The tax department had arrested several promoters on the basis of suspicion that they gamed GST rules.
MUMBAI: A dispute over the taxman’s power to arrest promoters of companies and attach their bank accounts over suspected evasion of goods and services tax has reached the Delhi High Court.
Several promoters have filed a joint writ petition in the high court, challenging the validity of the GST statutory provisions related to arrest and freezing of bank accounts. On Tuesday, the court admitted the petition for further hearing.
The indirect tax department had arrested several promoters in cases where it suspected their companies to be supplying goods without an invoice or indulging in “circular trading” to avoid paying GST or even avail input tax credits. In March, the Bombay High Court granted bail to some of the promoters who were arrested, and also criticised the department for some of its actions.
The department approached the Supreme Court in June, claiming that it could take such measures under law. While the matter is still before the top court, the department continued to arrest promoters where it suspected companies to have resorted to illegal means.
“The root cause of these rampant arrests is applicability of section 132 and section 69. As a result, it becomes important to read down these provisions in case there is no evasion of taxes,” said Abhishek A Rastogi, a partner at Khaitan & Co. These sections deal with selling goods without proper invoices and the powers of the tax department.
