Goods & Services Tax (GST) in IndiaStatutory Immunity can be granted only when the officer has exercised power within authority of law

The Supreme Court, in State of Gujarat & Anr. v. Paresh Nathalal Chauhan, [ 2024 SCC OnLine SC 568] decided on 12.03.2024],  expunged the part of the observation by the Hon’ble High Court stating that protection under Section 157 of CGST Act was not available to officers where the proceedings were conducted beyond the authority of law.

FACTS

Mr. Paresh Nathalal Chauhan (hereinafter referred to as the “Respondent”) filed a writ petition vide Special Civil Application No.18463 of 2019 before the Hon’ble High Court of Gujarat seeking protection from the arrest under section 69 read with section 132 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”).

The writ petition is pending before the Hon’ble Gujarat High Court. However, an interim order was passed with an observation that Section 157 of CGST Act grants protection to the officers who have carried out the illegal investigation “may not” justify the protection (hereinafter referred to as the “Impugned Order”).

The State of Gujarat (hereinafter referred to as the “Appellant”) being aggrieved by the Impugned Order has preferred the present Appeal.

ISSUE BEFORE THE SUPREME COURT

Whether or not the procedural requirements falling under the preview of GST were adhered by the State authorities or not.

CONTENTIONS OF THE PARTIES

 The Appellant contended that the part of the Impugned Order wherein the Hon’ble Gujarat High Court has observed that protection under Section 157 of the CGST Act may not be available was illegal and bad in law. It was also argued that such observation was bad and perverse in law. Therefore, the portion of the Impugned Order shall be expunged.

The Respondent submitted that the entire procedure of search and seizure was beyond the authority of law granted to the department. However, it did not intend to carry forward any further proceedings against the Appellant.

DECISION AND FINDINGS

The Supreme Court examined the Impugned Order and observed that there were several procedural lapses on the part of the officers while conducting the search. It was also held that immunity to statutory functionary can be provided only when the powers are exercised under “good faith”.

The Supreme Court examined “good  faith” under Section 3(22) of General Clauses Act, 1897 and categorically observed that the immunity was available only when the officer had conducted the proceedings within the limited powers conferred under the CGST Act and not further.

It was further observed that such observation by the Hon’ble Gujarat High Court in the Impugned Order may affect the integrity and independence of that adjudication, compromising the prosecution and the defence equally. However, the Respondent has equal legitimate right of initiating proceedings against the Appellant.

The Supreme Court held that as the Respondent has not shown interest in initiating proceedings against the officer, the part of the Impugned Order was expunged and disposed the appeal.

AMLEGALS REMARKS

The Supreme Court in the present case has held that the statutory immunity available to the officers under Section 157 of the CGST Act is limited when the powers are exercised in “good faith” and within the limitation of the powers conferred by the statute. Whenever, the officer exceeds the power, it would not be protected by the immunity. The Court also observed that such a precedent would affect the process of adjudication. Therefore, expunged the part of the order as the taxpayer was not interested in initiating proceedings against the officers.

– Team AMLEGALS assisted by Mr. Kushagra Bhagwat (Intern)