CAN ARRESTS/ DETENTION PROVISIONS BE INVOKED WHEN APPEARING FOR SUMMONS UNDER GST?

CAN ARRESTS/ DETENTION PROVISIONS BE INVOKED WHEN APPEARING FOR SUMMONS UNDER GST? - masterbrains

Have you heard about the arrest/detention provisions under the GST Act? Have you also received a summon from GST Authorities?

In all good intentions, the department has been rigorously investigating fraudulent availment of Input tax credit ('ITC') and fake invoicing cases where the actual movement of goods never happens. In such cases, it has been observed by various courts that the assessees called upon by way of issuing summons are afraid of invoking arrest or detention provisions if they appear for summons.

Do you know what is a 'summon'?

'Summon' means to order someone to appear before them with some evidence or documents or for recording the statements, etc.

Are there any provisions to be kept in mind by the department while issuing summons?

The following provisions under Central Goods and Services Tax Act ('CGST Act'), 2017, shall be considered while issuing summons. If not considered, the assessee has a ground that may prove consequential in cases escalating to higher authorities. They are as follows:

Section 70: Power to summon persons to give evidence and produce documents

Under this provision, the proper officer has the power to summon any person whose attendance is considered necessary to give evidence or produce a document/any other thing in inquiry, in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908.

Also, every such inquiry shall be deemed to be a "judicial proceeding" within the meaning of Section 193 (imprisonment of 7 years with a fine for giving false evidence) and section 228 (imprisonment of 6 months for insulting or interrupting public servant) of the Indian Penal Code.

What is a 'Proper Officer' in the above provision?

'Proper Officer" means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board (Section 2(91), CGST Act).

Further in CGST Act, 2017 in Section 70 the word 'The' before the words 'proper officer' have been used. This implies that a specific officer has been assigned with authority to issue summon under the said section.

Further, CBIC assigns 'Superintendent of Central Tax' as the proper officer for section 70 (Entry 4 of Circular 3/3/2017 dated 05.07.2017). Also, CBIC appoints Senior Intelligence Officer, GST Intelligence or Superintendent, GST Audit as Superintendent (entry 8 of Notification No. 14/2017 Central Tax dated 01.07.2017).

Since the initiation of investigations on fake invoices and fraudulent availment of ITC, manier assessees have sought relief from the High Courts by filing writs.

Specific procedures and principles have also been laid down by the Hon'ble Courts which are better explained in the summary of the following judicial pronouncements:

  • Ankit Bhutani v. Union of India [(2020) 116 taxmann.com 330 (Allahabad)]
    In the present case, the petitioner did not make his presence on the date of summons before the GST Dept. and by the way of writ requested to finalize enquiry proceedings. He also requested to not take any coercive action against him before holding him guilty in inquiry proceeding and to treat assessee's presence or appearance through his representative with all relevant documents as and when required. The writ was dismissed without providing relief to the assessee.
  • Bharat Raj Punj v. Commissioner of CGST Dept., Jaipur [(2019) 104 taxmann.com 174 (Rajasthan)]
    In the present case, the petitioner being the MD of the Company was summoned for the recording of the statement and was arrested for fraudulent availment of ITC under GST. The petitioner filed a writ praying for quashing of the summon and not to take any coercive action. The writ was dismissed without providing relief.
  • P V Ramana Reddy v. Union of India [2019-TIOL-873-HC-TELANGANA-GST]
    In the present case, the petitioner and others were summoned by the officers of GST Dept. The petitioners filed a writ application in the Telangana High Court for anticipatory Bail and requested no coercive action against them. However, no relief was granted by the Hon'ble High Court.
  • Dhirendra Singh v. Commissioner, CGST Commissionerate [(2021) 127 taxmann.com 577 (Gujarat)]
    In the present case, the petitioner was summoned for evidence and documents, the petitioner filed a writ petition seeking relief from this and that he might get arrested on the appearance on the date of summons, but the Hon'ble High court rejected the plea on no valid legal grounds.
  • Gail Gas Ltd. v. DGGI [(2018) 100 taxmann.com 242 (Delhi)]
    In the present case, the senior officers of the petitioner company were summoned by the DGGI, the petitioner company filed a writ requesting the DGGI to intimate officers who were familiar with records and the same was allowed by the Hon'ble High Court.
  • JSK Marketing Ltd. v. Union of India [(2021) 124 taxmann.com 483 (Bombay)]
    In the present case, the petitioner’s director i.e., the company's director was summoned by State GST Dept. for providing evidence and documents during the investigation. The petitioner (company) has filed a writ seeking protection for its director by the fear of being arrested but the Hon'ble High Court rejected the plea by disposing of the writ.
  • Meghraj Moolchand Burad v. DGGI [(2019) 21 GSTL 125 (Bombay)]
    In the present matter, the petitioner had filed a plea before Additional Sessions Judge for pre-arrest bail and the same was rejected. Then the appeal for the same was made before the Hon'ble Bombay High Court and was rejected as the petitioner has caused a huge loss to the exchequer.

