Can CA be arrested- Section 69 vs. Section 132 of the CGST Act
In recent few months this topic of harassment and arrest of CA professionals been a matter of debate and agony amongst the GST practitioners.
The provisions for arrests were created to tackle certain situations raised by some unscrupulous tax evaders. These provisions may appear to be very harsh but are necessary for efficient tax administration and also act as a deterrent and instill a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorisation from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit.
In this regard, Section 69(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) reads as under:
“69. Power to arrest.
(1) Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub[1]section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person.
” Relevant portion of Section 132 of the CGST Act is reproduced below:
“132. Punishment for certain offences.
(1) [Whoever commits, or causes to commit and retain the benefits arising out of]1 , any of the following offences, namely:- (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;
(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
shall be punishable––
(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;
(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;
(2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.
(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub[1]section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months.
(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, (2 of 1974) all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.
(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub[1]section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.”
From a co-joint reading of the above provisions, as per Section 69 of the CGST Act, the power to arrest can only be invoked when the Commissioner having reason to believe on the basis of concrete or credentials evidence or documents and a person has committed specified offence, however, Section 132 of the CGST Act does not use the term ‘reason to believe’ and it says whoever commits or causes to commit and retains benefit from specified offences.
Thus, for arresting a CA who has simply filed GST return for a professional fee, two conditions must be met for prosecution under Section 132:
- Causes to commit and
- Retaining benefit
Based on above we are sharing our considered view that, it cannot be said that the CA has committed an offence and professional fee cannot be said as retaining the benefit. If Section 69 wanted to arrest such tax professionals, then it should also have used the term ‘causes to commit and retains the benefit of’. Therefore, if the Commissioner wants to arrest such professionals then he has to establish that he has committed a specified offence and retained benefit which can be only established by issuance of a show cause notice and then order being passed under Section 74 of the CGST Act. At most such offence can be a bailable offence under Section 132(4) of the CGST Act.
