This article has been authored by Pratyush Pandey, a third year Student of Rajiv Gandhi National University of Law, Punjab.
Taxes, for the world, have since ages been a significant source to satiate the treasuries of Dynasties, Dictators, and Democracies. Despite having its provenance in the 3000 BCE Egypt; the term, itself, has a Latin origin from "taxare" meaning "to assess". In a gist, Tax is an enforced contribution of funds, imposed by the Government. At tandem, Taxation is the system of the imposition of obligatory taxes, upon individuals, to maintain revenue for expenditure.
In India, Taxation is as old as the Manu Smriti and ArthaShastra. Notably, Sir James Wilson, the founder of the Modern Indian Tax Law, himself quoted Manu Smriti in the Income Tax Act, 1860. Contemporary India follows 2 tier Taxation, namely, Direct Taxes and Indirect Taxes. While the Direct Tax is covered, majorly, by Income Tax Act 1961; the Indirect taxes come under, the newly enacted, GST Act 2017, that subsumes all the other Indirect Taxes, such as the VAT, Sale Tax, and the like.
Considering the recent judgments on the GST Act, enabling its authorities with great powers, particularly in regards to arrest and punishment. With this Article, the Author would cover the Power of Arrest under the GST regime and would analyze the legal lacunas, present therein.
Arrest, Punish and Bail under the GST Act
The GST Act 2017, lays down among other things, Power to Arrest a GST evader. Section 69 of the Act, quite profusely, gives power to a GST Officer to arrest a person, even only, with a reason to believe. The provisions state that a Commissioner is empowered to make arrests when an offense falls under any one of the four, specific clauses, (Clauses a, b, c, or d) under Section 132(1), on his subjective satisfaction. Moreover, this power is limited, only, to the extent that the offense has to be a Cognizable and Non-Bailable Offence. Notably, the Offence is Cognizable and Non-Bailable, under Section 69, when the amount of tax is more than Rs 5 Crore. Otherwise, for Non-Cognizable and Bailable offenses power to arrest depends on the order of the Magistrate, as per CrPC.
Therefore, for the purpose of arrest, under the GST Act, Section 69 is read with Section 132; and to facilitate it, further;
Firstly, the tax amount must be above Rs 5 Crore;
Secondly, the offense must, expressly, fall under any one of the four clauses under Section 132(1).
Thirdly, the offense must be cognizable and non-bailable, as under Section 132 (5).
The point to be noted here is that, under the GST Act, the power to arrest is unparalleled, and there is no provision for bail unless ordered by a Court. Further, the GST Act is silent on the grant of Anticipatory Bail, and do not refer, or import, the CrPC. Therefore, much of the matters pertaining to it depends upon Court's dictum. Furthermore, when the quantum of tax is more than Rs 2 Crore but less than Rs 5 Crore, the offense falls within any one of the four specified Offences, the arrest is made subject to bail and as per CrPC. In light of these, it is quite evident that within the GST Act, Powers of Arrest and Punishment are quite extensive, with limitations ranging paltry, to none.
The Contrasting views of the High Courts
Different High Courts have given different views on the Power of Commissioner to arrest under the GST Act. While some judgments tried restricting this overwhelming power, some have legitimized its usage for the purpose of the Act. Therefore, to understand the Judicial conscience, let us take into consideration some pertinent High Court Judgments.
In April 2019, the Telangana High Court, in P.V. Ramana Reddy vs Union Of India, upheld the Commissioner's power to arrest under Section 69 of the GST Act. The Court iterated that because the offenses covered under Section 69, read with Section 132, are by very nature cognizable, a FIR is not an essential driver in furtherance of the arrest. Thereby, supplanting "reason to record" with "reason to believe" and making FIR immaterial for arrest. With regards to Anticipatory Bail, the Court rejected the plea. Further, it enunciated that since the offenses are Civil, and there is no necessity for FIR, an Evader cannot implore for Anticipatory Bail under Section 438 CrPC. However, Article 226, the Writ of Mandamus, could be invoked for the same purpose, with the qualifiers "cautiously and sparingly." Thus, the Court limited, almost negated, the chances of Anticipatory Bail with limitations of the Constitutional Overreach.
However, in April 2019 itself, the Madras High Court, in Jayachandran Alloys (P) Ltd vs The Commissioner Of GST & Ors., neutralized the Commissioner's Power to arrest. The Court herein held the Power to Arrest in Section 69, read with Section 132, is activated only when it is established with concrete facts that a person has committed the offense. The Court thus showed a proclivity towards "reason to record". However, to the extent of the mode of a plea for Anticipatory Bail, the Court implicitly agreed to the Ramanna Reddy Case, but further coupled it with various considerations like the conduct of the applicant, the gravity of the offense, and the seriousness of allegations made. Therefore, the Court favoured the relief and granted Anticipatory Bail to the accused.
