The Delhi High Court has upheld the controversial provisions in the Central Goods and Service Tax (CGST) Act that gives power to authorities to arrest any person if there is “reason to believe” that he has committed tax evasion.
A Bench of Justice Manmohan and Justice Sanjeev Narula gave the decision on a petition challenging Sections 69 (power to arrest) and 132 (punishment for certain offences) of the CGST Act.
The petitioners here, a man and a firm facing action for allegedly availing fraudulent IGST refund and Input Tax Credits (ITC), had claimed that Section 69 being of criminal nature, it could not have been enacted under Article 246A of the Constitution. However, the High Court ruled “…the pith and substance of the CGST Act is on a topic, upon which Parliament has power to legislate as the power to arrest and prosecute are ancillary and/or incidental to the power to levy and collect Goods and Services Tax”.
It opined that both Sections 69 and 132 of the CGST Act are “constitutional and fall within the legislative competence of Parliament”. The court remarked that the scope of Article 246A is “significantly wide” as it not only empowers both Parliament and State Legislatures to levy or enact GST Act, but also grants the power to make all laws ‘with respect to’ GST.