As India Inc continues to demand respite from ‘tax terrorism’, the one power bestowed upon tax officials that is now back in the spotlight is the power to arrest. Be it I-T department officials or the GST commissioner, multiple legal provisions allow tax officials to make arrests without even securing a warrant from court.
But, under what circumstances can tax officials wield their powers to put individuals behind the bars? Read on to find out.
Section 69 of the Central Goods and Services Act 2017 (CGST) empowers the GST commissioner to order the arrest of a person. In certain cases, depending on the offence committed, the arrest can be cognisable and non-bailable. The commissioner also has the power to authorise an officer to make the arrest, reported Cleartax.
When read along with Section 132 of the CGST Act, 12 different types of offences have been listed out that could lead to an individual’s arrest. Some of these include:
If the tax amount involved exceeds Rs 2 crore but does not exceed Rs 5 crore, the person could face three years imprisonment and must pay a fine. In this case, there is provision for bail.
In cases where the amount is over Rs 1 crore but doesn’t exceed Rs 2 crore, the individual could be slapped with a fine and imprisonment up to one year. Here too, there is provision for bail.
1. Manpasand Beverages MD, CFO Arrested
In May 2019, GST officers arrested Abhishek Singh (MD) and Paresh Thakkar (CFO) of Gujarat based Manpasand Beverages for tax evasion worth Rs 40 crore and availing fraudulent credit. The CSGT authorities stated that they had ‘unearthed a huge racket of creating fake/dummy units’.
The authorities released a statement that said, “The continuing investigation has unearthed a network of more than 30 fake units located in various parts of the country which were used for committing fraud by availing illegal credit. The investigation regarding the ultimate beneficiary of the fraud and web of shell companies is under progress,” reported Business Today.
2. Telangana High Court Refused To Grant Relief Against Arrest
In April 2019, the Telangana High Court refused to grant any relief against arrest to the petitioners accused of claiming fraudulent input tax credit. The court stated that it was refusing this ‘in light of summons issued by Superintendent (anti-evasion) of the Hyderabad GST Commissionerate under the Central Goods and Services Tax Act, 2017’, reported Business Today.
The Supreme Court dismissed the same plea and refused to interfere with the Telangana High Court’s order.
3. SC Agrees To Examine CGST Powers to Arrest Individuals
Tax officials have been bestowed with the powers to arrest individuals since even before the implementation of the CGST Act. The Income Tax Department designated an official called the Tax Recovery Officer (TRO) to detain and arrest tax defaulters under provisions of the IT Act.
While speaking to The Quint, Chairman of Manipal Global Education and former Infosys Director, Mohandas Pai, compared his experience with tax officials in India and foreign countries.
Advocate Abhishek A Rastogi points out the loopholes in the GST system that often lead to arrest of individuals who are not even directly involved in the case.
“People have just been taken into judicial custody and locked up for 60 days. The authorities have not filed charge sheet in most of the cases. This trauma for any business is not a good sign especially when it can be proved that there is no tax leakage. I don’t think that happens anywhere else. We haven’t heard of such cases,”
Rastogi adds.
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