GST: Part-Payment Of Tax Can’t Be Pre-Condition For Bail, Says Supreme Court
The judgment reiterates the legal position that no amount can be recovered unless tax assessment is complete.
Until final assessment of tax liability is done, no amount as recovery can be made a pre-condition for bail, the Supreme Court has said. In saying so, the apex court set aside a Chhattisgarh High Court order that required the accused to deposit Rs 70 lakh as a pre-condition for bail.
The case involved alleged wrongful availment of input tax credit by Subhash Chouhan, who was arrested in October 2021. The Goods and Services Tax authorities said that Chouhan claimed nearly Rs 7 crore as input tax credit basis invoices from fake and fictitious firms. It was also alleged that he was involved in supplying goods without paying taxes and issuing invoices for such sales.
Chouhan’s counsel approached the Chhattisgarh High Court seeking his bail. Due procedure, the counsel argued, had not been followed throughout the investigation. Documents pertaining to Chouhan’s business were given to the authorities, but they were not looked at in the proper way. The GST department’s investigation hasn’t been concluded even though Chouhan has been in jail for nine months, his counsel submitted.
Satisfied with the arguments, the high court granted bail to Chouhan on fulfilment of certain conditions. One of which was depositing a sum of Rs 70 lakh in favour of the GST authorities within a period of 45 days from the date of his release.
This particular condition formed the basis for appeal before the Supreme Court.
His counsel said that since the final assessment concerning the tax liability has not been completed, it cannot be presumed that the appellant is under a legal liability to pay the amount. Incidentally, the government’s counsel Additional Solicitor General KM Nataraj, too, submitted that such a condition cannot be imposed while granting bail.
Consequently, the bench comprising Justices Krishna Murari and BV Nagarathna set aside the condition directing Chouhan to deposit Rs 70 lakh.
The judgment of the Supreme Court, in a way, reiterates the legal position in law that no amount can be recovered unless the assessment is complete and the due process of law is followed by the tax authorities, said Ritesh Kanodia, partner at ELP.
The legal position under GST on arrests will however only get settled once the three-member bench of the Supreme Court gives its final judgment in the Sapna Jain case and decides on multiple open questions of law, including powers of the Commissioner to arrest without issuing an FIR, requirement of issuance of notice under Section 74 and completion of assessment before arrest, etc.Ritesh Kanodia, Partner, ELP
Section 74 of the CGST Act, 2017 contains provisions for raising show-cause notices demanding tax, interest and penalty in cases where there is suppression of facts, a wilful misstatement or an element of fraud involved.