• Notification Date: 23-05-2024
• Notification No: N/A

SC Rules for Arrest under GST Act not to be Based Solely on Suspicion

The Supreme Court told the Centre on Thursday that any arrest under the Goods and Services Tax (GST) Act should not be on mere suspicion but has to be based on cogent material and adherence to proper procedure. 

A bench of Justices Sanjiv Khanna, M M Sundresh and Bela M Trivedi said the material upon which an arrest is made should be verifiable by a magistrate.  

"An arrest under the Act cannot be on mere suspicion but after proper inquiry and adherence to the procedure laid down under the law. It should be based on material that should be verifiable by the magistrate and certified by the commissioner," the bench told Additional Solicitor General (ASG) S V Raju, who appeared in the court on behalf of the Centre.  

The ASG replied, "Yes, any arrest made is based on proper material. We do not arrest anybody in the air." 

The court is hearing a batch of 281 petitions that have challenged various provisions of the Customs Act, the GST Act and the Prevention of Money Laundering Act amid allegations of misuse of penal provisions. 

Dealing with the Customs Act, Raju said the right to arrest is not taken away from a customs official and a special legislation overrides any other law in force.  

"For investigating and arrest, the only condition required is approval of the commissioner," he submitted.  

The bench said it will pronounce its verdict on the legal principle and deal with individual cases separately. 

"There are too many petitions, and it will be impossible to include all the facts in a judgment. Therefore, we will deal with individual cases separately after pronouncing the verdict on the legal principles in question," the bench said. 

The hearing remained inconclusive and would continue on May 14, when Raju will make submissions on GST provisions. 

On Tuesday, the top court directed the Centre not to use "threat and coercion" during search-and-seizure operations against traders for the recovery of the GST and said they should be persuaded to clear the dues voluntarily.  

Examining various sections of the GST Act, the bench said there is no provision under the law that empowers authorities to exert force for the payment of outstanding dues. 

On May 2, the top court had asked the Centre to furnish details about the issuance of notices and arrests effected under the provisions of the GST Act, saying it may interpret the law and lay down appropriate guidelines to avoid harassment of citizens by depriving them of their liberty. 

It voiced concern over the ambiguity in section 69 of the GST Act that deals with the powers of arrest. 

The top court had said it would interpret the law to "strengthen" the concept of liberty, if need be, but not allow citizens to be harassed.