Chandigarh excise department exploring options to make arrests under GST Act

The UT excise and taxation department (UTGST) is exploring options to arrest people involved in goods and services tax (GST) violations instead of its current practice to recommend registration of cases to the police, who then make arrests if required.

Now, the department wants to initiate arrest proceedings on its own under the GST Act.

“The department’s move comes in the aftermath of the delay in registration of five FIR in the ₹70 crore bogus GST bill by the police. The department is empowered to make arrests for certain cognizable offences as stipulated in the GST Act. Taxation departments in neighbouring states Haryana and Punjab are already making arrests under the GST Act,” said a senior department official privy to the development who did not want to be named.

Five firms in Chandigarh, AK Trading Co in Khuda Jassu, Vinita Enterprises in Dhanas, RJ Enterprises in Makhanmajra, Mahadev Metals in Dariya and RD Trading Co in Sector 45 were listed as scrap dealers. The bogus firms allegedly issued fake bills to companies in Punjab, Haryana, Himachal Pradesh and Delhi, which were then used to claim input tax credit (ITC) from the government.

ITC is the credit a manufacturer receives for paying input taxes towards inputs used in the manufacture of products. A dealer is also entitled to input tax credit if he has purchased goods for resale.

Those arrested are kept in the revenue lock-up designated by the inspector general prisons. Once a person is arrested, he or she has to be produced within 24 before the judicial magistrate for bail. Once the bail is granted the case is forwarded to the district court.

The taxation commissioner is now empowered to make arrests and authorise any person in the department to arrest a person who has committed an offence under Section 132 of the GST Act after informing him or her about the grounds of arrest.

The department will have to present the person before a magistrate within 24 hours in case of cognizable offence.

“A person can be arrested by the GST department officials only where the tax amount exceeds ₹200 lakh. However, the monetary limit is not applicable in case of repeat offenders. They can be arrested irrespective of the tax amount involved in the case,” said the official.

Even though a person can be arrested for specified offences involving taxes exceeding ₹200 lakh. However, where the tax amount is less than ₹500 lakh, the offences are classified as non-cognizable with the deputy/assistant taxation commissioner given the authority to grant bail to the arrested person.

However, “in case of arrests for specified offences where the tax amount involved is more than ₹500 lakh, the offence is classified as cognizable and non-bailable and in such cases the bail can be considered only by a judicial magistrate only,” the official added.

WHAT GST ACT SAYS

The Taxation commissioner can depute a department official to make an arrest for an offences specified under Section 132 of the Act:

1. Wrongful utilisation of tax refund by issuing invoice without supply of goods and services

2. Failure to deposit tax beyond three months of the due date

3. Supplying goods without invoice to evade taxes

4. Wrongful availment of tax credit

5. Repeat offender

WHEN AN ARREST IS MADE

a. Prior authorisation from taxation commissioner is a must

b. Arrest can only be made for specified offences as stipulated under GST Act (see box 1)

c. If the tax amount involved is more than the specified amount in the Act

d. Arrested person must be presented before a magistrate within 24 hours in case of cognisable offence for availing bail.