arrest seems too harsh. GST law
should have more clarity on the occasions when a person can be arrested considering that it is
a new law and there are bound to be genuine errors.