Constitutional validity of 'power to arrest' under CGST Act challenged before the High Court of Bombay

Constitutional validity of 'power to arrest' under CGST Act challenged before the High Court of Bombay

A writ petition has been filed before the High Court of Bombay (HC) challenging the constitutional validity of power to arrest under the Central Goods and Service Tax Act (CGST Act)

The Government claims that firms are booked under the Goods and Service Tax Act (GST Act) for claiming the Input Tax Credit (ITC) fraudulently. Abhishek Rastogi (Petitioner) who is a partner at Khaitan & Co. has filed a writ petition before the HC. The petitioner filed the petition for challenging the validity of Section 69 read with Section 132 (1) of the CGST Act.

The contention made in the petition was that the power to arrest as provisioned under the Act is arbitrary in nature. Under the said provision the GST Commissioner can arrest a person at his discretion based on the ground of having reasons to believe that the person is guilty of fraud under Input Tax Credit (ITC).

According to this provision of the CGST Act, the Commissioner can pass an order of arrest for up to five years, if he believed that the person is engaged in some fraudulent claims. Petitioner claimed that the powers to arrest given to the Commissioner under the said Act are prone to be misused and hence arbitrary in nature.

Further Section 132(2) of the CGST Act, deals with certain specific offenses related to tax evasions exceeding Rs. 5 crore. These offenses are non-bailable and cognizable in nature. Under CGST Act the officials have power under Section 69 of the said Act to proceed with the arrest of the suspect.

The petition contended that the power of arrest given to the official is arbitrary in nature and violates Article 21 of the Constitution of India. Section 69 of the CGST Act is a threat to personal liberty and in violation of the fundamental rights, as mentioned under the Constitution.

The petition stated, "The arrest provision can be used only in those cases wherein there is tax evasion and the adjudication process is complete. Interestingly, 'reason to believe' is mentioned both in the GST power to arrest provisions and Section 438 of the Indian Penal Code for anticipatory bail and hence there must be a fair balance before any harsh step".

The petitioner further mentioned in the petition that the CGST officials have arrested approximately 140 persons in an unscrupulous manner wherein they have misused their powers under the said Act. Hence, the petition requested the Court to look into the constitutional validity of the said provision.