Blog No. 5: Whether Adjudication shall precede arrest?

This question has been one of the much debated questions of GST regime and many assessee’s took shelter of this ground during investigation or for grant of bail, if arrested. Recently, Hon’ble Telangana High Court had the occasion to deal with this question wherein they answered it very clearly but made wrong observations on independence of section 69 and 132. These provisions are now examined by Hon’ble Gujarat High Court in the case of 𝑽𝒊𝒎𝒂𝒍 𝒀𝒂𝒔𝒉𝒘𝒂𝒏𝒕𝒈𝒊𝒓𝒊 𝑮𝒐𝒔𝒘𝒂𝒎𝒊 𝒗𝒔 𝑺𝒕𝒂𝒕𝒆 𝒐𝒇 𝑮𝒖𝒋𝒂𝒓𝒂𝒕 reported as 2020 (11) TMI 40 wherein the HC observed as under:

1. Section 69 and section 132 of the CGST Act are 𝒊𝒏𝒅𝒆𝒑𝒆𝒏𝒅𝒆𝒏𝒕 𝒐𝒇 𝒆𝒂𝒄𝒉 𝒐𝒕𝒉𝒆𝒓.
2. When the 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏𝒆𝒓 𝒉𝒂𝒔 𝒓𝒆𝒂𝒔𝒐𝒏 𝒕𝒐 𝒃𝒆𝒍𝒊𝒆𝒗𝒆 that the person has 𝒄𝒐𝒎𝒎𝒊𝒕𝒕𝒆𝒅 𝒂𝒏𝒚 𝒐𝒇𝒇𝒆𝒏𝒄𝒆 as per section 132(1)(a), (b), (c) or (d), which is punishable under the section 132(1)(i) or (ii) or 132(2), then he may pass an order authorising an officer of the department to arrest such person.
3. If it is 𝒄𝒐𝒈𝒏𝒊𝒛𝒂𝒃𝒍𝒆 𝒂𝒏𝒅 𝒏𝒐𝒏-𝒃𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒐𝒇𝒇𝒆𝒏𝒄𝒆 i.e. amount of tax involved is more than Rs. 5 crores, it is the duty of officer to inform the grounds of arrest and produce the person before magistrate within 24 hours [section 69(2)]
4. If it is 𝒏𝒐𝒏-𝒄𝒐𝒈𝒏𝒊𝒛𝒂𝒃𝒍𝒆 𝒂𝒏𝒅 𝒃𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒐𝒇𝒇𝒆𝒏𝒄𝒆 i.e., the amount is less than Rs. 2.50 Cr and is upto Rs. 5 Cr, the concerned officer can enlarge the person on bail [section 69(3)].

The Court also held that, 

1. Denying a person of his liberty is a serious matter. A 𝒑𝒆𝒓𝒔𝒐𝒏 𝒊𝒔 𝒏𝒐𝒕 𝒍𝒊𝒂𝒃𝒍𝒆 𝒕𝒐 𝒂𝒓𝒓𝒆𝒔𝒕 𝒎𝒆𝒓𝒆𝒍𝒚 𝒐𝒏 𝒕𝒉𝒆 𝒔𝒖𝒔𝒑𝒊𝒄𝒊𝒐𝒏 𝒐𝒇 𝒄𝒐𝒎𝒑𝒍𝒊𝒄𝒊𝒕𝒚 𝒊𝒏 𝒂𝒏 𝒐𝒇𝒇𝒆𝒏𝒄𝒆. There must be some reasonable justification in the opinion of the authority effecting the arrest that such arrest is necessary and justified.
2. The provision does not confer upon the GST officers, the powers of the officer in charge of a police station in respect of the investigation and report. This does not necessarily mean that a person alleged to have committed a non-cognizable and bailable offence cannot be arrested without a warrant issued by the Magistrate.
3. It is high time that the GST department prescribes a standardized format for the arrest memo. The format must contain all the mandatory requirements and necessary additions.

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