SUPREME COURT CLARIFIES GOOD FAITH PROTECTION UNDER SECTION 157 OF THE GST ACT IN STATE OF GUJARAT VS. PARESH NATHALAL CHAUHAN
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
THE STATE OF GUJARAT & ANR.
V/s
PARESH NATHALAL CHAUHAN
CIVIL APPEAL NO. 4168 of 2024
ARISING OUT OF SLP (C) NO. 666 /2021
Date of Judgment/Order: 12th March 2024
HEADNOTE-
This civil appeal arises out of an interim order passed by the High Court of Gujarat2 in a writ petition filed by the respondent seeking a direction for protection from arrest under section 69 read with section 132 of the GST Act. HELD-Court has expunged paragraph 28 of interim order of High Court. Appeal is disposed of.
IMPORTANT PARAGRAPHS
Para No. 3. The portion sought to be expunged is the observation of the High Court that the good faith clause in Section 157 of the GST Act, may not be available to the officers of the State as their conduct, according to the High Court, “may not” justify protection. We have expunged that portion of the order because the context as well as the conclusions of the High Court are wrong. We will explain this after indicating the relevant facts.
Para No. 6. The relevant portion in the order of the High Court that the statutory protection should not be made available to the officers is in paragraph 28 and it is relevant for us to extract the same.
“28. Lastly the court may sound a word of caution to the authorities exercising powers under the GST Acts. Sub-section (2) of section 157 of the GST Acts says that no suit, prosecution or other legal proceedings shall lie against any officer appointed or authorized under the Act for anything which is done or intended to be done in good faith under the Act or the rules made thereunder. An action like the present one which is not contemplated under any statutory provision and which infringes the fundamental rights’ of citizens under article 21 of the Constitution of India may not be protected under this section. An action taken may be said to be in good faith if the officer is otherwise so empowered and he exceeds the scope of his authority. However, in a case like the present one where the authorization was for search and seizure of goods liable to confiscation, documents, books or things and the concerned officer converted it into a search for a person and in investigation, which is not otherwise backed by any statutory provision, it may be difficult to accept that such action was in good faith. Protection of such action under section 157 of the GST Acts may unleash a regime of terror insofar as the taxable persons are concerned.”
Para no. 9. A good faith clause in a statute will therefore be a defense. If successfully pleaded, it not only legitimises the action but also protects the statutory functionary from any legal action. If a statutory functionary invokes the defence of good faith in a suit, prosecution or other legal proceedings initiated against him, it is for the court or a judicial body to consider, adjudicate, and determine whether the claim that the action was done in good faith is made out or not. Such a scrutiny, enquiry, or examination is done only in a proceeding against the statutory functionary. This Court has held that the scrutiny whether the act is done in good faith or not would depend upon the facts and circumstances of each case.
Para No. 10. It is in the above referred context that we have examined the observations made by the High Court in Paragraph 28 extracted hereinabove. The High Court was not conducting a suit, prosecution, or other legal proceeding against a statutory functionary. We have no doubt that the High Court was conscious of the principles governing good faith clauses and therefore couched its displeasure and distress by stating that such officials “may not” be protected or that it “may be difficult” to accept the contention of good faith. We are of the opinion that these observations are in the nature of advance rulings. This is because even before the initiation of a suit, prosecution or legal proceeding, the High Court expressed a tentative opinion. If such observations remain, they will affect the integrity and independence of that adjudication, compromising the prosecution and the defence equally.
Para No. 11. We say no more than reiterate that a citizen of this country has a right of accountability, for which he is entitled to initiate and adopt such legal remedies as are available to him, and in such proceedings the statutory functionary is equally entitled to take a defense of good faith. It is for the court to adjudicate and decide.
