Power of Tax Officials to Arrest

The promoters of some companies were arrested by the Tax officials on the allegation that the shell companies were inflating the turnovers to claim the input tax credit. Many of the promoters approached various high courts and got anticipatory bails. The tax experts questioned the power of tax officials to arrest saying it converts enquiries into criminal cases by arresting the promoters.

The Bombay High Court granting bails to those arrested sought an explanation from the department saying that the tax officials had not registered any FIR as warranted under criminal law. The tax department then moved the Supreme Court.

Arguments of Central Government in the Supreme Court

  • Parliament has segregated the CGST Act from criminal law and provided a separate procedure for dealing with offenders under the 2017 Act.
  • The high court orders granting anticipatory bail to GST offenders have brought the functions of the Directorate General of GST Intelligence to a grinding halt.

What did the Supreme Court Say?

The Telangana High Court had upheld the authority of the Commissioner of CGST to arrest and the SC had dismissed an appeal against that order.

The Supreme Court suggested the high court s not to grant anticipatory bail in GST default cases and reminded them about its order where it had upheld the Telangana HC s decision not to grant bail to such defaulters. This means GST defaulters may face arrest for now.


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