The GST investigation authority has asked its field offices not to exercise the power to arrest mechanically and refrain from summoning senior management officials such as CMDs and CEOs.

The investigation authority under the Central Board of Indirect Taxes and Customs (CBIC) has issued guidelines to field officers on issuing summons and provision of arrest and bail under the Goods and Services Tax (GST) law. It said that as an arrest impinges on the personal liberty of an individual, such a measure should be based on credible material.

“The arrest should not be made in a routine and mechanical manner.” The checklist for arrest includes whether the alleged offender is the mastermind; and if not arrested, the alleged offender will tamper with evidence and intimidate witnesses. The new guidelines take into account a Supreme Court judgment which says that “merely because an arrest can be made because it is lawful does not mandate that arrest must be made”.

The apex court had further said a distinction must be made between the existence of the power to arrest and the justification for arrest. Senior management officials such as CMD/MD/CEO/ CFO/similar officers of any company or a PSU (Public Sector Unit) should not generally be issued summons in the first instance.

“They should be summoned when there are clear indications in the investigation of their involvement in the decision-making process which led to the loss of revenue,” the guidelines said. AMRG & Associates senior partner Rajat Mohan said the guidelines should stop the rampant harassment of company officials by grassroots-level GST officers.

Rajat Bose, partner, Shardul Amarchand Mangaldas & Co. said: “An increasing trend was to summon senior officials of companies, routinely, when information was either available online or through other means of communication. The issue of the guidelines mandating a strict approval process and recording of reasons among others will go a long way in preventing undue harassment of company high officials, particularly when they may not be involved in routine compliance matters.”

The GST investigation authority said it has been brought to the notice of the CBIC that field formations were issuing summons to top officials of companies in a routine manner. KPMG in India Partner Indirect Tax Abhishek Jain said summons were issued to CXOs (chief experience officers) on matters which otherwise could have been addressed by the company.

“The guidelines reinstate the principle that CXOs should not be summoned at the first instance. Furthermore, the guidelines provide that DIN should be mentioned in the summons.”