2025 (2) TMI 1162 - SC - GST

Power to arrest under the Customs Act 1962 and the Central Goods and Services Tax Act 2017 - reasons to believe - non-cognizable offences - Jurisdictionary powers of judicial review under Article 32 and Article 226 of the Constitution of India. As per Sanjiv Khanna CJI HELD THAT - Section 41-D of the Code is applicable for offences under the Customs Act. Accordingly a person arrested by a customs officer has the right to meet an advocate of his choice during interrogation but not throughout interrogation - In Senior Intelligence Officer Directorate of Revenue Intelligence v. Jugal Kishore Samra 2011 (7) TMI 910 - SUPREME COURT . This Court held that an advocate/authorised person may be present within visual distance during interrogation but he cannot be within hearing distance of the proceedings nor can there be any consultations with such advocate/authorised person during the course of the interrogation. Reference can also be made to Section 50A of the Code which states that every police officer or other person making an arrest under the Code shall forthwith give information regarding such arrest and place where the arrested person is being held to any of his friends relatives or other person as may be disclosed or nominated by the arrested person for the purpose of giving such information. The arrested person must be informed of this right - the details of compliance with this mandate must be entered into the diary maintained by customs officer. It is the duty of the Magistrate when an arrested person is produced to satisfy himself that the requirements of Section 50A(2) and (3) have been complied with. Thus these stipulations will apply in cases of arrests made by the customs officers. Arvind Kejriwal v. Directorate of Enforcement 2024 (7) TMI 760 - SUPREME COURT a recent judgment authored by one of us (Sanjiv Khanna J.) is a dictum relating to the Prevention of Money Laundering Act 2002. This Court held that the power of arrest granted to the Directorate of Enforcement under Section 19 of the PML Act is fenced with certain pre-conditions. These pre-conditions act as stringent safeguards to protect the life and liberty of individuals. In Arvind Kejriwal a combined reading of Pankaj Bansal v. Union of India and Others 2024 (7) TMI 760 - SUPREME COURT Prabir Purkayastha v. State of NCT of Delhi 2024 (5) TMI 1104 - SUPREME COURT and Vijay Madanlal Choudhary and Others v. Union of India and Others 2022 (7) TMI 1316 - SUPREME COURT (LB) was adopted by this Court. It was held that the power to arrest a person without a warrant and without instituting a criminal case is a drastic and extreme power. Therefore the legislature had prescribed safeguards in the language of Section 19 itself which act as exacting conditions as to how and when the power is exercisable. These safeguards include the requirement to have material in the possession of DoE and on the basis of such material the authorised officer must form an opinion and record in writing their reasons to believe that the person arrested was guilty of an offence punishable under the PML Act. The grounds of arrest are also required to be informed forthwith to the person arrested. Arvind Kejriwal also holds that the courts can judicially review the legality of arrest. This power of judicial review is inherent in Section 19 as the legislature has prescribed safeguards to prevent misuse. After all arrests cannot be made arbitrarily on the whims and fancies of the authorities. This judicial review is permissible both before and after criminal proceedings or prosecution complaints are filed. The investigating officer is also required to look at the whole material and cannot ignore material that exonerates the arrestee. A wrong application of law or arbitrary exercise of duty by the designated officer can lead to illegality in the process. The court can exercise judicial review to strike down such a decision. There is substantively no difference between a person being guilty of an offence and a person committing an offence. In a catena of judgments of this Court it has been held that words of a statute must be understood in their natural ordinary or popular sense and construed according to their grammatical meaning unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary - given the framework of the Customs Act which explicitly classifies offences into bailable and non-bailable as well as cognizable and noncognizable the reasons to believe must reflect these classifications when justifying an arrest. The reasoning must weigh in why an arrest is being made in a specific case particularly given the specific severity assigned to the offence by the legislature. The reasoning must also state how the monetary thresholds outlined in the Act are met. There are no inconsistency between Section 19(1) of the PML Act and Section 104(1) of the Customs Act. We are of the opinion that principles and ratio developed in the case of Arvind Kejriwal and the principles specifically discussed and delineated in paragraphs 30 to 45 of this judgment are equally applicable to the power of arrest under Section 104 of the Customs Act. The respondent authorities are therefore directed to comply with the mandate of this judgment and that of Arvind Kejriwal. The challenge to the amendments as well as provisions of the Customs Act is rejected. Reliance placed by the petitioners on the decision of this Court in Om Prakash 2011 (9) TMI 65 - SUPREME COURT is misconceived as the statutory provisions have undergone amendments to bring them in consonance with the law of the land. Moreover the provisions themselves provide enough safeguards against arbitrary and wrongful arrests. Section 162(1) of the GST Acts permits compounding of offences and therefore the ratio in Makemytrip 2016 (9) TMI 52 - DELHI HIGH COURT should be applied to the GST Acts. The decision in Makemytrip itself carves out an exception when an assessment order under the Finance Act may not be required namely cases where a person who is shown to be a habitual evader as one who has not filed service tax returns for a continuous period of time who has a history of repeated defaults for which there have been fines penalties imposed and prosecutions launched etc. - there are sufficient safeguards to ensure that no arrests are made till the Commissioner is able to show and establish on the basis of material and evidence that the conditions of clauses (a) to (d) as well as clause (i) of sub-section 1 to Section 132 of the GST Acts are satisfied and therefore the offences are non-bailable. Constitutional validity of Sections 69 and 70 of the GST Acts - HELD THAT - The Parliament under Article 246-A of the Constitution has the power to make laws regarding GST and as a necessary corollary enact provisions against tax evasion. Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies. The impugned provisions lay down the power to summon and arrest powers necessary for the effective levy and collection of GST. Time and again this Court has held that while deciding the issue of legislative competence entries should not be read in a narrow or pedantic sense but given their broadest meaning and the widest amplitude because they are intrinsic to a machinery of government. 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 GST Acts in pith and substance pertain to Article 246-A of the Constitution and the powers to summon arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected. The challenge to the constitutional validity as also the right of the authorised officers under the Customs Act and the GST Acts to arrest are rejected and dismissed with elucidation and clarification on the pre-conditions and when and how the power of arrest is to be exercised. The matters are directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal. As per Bela M. Trivedi J HELD THAT - Whenever the jurisdiction of the High Court or the Supreme Court is invoked under Article 226 or Article 32 as the case may be challenging the punitive or preventive detention the Court is expected to take into consideration the nature of right infringed the scope and object of the legislation under which such arrest or detention is made the need to balance the rights and interests of the individual as against those of the society the circumstances under which and the persons by whom the jurisdiction is invoked etc. In exercise of their discretionary jurisdiction the High Courts and the Supreme Court do not as courts of appeal or revision correct errors of law or of facts. The judicial intervention is warranted only in exceptional circumstances when the arrest is prima facie found to be malafide; or is prompted by extraneous circumstances or is made in contravention of or in breach of provisions of the concerned statute; or when the authority acting under the concerned statute does not have the requisite authority etc. The power of judicial review keeps a check and balance on the functioning of the public authorities and is exercised for better and more efficient and informed exercise of their powers such power has to be exercised very cautiously keeping in mind that such exercise of power of judicial review may not lead to judicial overreach undermining the powers of the statutory authorities. To sum up the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the special Acts required to be followed by the authorized officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act. Conclusion - i) The amendments to the Customs Act and GST Act are valid. ii) The procedural safeguards under the CrPC apply to arrests under the Customs Act and GST Act ensuring protection of individual rights. iii) Customs officers must exercise their arrest powers with caution ensuring compliance with statutory and constitutional safeguards. iv) The power of arrest under these Acts is subject to judicial review to prevent arbitrary or unlawful arrests. v) The constitutional validity of Sections 69 and 70 of the GST Acts is upheld affirming the legislative competence to enact such provisions.

