Source: Supreme Court  

Why in News? 

Recently, the bench of Chief Justice of India Sanjiv Khanna, Justice MM Sundresh and Justice Bela M Trivedi has upholds the Constitutional validity of Sections 69 and 70 of the GST Act, affirming the power to arrest and summon. 

• The Supreme Court held this in the matter of Radhika Agarwal v. Union of India and Ors (2025). 

What was the Background of Radhika Agarwal v. Union of India and Ors? 

• The case arose from challenges to the constitutionality of Sections 69 and 70 of the Goods and Services Tax Act (GST Act) which grant powers of arrest and summons respectively. 
• The petitioners contended that Parliament lacked the legislative competence to enact these provisions under the Constitution of India. 
• Their primary argument was that Article 246-A of the Constitution, while conferring legislative powers on Parliament and State Legislatures to levy and collect GST, does not explicitly authorize making violations criminal offences. 
• The petitioners referenced Entry 93 of List I to the Seventh Schedule of the Constitution, arguing that Parliament can only enact criminal provisions for matters enumerated in List I. 
• They maintained that the powers to summon, arrest, and prosecute individuals are not ancillary or incidental to the power of levying GST. 
• Therefore, the petitioners argued these powers exceeded Parliament's legislative authority under Article 246-A of the Constitution. 
• The petitioners suggested that these provisions represented an overreach of Parliament's taxing powers by incorporating punitive criminal elements. 
• The case raised fundamental questions about the scope and limitations of Parliament's legislative authority under Article 246-A, which was specifically introduced by the Constitution (One Hundred and First Amendment) Act, 2016 to enable the GST regime. 
• The matter involved interpretation of the extent to which enforcement mechanisms, including criminal provisions, could be considered inherent to tax legislation. 
• This case presented the Supreme Court with the opportunity to determine the constitutional boundaries between taxation powers and the authority to create criminal offences in the context of GST legislation.

What were the Court’s Observations?

• The Supreme Court held that the Parliament, under Article 246-A of the Constitution, has the power to make laws regarding GST and, as a necessary consequence, can enact provisions against tax evasion. 
• The Court determined that Article 246-A of the Constitution is a comprehensive provision that should be interpreted broadly, with the doctrine of pith and substance applying to it. 
• The Court observed that when deciding issues of legislative competence, constitutional entries should not be read in a narrow or pedantic sense but given their broadest meaning and widest amplitude. 
• The Court noted that legislative entries are integral to the machinery of government and therefore require broad interpretation. 
• The Court found that the impugned provisions establishing powers to summon and arrest are necessary for the effective levy and collection of GST. 
• The Court recognized that a penalty or prosecution mechanism for the levy and collection of GST, and for checking its evasion, is a permissible exercise of legislative power. 
• The Court held that the GST Acts, in pith and substance, pertain to Article 246-A of the Constitution. 
• The Court determined that the powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect Goods and Services tax. 
• Based on these observations, the Court concluded that the constitutional challenge to Sections 69 and 70 of the GST Acts must fail. 
• The Court rejected the vires challenge to Sections 69 and 70 of the GST Acts, effectively upholding their constitutional validity. 
• The Court affirmed that Parliament's power to enact laws concerning GST extends to creating mechanisms for enforcement and compliance, including criminal provisions. 
• The Court's interpretation established that Article 246-A should be understood as granting comprehensive legislative authority regarding all aspects of GST implementation and enforcement. 

What is Article 246A of the Indian Constitution? 

• Article 246A was introduced through the 101st Constitutional Amendment Act, 2016 as a special provision for Goods and Services Tax (GST). 
• It grants concurrent power to both Parliament and State Legislatures to make laws with respect to Goods and services tax imposed by the Union or by States. 
• Parliament has exclusive power to make laws regarding GST where the supply of goods or services or both takes place in the course of inter-State trade or commerce. 
• This article overrides Article 246 (which deals with the subject-matter of laws made by Parliament and State Legislatures) and Article 254 (which addresses inconsistency between laws made by Parliament and laws made by State Legislatures). 
• The provisions of Article 246A, in respect of GST referred to in clause (5) of Article 279A, take effect from the date recommended by the GST Council. 
• It fundamentally altered the earlier framework of fiscal federalism by creating a concurrent taxing power between the Union and States specifically for GST. 

What is Section 69 and Section 70 of GST Act? 

Section 69 

• Section 69 provides the Commissioner with the power to arrest a person when there are reasons to believe that the person has committed specified offences under section 132(1). 
• When a person is arrested for an offence under section 132(5), the arresting officer must inform the person of the grounds of arrest and produce them before a Magistrate within 24 hours. 
• For offences specified under section 132(4):  
  • The arrested person can be admitted to bail or forwarded to the Magistrate's custody according to the Code of Criminal Procedure, 1973. 
  • For non-cognizable and bailable offences, the Deputy Commissioner or Assistant Commissioner has the same powers as a police station officer-in-charge for releasing an arrested person on bail. 

Section 70 

• Section 70 gives the proper officer the power to summon any person whose attendance is considered necessary to give evidence or produce documents/items in an inquiry. 
• This summoning power is similar to that of a civil court under the Code of Civil Procedure, 1908. 
• Any inquiry conducted under this section is deemed to be "judicial proceedings" within the meaning of sections 193 and 228 of the Indian Penal Code.