2025 (7) TMI 1612 - HC - GST

Challenge to vires of Sections 69 and 132 of Central Goods and Services Tax Act 2017 - Power to Arrest and Punishment - lack of legislative competence and being violative of Articles 14 20 and 21 of Constitution of India - parties are ad idem that in the present factual matrix challenge to vires of Sections 69 132 CGST Act no longer survives - HELD THAT - The parties are ad idem that controversy as raised in these writ petitions is now squarely covered in favour of revenue in terms of judgment of Hon ble the Supreme Court in Radhika Agarwal Vs. Union of India and others 2025 (2) TMI 1162 - SUPREME COURT (LB) . Hon ble the Supreme Court in the said case upheld constitutional validity of Sections 69 and 132 of CGST Act. While rejecting the argument in aforementioned case that legislature lacked the competence to enact the said provisions Hon ble the Supreme Court held that Article 246A of the Constitution is a special provision defining the source of power and field of legislation for the Parliament and State Legislature with respect to CGST and that Parliament under Article 246A of the Constitution has the power to make laws regarding GST and as a necessary corollary enact provisions against tax evasion. Keeping in view the facts and circumstances as above challenge to vires of Sections 69 132 CGST Act is negated and prayer in this respect is rejected. All the abovesaid writ petitions are accordingly disposed of in terms of judgment of Hon ble the Supreme Court in Radhika Agarwal Vs. Union of India and others. Application disposed off.

Summary

ISSUES:

Whether Sections 69 and 132 of the Central Goods and Services Tax Act, 2017 (CGST Act) are constitutionally valid and within legislative competence.Whether Sections 69 and 132 of the CGST Act violate Articles 14, 20, and 21 of the Constitution of India.The scope and conditions under which the power of arrest under Section 132(5) of the CGST Act can be exercised.Whether an arrest under Section 132(5) of the CGST Act can be made prior to completion of assessment proceedings under Section 73 of the CGST Act.

RULINGS / HOLDINGS:

The constitutional validity of Sections 69 and 132 of the CGST Act is upheld as these provisions fall within the legislative competence under Article 246A of the Constitution. The Court held that "Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies."The provisions do not violate Articles 14, 20, or 21, as the powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect GST and prevent tax evasion.An order of arrest under Section 132(5) of the CGST Act requires the Commissioner to record "reasons to believe" that the person has committed a "non-bailable offence" with reference to "material" forming the basis of such belief; arrest cannot be based on "mere ipse dixit without foundational reasoning and material."The power of arrest under Section 132(5) may be exercised even before completion of assessment proceedings under Section 73, provided the Commissioner has "a sufficient degree of certainty" and records explicit reasons supported by material that the offence is non-bailable and the amount of tax evaded falls within the specified limits.

RATIONALE:

The Court applied the constitutional framework under Article 246A, which grants Parliament and State Legislatures legislative power over GST, including ancillary powers necessary for effective tax collection and prevention of evasion.Precedents emphasizing a broad and liberal interpretation of legislative competence entries were relied upon, including the principle that "the most liberal construction should be put on the words so that they may have effect in their widest amplitude."The Court referred extensively to the Supreme Court's judgment in Radhika Agarwal Vs. Union of India, which upheld the vires of Sections 69 and 132 and clarified procedural safeguards and conditions for arrest under the GST Acts.The Court emphasized procedural safeguards requiring the Commissioner to record reasons to believe based on evidence, not suspicion, and the necessity of compliance with rights of the accused in arrest and detention, paralleling principles under the Customs Act.No dissent or doctrinal shift was noted; the judgment follows binding Supreme Court authority and clarifies the application of arrest powers under the CGST Act.