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October 13, 2020

Know all about arrest under GST

by CA Shivam Jaiswal in GST

Know all about arrest under GST

In any tax administration the provisions for Inspection, Search, Seizure and Arrest are provided to protect the interest of genuine tax payers as the Tax evaders, by evading the tax, get an unfair advantage over the genuine tax payers. These provisions are also required to safeguard Government’s legitimate dues. Thus, these provisions act as a deterrent and by checking evasion provide a level playing field to genuine tax payers. Let us understand provisions pertaining to arrest under GST in this article.

When can someone be arrested under GST?

Section 69 of the CGST Act pertains to power to arrest under GST. If the Commissioner of CGST/SGST believes a person has committed an offence u/s 132, he may, by order, authorise any officer of central tax to arrest such person. The arrested person will be informed about the grounds of his arrest. He will appear before the magistrate within 24 hours in case of cognizable offence.

Is any approval required before arresting any person under GST?

Provisions for arrests are used in exceptional circumstance and only with prior authorisation from the Commissioner.

What are the offences mentioned in Section 132 of the CGST Act?

Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences shall be punishable under GST as per Section 132.

a. supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax

b. issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

b. avails input tax credit using such invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill

c. collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

d. evades tax, or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d)

e. falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;

f. obstructs or prevents any officer in the discharge of his duties under this Act;

g. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder

h. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder

i. tampers with or destroys any material evidence or documents

j. fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or

k. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section

What is the punishment for offences committed under Section 132?

Offences mentioned in points (a) to (k) above shall be punishable as follows:

  • in cases where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 500 lakh, with imprisonment which may extend to 5 years and with fine
  • in cases where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 200 lakh but does not exceed Rs 500 lakh, with imprisonment which may extend to 3 years and with fine
  • in the case of any other offence where the amount of tax evaded or the ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 100 lakh but does not exceed Rs 200 lakh, with imprisonment which may extend to 1 year and with fine
  • in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment which may extend to six months or with fine or with both.

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What is the punishment for subsequent offence?

Where any person convicted of an offence under section 132 is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment which may extend to 5 years and with fine.

What is the general procedure to be followed while arresting someone?

Section 46 of The Code of Criminal Procedure, 1973 states how an arrest should be made. According to Section 46:

  • In making an arrest the police officer or other person making the same shall actually touch or confine the body of the person to be arrested, unless there be a submission to the custody by word or action
  • If such person forcibly resists the endeavour to arrest him, or attempts to evade the arrest, such police officer or other person may use all means necessary to effect the arrest.
  • Nothing in this section gives a right to cause the death of a person who is not accused of an offence punishable with death or with imprisonment for life.

The person arrested has a right to know his grounds of arrest. Apart from certain exceptional circumstances, no women shall be arrested after sunset and before sunrise. If such exceptional circumstances exist, then arrest shall be made by making a written report and obtaining  prior permission of the Judicial Magistrate within whose jurisdiction the offence is committed or the arrest is to be made

What do you mean by cognizable offence and non-cognizable offence?

A cognizable offence is an offence in which the police officer, can arrest the convict without a warrant and can start an investigation without the permission of the court. Cognizable offences are generally heinous or serious in nature.

A non-cognizable offence is the offence listed under the first schedule of the Indian Penal Code and is bailable in nature. In case of a non-cognizable offence, the police cannot arrest the accused without a warrant as well as cannot start an investigation without the permission of the court.

What do you mean by bailable offence and non-bailable offence?

Section 2(a) of CrPC defines bailable offences as the offence that has been shown in the First Schedule as bailable or which is made bailable by any other law for the time being in force. 

As per Section 2(a) of CrPC, non-bailable offence includes all those offences which are not included in bailable offence in the First Schedule. A person accused of a non-bailable offence does not have the right to be released on bail but the bail can be granted at the discretion of the court, subject to certain conditions 

What offences are cognizable and non-bailable under GST?

According to Section 132(5), the following offences are cognizable and non-bailable under GST:

  • supply of any goods, services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax
  • issue of any invoice or bill without supply of goods, services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
  • availment of input tax credit using such invoice or bill referred to in clause (b) or fraudulent availment of input tax credit without any invoice or bill
  • collecting any amount as tax but failing to pay the same to the Government beyond 3 months from the date on which such payment becomes due
  • receiving or in any way concerned with the supply of, or in any other manner dealing with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder

In the GST administration, the provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders to prevent evidence tampering and the alleged person from absconding. It is a tool given to the Department for investigation and should be used only in exceptional circumstances.  Misuse of such provisions for completing revenue targets will consequently result in harassment of taxpayers which is not the rationale behind these provisions. To some these may appear very harsh but these are necessary for efficient tax administration and also act as a deterrent and instil a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorisation from the Commissioner.

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