Some Merit In Allegations That GST Officials Coerce Assesses To Pay Tax With Threat Of Arrest; It's Impermissible: Supreme Court

The Supreme Court on Thursday (February 27) observed that there was some merit in the allegation that tax officials coerce assesses to pay the Goods and Services Tax with the threat of arrest. This observation was made by the Court on the basis of data.

The Court said that if any person is feeling coerced to pay GST, they can approach the writ court for refund of the tax paid by them under coercion. The Court also said that the officers who indulge in such coercion must be dealt with departmentally.

A bench comprising Chief Justice of India Sanjiv Khanna, Justice MM Sundresh and Justice Bela Trivedi was pronouncing the judgment on a batch of petitions dealing with the powers of arrest under the GST Act and the Customs Act.

"We have commented on the basis of data with regard to allegations that there was force and coercion in the payment of taxes. We have some said that there may be some merit in it. Wherever a person is disposed to pay, he can go to the writ court and get an order. And the officers will have to be dealt with departmentally also. We have said that this cannot be permitted. This is contrary to the law. We have referred to Nandini Satpathy case in that regard," Chief Justice of India Sanjiv Khanna stated while pronouncing the verdict.

In Nandini Satpati v. P.L. Dani and Another(1978), the Court had held that compelled testimony obtained by threat of physical or mental violence, or intimidatory tactics was illegal.

Data of arrest

The judgment, in paragraph 66, extracted a table regarding arrests made by GST officials from 2017-18 onwards and the amount involved. The figures indicated that the persons were forced to pay taxes as a condition to prevent arrest.

"Analysing the aforesaid data indicates that the number of people arrested is normally in hundreds or more.52 However, it is to be noted that the figures with regard to the tax demand and the tax collected would, in fact, indicate some force in the petitioners' submission that the assessees are compelled to pay tax as a condition for not being arrested. Sub-section (5) to Section 74 of the GST Acts gives an option to the assessee and does not confer any right on the tax authorities to compel or extract tax by threatening arrest. This would be unacceptable and violative of the rule of law," the judgment stated.

"We would observe that in case there is a breach of law, and the assessees are put under threat, force or coercion, the assessees would be entitled to move the courts and seek a refund of tax deposited by them. The department would also take appropriate action against the officers in such cases," the Court added.

Also from the judgment - BNSS/CrPC Provisions On Rights Of Arrested Persons Applicable To GST & Customs Acts : Supreme Court

Case Title: Radhika Agarwal v. Union of India and Ors., W.P.(Crl.) No. 336/2018 (and connected matters)

Citation : 2025 LiveLaw (SC) 255