    Meghraj Moolchand Burad v. DGGI [2019 (1) TMI 1563 – SC of India]
    The petitioner approached the Hon'ble Apex Court by the way of SLP and the court directed the DGGI not to arrest the petitioner as the petitioner would cooperate with the Dept.
  • Nannapaneni Krishnamurthy v. State of Andhra Pradesh [(2021) 128 taxmann.com 250 (Andhra Pradesh)]
    In the present matter, the petitioner was summoned to appear on 22-4-2021 and 24-4-2021 and the petitioner filed a writ seeking relief from arrest on both the dates of summon. The Hon'ble High of Andhra Pradesh accepted the request and directed the officers not to take any coercive steps like arrest on the date of these two summons.
  • Nitesh Wadhwani v. State of M.P.[(2020) 118 taxmann.com 520 (Madhya Pradesh)]
    In the present matter, the petitioner filed a writ before the Hon'ble High Court of Madhya Pradesh seeking protection against arrest or coercive action by the GST officers as the GST Dept. alleged that the petitioner did not adhere to the summons issued. The petitioner stated that his real uncle cooperated in the investigation and still was arrested by the officers without any intimation. The writ was accepted and direction to the revenue was provided not to take any coercive steps against the petitioner.
  • Nitin Verma v. State of U.P [(2021) 125 taxmann.com 326 (Allahabad)]
    In the present matter, the petitioner filed a writ before the High Court of Allahabad praying for grant of anticipatory bail with reference to summon issued by GST Dept. under section 70 during the pendency of the case as he was in the apprehension of being arrested during the summons. The Hon'ble High Court accepted the request on fulfilment of the conditions mentioned in the order.
  • M/s. Jayachandran Alloys (P) Ltd [2019 105 taxmann.com 245 (Madras)]
    In the present case, the Hon’ble High Court held that Section 132 shall be triggered only on establishing 'committal of offence' that will be post-determination of demand due from an assessee and that the process of an assessment needs to be followed. To reach this decision the Hon'ble High Court relied on the judgement of Union of India & Ors v. Make My Trip (India) Pvt. Ltd. (SC) (Civil appeal number 8080 of 2018 dated January 23, 2019).
  • Pawan Goel And Anr. [2021-TIOL-1318-HC-DEL-GST]
    That the petitioners were alleged to be involved in availing ITC by using fake invoices and the anticipatory bail was cancelled by the Patiala House Court. However, Hon'ble Delhi High Court granted bail as the petitioners were cooperating in the investigation and were not regular offenders.

What inferences can be drawn from the above pronouncements?

The GST Dept. has been on their toes and actively investigating the matters mentioned in Section 132 of the CGST Act, 2017 like the fraudulent availment of ITC without actual movement of goods. However, the above judicial pronouncements can be observed/inferred that High Courts are divided on providing relief in such matters.

Most of the High Courts are not inclined to give relief to the alleged persons as fraudulent availment of ITC is considered to be grave in nature. However, a few High Courts have provided relief by directing the Dept. not to take coercive steps against the assessees who agree to cooperate or cooperate with the GST Dept.

Things to remember for Assessees Summoned:

Superintendent can issue a summon only after obtaining a written permission of an officer whose rank is equal to or higher than that of an Assistant Commissioner. [Section 64(1)].

In the case of Agarwal Foundries Vs. UOI [121 taxmann.com 134 (Telangana HC)], the Hon'ble Telangana High Court, directed that the summons directing assessees to be present at odd hours is not permissible.

The assessee (s) has the right to remain silent during the summons as per Article 20(3) of the Constitution of India which guarantees a fundamental right against self-incrimination. The article says that 'No person accused of any offense shall be compelled to be a witness against himself. [NSR Krishna Prasad (1992) 57 ELT 568 AP and Padam Narain Agarwal AIR 2009 SC 254]

The assessee has the right to retract the statement given while appearing for the summon in a scenario where it is found to be incorrect or was not given under sound mind or was given under coercion, subsequently. [Section 24 in The Indian Evidence Act, 1872]

The assessee has the right to cross-examine the witness/ third party whose statements have been obtained and used against such person. [Principle of Natural Justice]

It is advisable to take time to refresh memory before making a statement. It is always a better option than giving a piece of incorrect information. [Section 159 of Indian Evidence Act]

The assessee can refer to the Books of Accounts and other documents before giving a statement as one cannot be expected to remember everything [Chelapati Ganeswar Rao 1963 AIR 1850, 1964 SCR (3) 297].

Contributed by: Advocate Shubham Goel

Disclaimer: The above content is general and not for legal/professional advice. While the contributor has done proper research to ensure the relevancy of the content, however, contributor or Master Brains shall be under no liability in any manner whatsoever for incorrect information/amendments in due course, if any.

 
     
57068 Times Visited