Supreme Court Upholds Arrest & Summons Provisions in GST Law

Supreme Court Upholds Constitutionality of GST Arrest & Summons Provisions

The Supreme Court of India has upheld the constitutional validity of Sections 69 and 70 of the Goods and Services Tax (GST) Act, which grant authorities the power to arrest and summon individuals in cases of tax evasion. The ruling reinforces the Parliament’s legislative competence to enact such provisions under Article 246-A of the Constitution.

Legal Challenge to GST Arrest & Summons Powers

The petitioners challenged these provisions on the basis that:

• Parliament lacked legislative competence to criminalize GST violations since Article 246-A, which provides Parliament and State Legislatures the power to levy and collect GST, does not explicitly mention penal provisions.
• Entry 93 of List I (Seventh Schedule) permits Parliament to enact criminal laws only on matters enumerated in List I. The petitioners contended that since taxation falls under List II and Article 246-A, criminal provisions under the GST Act were unconstitutional.
• The powers to summon, arrest, and prosecute were argued to be beyond the scope of tax collection and therefore extraneous to GST laws.

Supreme Court’s Verdict

Rejecting these arguments, the bench comprising Chief Justice of India Sanjiv Khanna, Justice MM Sundresh, and Justice Bela M Trivedi ruled that:

• Article 246-A grants Parliament the authority to legislate on all matters related to GST, including penal provisions against tax evasion.
• The doctrine of pith and substance applies, meaning that ancillary provisions like arrest and summons are intrinsically linked to GST enforcement.
• Sections 69 and 70 are necessary mechanisms for ensuring effective GST compliance and tax collection.

Key Observations by the Supreme Court

The judgment, authored by CJI Sanjiv Khanna, emphasized:

“The Parliament, under Article 246-A of the Constitution, has the power to make laws regarding GST and, as a necessary corollary, enact provisions against tax evasion.”

“The GST Acts, in pith and substance, pertain to Article 246-A, and the powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect goods and services tax.”

The Court further clarified that taxation laws are not to be interpreted in a narrow or pedantic manner but must be given a broad and purposive interpretation to ensure effective enforcement.

Implications of the Judgment

This ruling has several key implications:

1. Strengthened Enforcement Powers: GST authorities can continue to use arrest and summons as tools to combat tax evasion.
2. Clarification of Legislative Authority: It establishes that Parliament has the right to legislate on tax-related criminal offenses under Article 246-A.
3. Reinforcement of Judicial Precedent: This ruling aligns with past Supreme Court judgments that affirm a broad interpretation of legislative powers in taxation matters.
4. Implications for Businesses: Taxpayers and businesses must ensure GST compliance as authorities now have clear constitutional backing for enforcement actions.