The company has challenged the constitutional validity of the tax department’s right to make arrests in cases that are exempt from GST, as in the case of an agricultural produce company.
Sumaya said that even after issuing summons, the tax department has no authority.
It claimed that at least six summonses had been issued to company officials over the past few weeks, and feared they would be arrested soon.
Sumaya told the court that some officials faced “imminent threat of arrest” after a customer of a company defaulted on GST liability.
The company said this happened despite the fact that agricultural products are outside the purview of GST.
Arguing the matter before the court, the counsel for the company, Abhishek A Rastogi, partner of Khaitan & Co, said that there cannot be a case of tax evasion involving unbranded agricultural products and this decision is necessary.
This is not the first time that the issue of the tax department’s right to arrest has come under legal scrutiny.
In 2019, the Bombay High Court granted bail to some promoters arrested by GST authorities and criticized 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 the law.
The earlier standoff between tax authorities and Indian companies was mainly over input tax credit.
The Indirect Taxes Department had conducted a nationwide search and investigation suspecting several companies to have received fake input tax credits under the GST.
Several companies have recently approached the courts after the taxman issued summons.
US fast food chain Subway has dragged the indirect tax department to court for allegedly forcing it to pay differential GST on services before issuing notice, ET reported on Wednesday.
In its writ petition filed in the High Court of Punjab and Haryana, Subway Systems India stated that the tax department had issued several summons to its top management on the taxability of intellectual property rights.
The company also said that the tax department continued to issue summons without following due process, which could have caused “trauma” to anyone.
Milford, a Connecticut-based fast food company, said these summons were issued despite explaining to tax officials that an advance judgment application was pending.
Hearing Subway’s petition, the High Court said that Subway should be given a reasonable time to present the case. Subway has been asked to submit all the facts, after which the authorities will pass an order.