The Punjab and Haryana High Court declared that Chartered Accountants (CAs) or Attorneys who support businesses but aren’t engaged in the bogus latter commits shouldn’t be detained.
In a case where a chartered accountant and an attorney for a firm of exporters were called in and detained, the court issued this decision. They had petitioned on behalf of the exporters, who were accused of submitting a false claim for an Integrated goods and services tax (IGST) refund.
Eventually, the petitioners were reportedly implicated in the scheme by the exporters.
The court ruled that arrests should not be made until a person’s guilt is established and a penalty is imposed if there is no documented or other solid proof showing that the individual was directly involved in the evasion of significant sums of tax.
Without any supporting evidence connecting the professionals to the alleged offence, CAs or advocates who had filed GST returns for or otherwise helped a firm but were neither benefactors nor parties to the scam should not be detained.
The court noted that a designated officer is authorized by the GST Act to detain anyone who has avoided taxes in excess of Rs. 5 crores. The Act also stipulates a five-year maximum punishment for such evasion.
The court did state, however, that the authority to make an arrest should not be used at the whims and caprices of any officer, for financial gain, to terrorize any businessman, or to foster an environment of fear.
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The court ruled that this authority should only be used in extreme cases during an investigation, such as when a person is involved in massive tax evasion but lacks a permanent place of business or when a person refuses to show up despite receiving multiple summonses and being involved in massive tax evasion, among other situations.
