Arrest trick in GST to force collection is condemned as offence by Apex court

 When an inspection without proper jurisdiction is carried out, the verdict by the Hon’ble Supreme Court to clarify the powers of arrest by the Customs and GST Authorities has restored the rights of Registered Persons under the respective Acts. It is clearly reiterated that the in order to arrest a Registered Person, firstly the provisions of Section 69 read with Section 132 of Central GST Act, 2017 are to be invoked. Few extracts for reference: 

The aforesaid exercise should be undertaken in right earnest and objectively, and not on mere ipse dixit without foundational reasoning and material. The arrest must proceed on the belief supported by reasons relying on material that the conditions specified in sub-section (5) of Section 132 are satisfied, and not on suspicion alone. An arrest cannot be made to merely investigate whether the conditions are being met. The arrest is to be made on the formulation of the opinion by the Commissioner, which is to be duly recorded in for the reasons to believe. The reasons to believe is not mere suspicion but based on information on hand to the satisfaction of the Commissioner that the requirements of sub-section (5) to Section 132 of the GST Act are met.

 The unfortunately Section 70 of Central GST Act sometimes invoked without procuring jurisdiction from one of those underlying provisions such as Section 67, 65 etc, as section 70 independently doesn’t give such power, and have the audacity to threaten for an arrest. There would be no investigative material nor any finding in inspection but a mere reconciliation of Form GSTR 2A and Form GSTR 3B or difference between Form GSTR 7 and Form GSTR 1 etc. for said number of years. Any right exercised under Section 160(2) read with Section 67(10) , often it lack due traction from revenue. When a liberty assumed by the officer can have such strength, then a Right embedded in law can equally have its valor. The illegality of such demands made are exposed by the submission made to the Hon’ble Supreme Court as follows: 

The Per Cent of recovery of ITC fraud cases has frowned from 92% in FY 2017-18 to a mere 9% in 2023-24. This enormity in demand canvassed by revenue were from illegal procurement of jurisdiction for Inspection, search and seizure cases. In some cases authorization in From GST INS-01 is only a paper sake without adequate ‘reasons to believe” should pre-exist at the time of such authorization under section 67(1). And irony is that having procured the jurisdiction through taxpayer acquiescence or innocence, a full-fledged audit process often carried out which is barred under section 67. The Hon’ble Court has pointed that without any sufficient relevant material to the satisfaction required in law, any arrest made is erroneous and illegal. Similarly, when there is inspection without sufficient reasons to believe, would be illegal. A remedy under Section 67(10) read with Section 160(2) of Central GST Act rejected or ignored without any reason and proceeding to demand is coercion, is also an offence. The weight of liberty of revenue to canvass any demand has made it difficult for a vigilant Registered Person to enjoy his rights insulated under law. The facts reproduced in the tables above are loud and clear.

- K N Akshaya, MA, LLB