Avoid Arrest In GST Cases Of Technical Nature, Don't Use This Power Mechanically : CBIC Issues Guidelines

The CBIC has issued guidelines in the light of the decision of the Supreme Court in the case of Siddharth vs. The State of Uttar Pradesh, dated August 16, 2021. The Supreme Court held that if arrests are made routine, they can cause incalculable harm to the reputation and self-esteem of a person. If the investigating officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, cooperated with the investigation, then why should there be a compulsion on the officer to arrest the accused.

"Since arrest impinges on personal liberty of an individual, the power of arrest must be exercised very carefully.  The arrest should not be made in a mechanical and routine manner. Even if all the legal conditions to arrest mentioned in Section 132 of the GST Act is fulfilled, that will not, ipso facto, mean that an arrest must be made", the CBIC stated.

While prescribing the condition of arrest, the CBIC guidelines stated that the reasons to believe to arrive at a decision to place an alleged offender under arrest must be unambiguous and abundantly clear. The reasons for believing must be based on credible material.

"Approval to arrest should be granted only where the intent to evade tax or commit acts leading to availment or utilisation of wrongful Input Tax Credit or fraudulent refund of tax or failure to pay amount collected as tax as specified in sub-section (1) of Section 132 of the CGST Act 2017, is evident and the element of mens rea/guilty mind is palpable," the guidelines added.

The relevant factors before deciding to arrest a person, apart from fulfilling legal requirements, must be the need to ensure proper investigation and prevent tampering of evidence and intimidation of witnesses.

No arrest in cases of technical nature

"Arrest should, however, not be resorted to in cases of technical nature, i.e where the demand of tax is based on a difference in opinion regarding the interpretation of law. The prevalent practice of assessment could also be one of the determining factors while ascribing intention to evade tax to the alleged offender. Other factors influencing the decision to arrest could be if the alleged offender is cooperating in the investigation, viz, compliance to summons, furnishing of documents called for, not giving evasive replies, voluntary payment of tax etc" 

The guidelines state that the grounds of arrest must be explained to the arrested person and must be noted in the arrest memo. A nominated or authorised person of the arrested person should be informed immediately and this fact should be mentioned in the arrest memo. The date and time of arrest shall be mentioned in the arrest memo, and the arrest memo should be given to the person arrested with proper acknowledgment.

A medical examination of an arrested person should be conducted by a medical officer in the service of the Central or State government and, in case the medical officer is not available, by a registered medical practitioner, soon after the arrest is made. If an arrested person is a female, then such an examination shall be made only by or under the supervision of a female medical officer, or if the female medical officer is not available, by a female registered medical practitioner.

The CBIC directed that every commissionerate/directorate should maintain a bail register containing the details of the case, arrested person, bail amount, surety amount, etc. The money/instruments/documents received as surety should be kept in the safe custody of a single nominated officer who shall ensure that these instruments/documents received as surety are kept valid till the bail is discharged.

The guidelines state that the Pr. Director-General (DGGI)/Pr. Chief Commissioner(s)/Chief Commissioner(s) shall send a report on every arrest to the Member (Compliance Management) and to the Zonal Member within 24 hours of the arrest. From September, 2022 onwards, a monthly report of all persons arrested in the Zone shall be sent by the Principal Chief Commissioner(s)/Chief Commissioner(s) to the Directorate General of GST Intelligence, Headquarters, New Delhi, by the 5th of the succeeding month. The monthly reports received from the formations shall be compiled by DGGI, Hqrs. and a zone-wise report shall be sent to the Commissioner (GST-Investigation), CBIC by 100 every month. All reports shall be sent only by e-mail, and the practise of sending hard copies to the Board should be stopped with immediate effect.

Instruction No. 02/2022-23 (GST-Investigation)

Dated: 17.08. 2022