On this the Supreme Court has made it clear that an order to arrest under GST law needs to be communicated to the person to enable the arrest. This is for arrests under Section 69 of the Central Goods and Services Tax (CGST) Act and the objective of the Court is to protect the right of the individual to know what he can expect, and where he or she is going to go to seek legal remedy.
The judgment was delivered by a bench of Justices Dipankar Datta and Sheel Nagu. When the Commissioner records the necessary “reasons to believe” and passes an order authorising arrest, that order should be communicated to the person concerned, the court said. The court directed that the order can be issued via email before the arrest is carried out.
The case concerned Sunil Biyani, a non-executive director of Future Group. The Bombay High Court had given him a week’s protection from arrest if GST authorities took action against him later to arrest him. The Supreme Court held that the protection after dismissal of the pre-arrest bail plea was not legally permitted but also pointed out that in fact a Section 69 arrest order should be communicated.
The Supreme Court’s reasoning is based on personal liberty and legal remedies. If someone doesn’t know that an arrest order has been issued, it’s difficult to challenge the order or seek anticipatory bail. The court said that communicating the order can help the person exercise his or her legal rights and that the “reasons to believe” recorded by the Commissioner can be reviewed in court.
The ruling will not mean that GST authorities can arrest people accused of serious tax crimes. Section 69 ensures that the Commissioner can authorise an arrest if the statutory conditions are satisfied. But the Supreme Court has added an important procedural safeguard: once an arrest order is issued, the affected person must be informed before the authorities proceed with the arrest. The government also gave in the course of the court that there was no reason to withhold the order from the concerned person.
The decision could have wider implications for GST investigations of tax evasion, fraudulent input tax credit and other crimes covered by Section 132 of the CGST Act. Businesses and individuals under investigation will now have a clearer picture of when they have an actual arrest threat and if they are entitled to judicial protection.
The judgment also makes a distinction between GST summons or ongoing investigation and actual arrest authorisation. Just having a summons does not mean anything but that an arrest order has been made by Section 69. From the legal point of view of the judgment, Section 69 order is significant in that it records the Commissioner's reasons to believe and formally authorises the arrest.
Overall, the Supreme Court’s decision in this case is very positive for GST enforcement and personal liberty protection. The authorities still have that power to investigate and arrest, but in such cases the arrest authorisation needs to be made public before the police exercise it.
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