Recently a single member High Court Bench has provided for conditional bail of the accused on the condition that they may approach the GST authorities for Compounding of their Offenses as provided under the act. Compounding of Offenses as provided by Section 138 of the GST law would allow the accused to avoid criminal prosecution on admittance and payment of the evaded duty,interest and other penalties.Similar provisions exist in other taxation laws and also in Section 320 of Criminal Procedure Code (CrPC).The provisions of arrest in GST Law are very strict to deter possible evasion of tax in a new taxation regime where all stakeholders have less experience.
In a previous hearing of the same matter the accused who are alleged to be involved in a GST Fraud to the tune of Rs 141 Crore by the Central Goods and Services Department ,Kolkata were denied bail by the Calcutta High Court sighting the provision that since chargesheet was filed by the GST Department under Section 69(1) and 132 of the CGST Act after the ninety days of arrest the conditions of Section 167(2) of CrPC was not applicable and hence the bail petition was rejected. Also, while going into the provisions of Section 41,41A of CrPC for summoning of accused the court had held that these were not pari materia (to be construed together) to similar provisions in the GST Act.
But here the Court has observed here that the authorities should keep the safeguards provided here in consideration while arresting a person under GST Law . It shows that the court is cognizant of the rights of an accused and due process must be provided. It has been stated time and again by courts that arrest should be made as a matter of routine but only when necessary. But even the Apex Court has chosen not to interfered with the mandatory arrest provision of GST Law. It shows that the Courts are cognizant of the seriousness of cases of Economic Crimes where it has been held that the victim is the entire society and economy as a whole.This brings a very higher responsibility on the Executive which exercises this power. Arrest, while not defined legally is said to be the apprehension of a person by legal authority so as to cause deprivation of liberty. Hence, the Courts have given various instructions from time to time like those in which have to be followed strictly in each arrest made by a Police Officer or a Magistrate.The Landmark case of D.K. Basu vs State of West Bengal does come to mind as an edifice of personal liberty against state action.
In order to accomplish the Twin objective of Revenue collection and Business Facilitation, the tax authorities should be like Bee of the Arthashastra who takes only the requisite honey from the flower without causing any undue harm to the flower.But we are in the midst of a Black Swan like Covid-19 scenario where tax revenue and businesses are both going to suffer. There has also been an increase in the number of GST evasion cases. Here, we should not that in order to facilitate the honest taxpayer the dishonest ones need to be penalized.The demands that the various provisions of GST have to interpreted harmoniously to provide the least amount of friction for the honest taxpayers is greater than ever.
The provisions of compounding is an elegant solution where tax disputes can be settled with honest intentions from both side without the threat of arrest. It is a wonder why the same has not been explored further by the Indian Tax System.