Gujarat HC reminds Revenue to exercise the power of ‘arrest’ with lot of care & caution

Categories: Advance Ruling
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The Hon’ble Gujarat High Court has succinctly clarified the manner as to how an investigation pertaining to alleged non-compliance of GST is to be dealt with recently in the matter of Vimal Yashwantgiri Goswami vs the State of Gujarat.

Facts:

Vimal Yashwantgiri Goswami (“the Petitioner”) who is a proprietor of Heugo Metals has requested the court to issue a writ of Mandamus and/or Writ of Prohibition and/or any other appropriate writ, order or direction, directing the Respondents not to take any action against him exercising powers under Section 69 read with Section 132 of the CGST Act, 2017 (“CGST Act”) without following due procedure of law of assessment and adjudication of alleged evasion of GST as contemplated under Section 61, Section 73 or Section 74 of the CGST Act.

Issues involved:

Whether the Revenue is entitled to arrest a person in an arbitrary manner without following the due course of law?

Held:

The Hon’ble Gujarat High Court in the matter of Special Civil Application No. 13679 of 2019 dated August 7, 2019, observed as under:

  • The powers of arrest under Section 69 of the CGST Act are to be exercised with a lot of care and circumspection. The prosecution should normally be launched only after the adjudication is completed. To put it in other words, there must be in the first place a determination that a person is “liable to a penalty”. Till that point of time, the entire case proceeds on the basis that there must be an apprehended evasion of tax by the assessee.
  • Reliance is placed on the decision of the Delhi High Court in the case of Makemytrip (India) Pvt. Ltd. vs. Union of India [2016 (44) S.T.R. 481 (Del.)] as well as decision of the Madras High Court in the case of M/s Jayachandran Alloys (P) Ltd. vs the Superintendent of GST and Central Excise and Others in the Writ Petition No.5501 of 2019 decided on April 4, 2019, which emphasised the safeguards as enshrined under the Constitution of India, particularly under Article 22 (arrest) and Article 21 (No person shall be deprived of his life and liberty except according to the procedure established by law).

Conclusively, the Hon’ble High Court issued Notice to the Revenue while directing that “no coercive steps of arrest shall be taken against the writ applicant”. The matter will be posted on September 18, 2019.

Citation:  TS-618-HC-2019(GUJ)-NT