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May 3, 2024

Supreme Court Demands Details of GST Notices and Arrests: Citizens’ Liberty at Stake

The Supreme Court has raised concerns over the issuance of notices and arrests conducted under the Goods and Services Tax (GST) Act, urging the Centre to provide details to prevent any harassment of citizens and to interpret the law effectively. A special bench comprising Justices Sanjeev Khanna, MM Sundresh, and Bela M Trivedi, hearing a series of 281 petitions challenging various provisions of the GST Act, Customs Act, and the Prevention of Money Laundering Act (PMLA), emphasized the need to clarify Section 69 of the GST Act, which deals with the powers of arrest.

Expressing worry over potential ambiguity in the law that could lead to citizens’ harassment, the bench emphasized its commitment to strengthening individual liberties. It directed the Centre to furnish data on notices issued and arrests made under the GST Act for alleged defaults ranging from Rs 1 crore to Rs 5 crore over the past three years. The bench’s directive came after senior advocate Siddharth Luthra, representing some of the petitioners, flagged concerns about the misuse of authorities’ powers under the GST regime, which he argued was impinging on individual liberty.

Luthra highlighted instances where individuals faced harassment through notices threatening arrest, even without actual arrests being made. He pointed out that under the GST Act, arrest should follow an adjudication of the amount due and payable by a taxpayer, raising questions about the legality of curtailing individuals’ liberty before such assessment.

In response, Additional Solicitor General SV Raju assured the court that he would gather data on notices and arrests made under the Central GST Act, although compiling information from states might pose challenges. The bench insisted on obtaining comprehensive data, emphasizing the importance of distinguishing between cases of fraud and inadvertent lapses.

Furthermore, the bench expressed its intention to examine the issue of providing written grounds for arrest to individuals, noting that mere verbal communication of reasons might not comply with principles of natural justice. It drew parallels with the PMLA case, where the court mandated providing written grounds for arrest, suggesting a similar arrangement could be made under the GST Act.

The ASG agreed to address the court’s queries during the next hearing scheduled for May 9. The bench stressed the necessity for arrested individuals to have written grounds for detention to challenge their arrest or plea for remand effectively.

In conclusion, the Supreme Court’s scrutiny of GST notices and arrests underscores its commitment to protecting citizens’ liberties while ensuring effective enforcement of tax laws. The forthcoming data and potential guidelines may shape the future interpretation and application of the GST Act, aiming to strike a balance between compliance and individual rights.

Jhumpa Lahiri

Jhumpa Lahiri

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