• Notification Date: 22-05-2024
• Notification No: N/A

SC Forbids Centre from Using Threats, Coercion during Search & Seizure for Recovering GST

The Supreme Court on Wednesday directed the Centre to not use “threat and coercion” during search and seizure operations against traders for recovery of Goods and Services Tax (GST) and instead persuade them to clear the dues voluntarily.  

A bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi, which is examining various provisions of the GST Act, said there is no provision under the law which empowers the authorities to exert force for payment of outstanding dues. There is no power under the Act to compel any person to pay the tax liability during the search and seizures. Ask your department that the payment should be voluntarily and there should not be use of any force.  

You need to give three-four days’ time to the alleged offender to consult, think and clear the liability. It should be voluntary and there should not be use of any threat or coercion,” the bench told Additional Solicitor General SV Raju, appearing for the Centre.  

“Yes, there is possibility of both ways but mostly the payment is done voluntarily or after a few days as the alleged offender wanted to consult his advocate for payment of liability. Yes, there may have been some instances in the past but that is not the norm,” he said during the day-long hearing.  

The bench said several petitioners have alleged that the authorities exercised threat and coercion during search and seizure operations. It said, “We know what is on paper and what happens when a person is subjected to search and seizure. If there is denial of payment, you can provisionally attach the properties, but you need to give some time to consult, think and clear the liability. You can’t put him under threat and coercion of arrest.”  

When Raju said many times, the alleged offenders adopt various methods to evade taxes, the bench told him, “Arrest him but it should be strictly under the procedure laid down under law.” It said unlike the Income Tax Act, there is a provision for arrest under section 69 of the GST Act.  

Senior advocate Sujit Ghosh, appearing for one of the petitioners, said safeguards provided under the law are not implemented and instead people are subjected to threat of arrest to pay up. During the hearing on a batch of 281 petitions which have challenged various provisions of the GST Act, Customs Act and the Prevention of Money Laundering Act, the bench told Raju that the GST law provides for checks and balances.  

“We agree there cannot be a broad-brush approach, but we have to ensure that safeguards are there. There needs to be a strict compliance of section 69 (power to arrest) and section 70 (power to summon). When the legislature has enacted safeguard provisions, then they need to be implemented strictly. You have to apply your mind at the time of summon or arrest,” the bench told Raju. The law officer spoke of instances when goods are transported in oil tankers, auto-rickshaws and various methods are adopted to evade liability.