These two cases, being the Violet and Red of the VIBGYOR, lays before us the larger Judicial View of the Indian Courts, where some follow the former, and some follow the latter. Therefore, for further clarity, the view of the Hon'ble Supreme Court has to be taken into consideration.
The Supreme Court view for Legal Objectivity
A Vacation Bench of the Supreme Court, in Union of India v. Sapna Jain and ors., headed by Hon’ble Ranjan Gogoi C.J., in May 2019, in light of the subjective views of High Courts on Arrests and Anticipatory Bail, in matters pertaining to the GST regime, tried bringing legal objectivity. Clarifying the Legal Position, the Apex Court upheld the Telangana High Court Order, and, thus, the superiority of the Commissioner to make arrests on reason-to-believe-basis. The Apex Court further asked the High Courts not to grant anticipatory bail to evaders, thus, if considering Mukul Rohtagi’s statement, "closing all doors" of relief for GST Evaders.
Thus, in light of the Sapna Jain Case, the order of Telangana High Court stands upheld, and is the law of the land, for contemporaneity. Therefore, under the GST regime, a commissioner has the power to arrest a person in case he has reasons to believe that the tax evasion is likely to be more than Rs 5 Cror without an FIR or the procedure of the CrPC. Further, the chances of Anticipatory Bail are bleak to none, but, a person may approach the High Courts for relief in the form of Pre-Arrest Protection, by way of Mandamus.
Analysis of, what now has become, the Law of the Land
As we amble forth, it is now evident that the Apex Court has negated the relief of Anticipatory Bail in the GST regime. But the question here is “Is this negation proper ?" Firstly, and foremost, in the modern-day economy, businesses can only operate within the periphery of liberty. A Businessman, who is in the constant apprehension that there is a guillotine of arrest hanging on his neck, can never run a business efficaciously, which in turn, when taken as a collective conscience of the nation, weakens and crumble its economy. Exacerbating would be the fact that the person so arrested have the Courts closed their doors for him to seek any relief, which is otherwise open for graver crimes.
The Apex Court, though with noble intent, did just the same by upholding the Telangana High Court Order. It not only buttresses the overwhelming power of Commissioner to Arrest but also defies the principle of natural justice by not harking to evader and shunning them from seeking any relief. In a country like India, particularly, where the natural justice principle, Audi Altrem Partem (let the other side heard), is so deeply ingrained; condescending such an order is unjustifiable. Therefore the Author avers that the order holds a grave constitutional issue, and is arbitrary, unreasoned, and erroneous.
The aspect of "reason to believe" or "subjective satisfaction" adds up to this lacuna, because GST Act, unlike the Income Tax Act, has no set of regulations to check the subjective satisfaction. When on one hand GST Act imports provisions of CrPC for defining the role of Tax-Officers as Police, giving them ample power, it fails to include even a single mention of Anticipatory Bail for the evaders. The Telangana High Court, negated the presence of Anticipatory Bail in the GST regime for it being covering civil offenses and did not heed the import of provisions of CrPC in the GST Act.
All this purports a dichotomy the legislature and the Judiciary have made. The aspect of Anticipatory Bail can, and shall, not be effaced from corporeal punishment, because when a Direct Tax Evader has the avail of Anticipatory Bail, and a GST evader not, it simply defies the Constitutional notion of equality before the law. Though Anticipatory Bail is not a matter of Right or covered within the Golden Triangle, Article 14, 19 & 21. It is a relief of great avail when a person is charged and incarcerated, falsely, with trumped-up charges. Therefore, the Author avers that the repudiation of Anticipatory Bail in the GST Regime is a legal blunder, and is deviant from the Constitutional and Natural Justice values of India.
Power to Arrest is a significant instrument of maintaining Law and Order. Courts have recurrently emphasized on the incumbent responsibilities an authority hold when granted such power. However, a dictum, like that of the Telangana High Court, which patronizes the overwhelming power of arrest, that outrightly, shunts the morals of the Constitution and Natural Justice, is unjustifiable. GST Law is indeed a "special law"; however, skirting natural justice in that context cannot be justified. Therefore, firstly the law, and secondly the order must be amended. The legislature should, through an amendment import Anticipatory Bail in the GST Act and liberalize the Power of Arrest granted to its Commissioner. The Apex Court, like the Income Tax Act, must try removing the interpretational issues in the GST Act and should lay down guidelines for the "reason to believe" qualifier of initiating arrest. GST, as a law, is a very new regime in the Indian Legal System and has a long way to go to achieve its relative ideal type. Therefore the aim should be to pursue perfection. Naturally it is impossible, however the solution and a combined effort is what really matters, therefore the same must be a defined aim of both the Judiciary and the Legislature.