Nathalal Maganlal Chauhan vs State Of Gujarat on 4 February, 2020

1. Outcome

The writ applications were rejected. The Gujarat High Court upheld the legality and validity of Notification No.EST/1/Jurisdiction/B.2168 dated 05.07.2017, thereby validating the delegation of the Commissioner's powers, including the power to authorize arrest under Section 69 of the GGST Act, 2017, to subordinate officers.

2. Core Issue

The central legal question was whether the Commissioner of State Tax can, through a general notification, delegate his power to authorize arrest under Section 69 of the Gujarat Goods and Services Tax (GGST) Act, 2017. Specifically, the court examined if a power that is conditional upon the Commissioner's personal "reasons to believe" could be validly delegated to subordinate officers like the Special Commissioner and Additional Commissioners.

3. Key Facts

• The petitioner's son, Paresh Nathalal Chauhan, was arrested by the Additional Commissioner of State Tax on 30th December 2019.
• The arrest was authorized under Section 69 of the GGST Act, 2017, based on the belief that he had committed offenses under Section 132 of the Act, involving a multi-crore scam of fake entities and illegal Input Tax Credit (ITC).
• The power to authorize the arrest was exercised by the Additional Commissioner based on a Notification dated 05.07.2017, issued by the Commissioner of State Tax.
• This notification, issued under Section 5(3) of the GGST Act, delegated all functions of the Commissioner under the said Act to the Special Commissioner and Additional Commissioners of State Tax, to be exercised under the overall supervision of the Commissioner.
• The petitioner, the father of the arrested person, challenged the legality and validity of this notification, arguing that the power of arrest under Section 69 could not be delegated.

4. Arguments

Petitioner's Arguments:
* The power under Section 69 of the GGST Act requires the personal satisfaction and "reasons to believe" of the Commissioner himself, which is a quasi-judicial function that cannot be delegated.
* The phrase "reasons to believe" contemplates an objective determination based on intelligent deliberation, which the legislature specifically entrusted only to the high office of the Commissioner.
* A blanket delegation of all powers is impermissible. The statute, while allowing delegation, did not intend for powers involving severe consequences like arrest to be delegated.
* The delegation creates a discrepancy with the CGST Act, where such powers are exercised by higher-ranking officers.

Respondent's (State's) Arguments:
* Section 5(3) of the GGST Act expressly empowers the Commissioner to delegate his powers to any subordinate officer. The validity of this statutory provision itself was not challenged.
* It is administratively impossible for a single Commissioner to personally discharge all functions across the entire state, making delegation a practical necessity for the effective administration of the new tax regime.
* The legislature, in its wisdom, did not place any restrictions on which powers could be delegated under Section 5(3). If it intended to prevent the delegation of the power of arrest, it would have explicitly provided for it.
* Similar provisions for delegation exist in other tax legislations like the Customs Act and Central Excise Act.
* Once the power is delegated, the delegatee (the Additional Commissioner) is entitled to exercise it, which includes forming their own "reasons to believe" to authorize an arrest.

5. Court’s Reasoning

• Express Power of Delegation: The Court heavily relied on Section 5(3) of the GGST Act, which provides a clear and express statutory power for the Commissioner to delegate his functions. This express provision is a recognized exception to the general administrative law principle that a statutory authority must exercise its power personally (delegatus non potest delegare).
• Administrative Necessity: The Court acknowledged the practical reality that a single Commissioner cannot possibly exercise each and every power conferred by the Act across the state. Therefore, delegation is an administrative necessity, and the legislature has consciously provided for it.
• Nature of Delegated Power: The Court held that when a power is validly delegated, the delegatee exercises it in their own right. The condition precedent for exercising the power under Section 69, i.e., having "reasons to believe," also shifts to the delegate. The delegate must form their own satisfaction and reasons to believe before authorizing an arrest. The nature of the power does not change, only the authority exercising it does.
• Supervision Clause: The notification states that the delegated functions shall be under the "overall supervision of the Commissioner." Citing the Supreme Court's judgment in Bombay Municipal Corporation v. Dhondu Narayan Chowdhary, the Court interpreted this to mean administrative control over the process (e.g., types of cases to be handled), not control over the core quasi-judicial decision-making of the delegate in a specific case.
• Precedents on Delegation: The Court distinguished between the delegation of essential legislative functions (which is impermissible) and administrative or quasi-judicial functions. It cited Supreme Court rulings in Sahni Silk Mills and Sidhartha Sarawgi to conclude that delegation of administrative and even quasi-judicial powers is permissible when the parent statute expressly allows for it.
• Overruling of Prior View: The Court noted that its own observations in a previous case, Valerius Industries, which had questioned such a delegation under Section 83, were made per incuriam (in ignorance of binding precedents) and did not lay down the correct law.

6. Statutory References

• Gujarat Goods and Services Tax Act, 2017: Sections 2(24), 3, 5, 5(3), 69, 132, 167.
• Central Goods and Services Tax Act, 2017: Sections 67, 69, 132.
• Constitution of India: Article 226.
• Code of Criminal Procedure, 1973
• Customs Act, 1962
• Central Excise Act, 1944

7. Precedents Cited

• Sidhartha Sarawgi v. Board of Trustees for the Port of Kolkata ((2014)16 SCC 248)
• State of Bihar and others v. Anil Kumar and others ((2017)14 SCC 304)
• Sahni Silk Mills (P) Ltd. and another v. Employees' State Insurance Corporation ((1994)5 SCC 346)
• Bombay Municipal Corporation v. Dhondu Narayan Chowdhary (AIR 1965 SC 1486)
• Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. v. The Assistant Commissioner of Sales Tax ((1974) 4 SCC 98)
• Raghunath v. Indore Municipal Corporation, Indore (AIR 1987 (MP) 181)
• Valerius Industries v. Union of India (SCA No.13132 of 2019) (Observations in this case were held to be per incuriam)