INCONGRUITIES IN SECTION 69 AND 132 OF CENTRAL GOODS AND SERVICES TAX ACT, 2017

[Mr. M. GOVINDARAJAN]

Cognizable offences

Section 132(5) of the Central Goods and Services Act, 2017 (‘Act’ for short) provides that the offence specified in section 132 (1) (a) to (d) shall be cognizable and non bailable.  The following offences are cognizable offences under the Act-

1. supplies any goods or services or both without issue of any invoice, in violation of the Act or the rules made there under, with the intention to evade the tax;
2. issues any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made there under leading to wrongful availment or utilization of input tax credit or refund of tax;
3. avails input tax credit using such invoice or bill referred to in clause (b);
4. 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.

Non cognizable offences

According to section 132(4) the following are non cognizable offences-

• evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under section 132(1) (a) to (d);
• falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under the Act;
• obstructs or prevents any office in the discharge of his duties under the Act;
• acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying or purchasing or in any other manner deals with, any goods which he knows or reasons to believe are liable to confiscation under the Act or the rules made there under;
• receives or in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of  any provisions of the Act or the rules made there under;
• tampers with or destroys any material evidence or documents;
• fails to supply any information which he is required to supply under the Act or the rules made there under or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
• attempts to commit, or abets the commission of any offence mentioned above and in section 132(1) (a) to (d).

Power to arrest

Section 69(1) of the Act provides that where the Commissioner has reasons to believe that a person has committed any offence in clause (a) or clause (b) or clause (c) of clause (d) of the section 132(1) or section 132(2) he may, by an order, authorize any offence of central tax to arrest such person.

Section 69(2) of the Act provides that where a person is arrested under section 69(1)  for cognizable and non bailable offences under section 132(5), the officer authorized to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours.

Section 69(3) of the Act provides that subject to the provisions of the Code of Criminal Procedure, 1973-

• where a person is arrested under section 69(1) for any non cognized offence under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate;
•  in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.

Incongruities

In ‘P.V. Ramana Reddy v. Union of India’ – 2019 (4) TMI 1320 - TELANGANA AND ANDHRA PRADESH HIGH COURT, the Telengana High Court found some incongruities in section 69 itself and in section 69 and section 132 of the Act.

The High Court found that it is clear from section 69(1) of the Act that the power of the Commissioner to order the arrest of a person, can be exercised only in cases where such a person is believed to have committed a cognizable and non bailable offence as in section 132(1)(a) (d) of the Act.  The offences indicated in section 132(1)(e) to (l) are non cognizable offences and bailable. 

The High Court found an incongruity between section 69(1) and 132 (4) and (5).  The incongruity is that when the very power to order arrest under section 69(1) is confined only toe cognizable and non bailable offence, how an order for arrest can be passed under section 69(1) been respect of offences which are declared as non cognizable and bailable offences under section 132(4) of the Act.

The High Court found that the power of arrest under section 69(1) of the Act deal is confined only to cognizable and non bailable offences, is also fortified by section 69(2) which obliges the Officer, who carries out the arrest to inform the arrested person of the grounds of arrest and to produce him before a Magistrate within 24 hours.  The duty enjoined upon the Officer carrying out the arrest, to inform the arrested person of the grounds of arrest, to inform the person of the  grounds of arrest and to produce him before a Magistrate within 24 hours, is co-relatable under section 69(2) of the Act to section 132(5) of the Act that deals only with cognizable and non bailable offences.

The phrase ‘subject to the provisions of the Code of Criminal Procedure’ is used only in section 69(3) which deals in entirely only with the procedure to be followed after the arrest of a person who is believed to have committed a non cognizable and bailable offence.  Even though section 69(1) of the Act does not give any power upon the Commissioner to order the arrest of a person, who has committed an offence which is non cognizable, section 69(3) of the Act deals with the grant of bail, remand to custody and the procedure for grant of bail to a person accused of the commission of non cognizable and bailable offences.  Thus the High Court found some incongruity between sections 69(1) and (3) read with section 132 of the Act.