2020 (6) TMI 744 - HC - GST

Grant of Bail - passing of Input Tax Credit (ITC) by issuing sale bills to various parties without supply of goods - Section 132 of the GGST Act 2017 - HELD THAT - Notice of motion for 30.07.2020. The interim bail already granted due to COVID-19 Pandemic till 11.07.2020 shall stand extended till further orders.

Summary

Issues: Jurisdiction of arrest and criminal trial under Sections 69 and 132 of the CGST Act, 2017

Analysis:
The petitioner, a partner and director of two businesses engaged in trading lead ingots, was arrested under Section 69 of the CGST Act, 2017 for allegedly passing on Input Tax Credit without supplying goods. The respondents filed a complaint under Section 132 of the same Act, alleging offenses. The trial is at the pre-charge evidence stage, with no witnesses examined yet. The petitioner sought bail, which was granted but later extended due to the COVID-19 pandemic.

Constitutional Challenge:
The challenge was laid on the vires of Sections 69 and 132 of the CGST Act, 2017. It was argued that the power to legislate flows from Schedule VII read with Article 246 and specific Articles like Article 35, 323B, and 369. The 101st Constitutional Amendment inserted Article 246-A, empowering Union and State Legislatures to levy GST. The contention was that the power to arrest and prescribe sentences are not ancillary or incidental to tax laws. The power to legislate offenses is established through entries in the Union and State Lists of Schedule VII and various Articles of the Constitution.

Legal Arguments:
The petitioner contended that the power to levy tax includes making laws for ancillary and incidental matters, but arrest and sentencing are not covered. The power to legislate offenses is not incidental, as seen in Article 323-B and other provisions. The argument was supported by references to specific entries in the Union and State Lists, empowering legislatures to make laws for offenses. It was vehemently argued that criminal trials and arrests under the CGST Act, 2017 lack jurisdiction and constitutional backing.

Court's Observation:
The Court found considerable force in the submissions made by the petitioner's advocate. The matter was listed for further hearing, with the respondents accepting notices. The interim bail granted due to the pandemic was extended until further orders.

This detailed analysis covers the issues of jurisdiction regarding arrest and criminal trial under Sections 69 and 132 of the CGST Act, 2017, along with the constitutional challenge raised in the case.