The company has challenged the constitutional validity of the tax department’s right to make arrests in cases where GST is exempt, as in the case of the agro products company.
Suumaya said that the tax department has no jurisdiction over issuing summonses either.
It claimed that at least six summonses had been issued to the company’s executives in the last few weeks, and the fear was that they would be arrested soon.
Suumaya told the court that some of the executives faced an “imminent threat of arrest” after a company’s customer defaulted on its GST liability.
The company said that this happened despite the fact that agro products are outside the scope of GST.
Arguing the case before the court, the company’s advocate, Abhishek A Rastogi, partner at Khaitan & Co, said that there cannot be a case of tax evasion involving unbranded farm products and that adjudication is essential.
This is not the first time that the issue of the tax department’s authority to arrest has come under legal scrutiny.
In 2019, the Bombay High Court granted bail to some promoters arrested by the GST authorities and also criticised the tax department for some of its actions. The tax department then approached the Supreme Court in June 2020, claiming that it could take such measures under law.
The earlier standoff between the tax authorities and Indian companies was mainly around input tax credits.
The indirect tax department had carried out nationwide searches and investigations, suspecting several companies of availing fake input tax credits under GST.
Lately, many companies have knocked on the doors of the courts after the taxman started issuing summons.
ET on Wednesday reported that American fast food chain Subway has dragged the indirect tax department to court over allegedly forcing it to pay differential GST on services before issuing any notices.
In its writ petition filed in the High Court of Punjab and Haryana, Subway Systems India said that the tax department had issued multiple summonses to its top management over the taxability of intellectual property rights.
The company also said that the tax department kept issuing summons without following the due process, which could “traumatise” anyone.
The Milford, Connecticut-based fast food company said that these summonses were issued despite explaining to the tax authorities that an advance ruling application was pending.
Hearing Subway’s petition, the High Court held that appropriate time must be given to Subway to present the case. Subway has been asked to submit all facts, following which the authorities will pass an order.