Summary

The judgment addresses several critical issues concerning the power of arrest under the Customs Act, 1962, and the Central Goods and Services Tax Act, 2017. The core issues revolve around the interpretation of these laws, the amendments made to them, and their implications on the rights of individuals, particularly concerning arrest and detention.

Issues Presented and Considered

The primary legal questions considered include:

1. The validity and implications of the amendments to the Customs Act and the GST Act concerning the power of arrest.

2. The interpretation of the terms 'cognizable' and 'non-cognizable' offences under these Acts.

3. The applicability of the Code of Criminal Procedure (CrPC) to the procedures under the Customs Act and GST Act.

4. The role and limitations of customs officers and their powers compared to police officers.

5. The safeguards and conditions required for lawful arrests under these Acts.

6. The judicial review of arrest powers and the constitutional validity of Sections 69 and 70 of the GST Acts.

Issue-wise Detailed Analysis

1. Amendments to the Customs Act and GST Act

The Court examined the amendments to the Customs Act, which redefined certain offences as cognizable and non-bailable. The amendments were seen as a legislative response to the decision in Om Prakash, which had previously limited the power of arrest without a warrant for non-cognizable offences. The Court found that the amendments were substantive and aimed at addressing the limitations identified in Om Prakash.

2. Interpretation of 'Cognizable' and 'Non-Cognizable' Offences

The Court clarified that 'cognizable offences' allow arrests without a warrant, whereas 'non-cognizable offences' require a warrant. The amendments to the Customs Act categorized specific offences as cognizable, thereby empowering customs officers to arrest without a warrant under certain conditions.

3. Applicability of the CrPC

The Court discussed the applicability of the CrPC to the Customs Act and GST Act, emphasizing that while these Acts provide special procedures, the CrPC applies unless expressly excluded. The Court highlighted that the procedural safeguards under the CrPC, such as maintaining arrest records and informing the arrestee of their rights, are applicable to arrests under these Acts.

4. Role of Customs Officers

The Court reaffirmed that customs officers are not police officers and do not possess all the powers of police officers. However, they are empowered to arrest under the Customs Act for specified offences. The Court emphasized that the power of arrest by customs officers must be exercised with caution and within the legal framework.

5. Safeguards for Lawful Arrests

The judgment stressed the importance of procedural safeguards to protect the rights of individuals. These include the requirement for customs officers to have 'reasons to believe' based on material evidence before making an arrest. The Court also highlighted the necessity of informing the arrestee of the grounds of arrest and maintaining proper records of the arrest process.

6. Judicial Review and Constitutional Validity

The Court upheld the constitutional validity of Sections 69 and 70 of the GST Acts, which confer powers of arrest and summons. It rejected the argument that these provisions exceeded legislative competence, affirming that they are ancillary to the effective implementation of GST laws. The Court also emphasized the role of judicial review in ensuring that the power of arrest is not exercised arbitrarily.

Significant Holdings

The Court established several core principles:

- The amendments to the Customs Act and GST Act are valid and address the limitations identified in prior judgments.

- The procedural safeguards under the CrPC apply to arrests under the Customs Act and GST Act, ensuring protection of individual rights.

- Customs officers must exercise their arrest powers with caution, ensuring compliance with statutory and constitutional safeguards.

- The power of arrest under these Acts is subject to judicial review to prevent arbitrary or unlawful arrests.

- The constitutional validity of Sections 69 and 70 of the GST Acts is upheld, affirming the legislative competence to enact such provisions.

In conclusion, the judgment clarifies the legal framework governing arrests under the Customs Act and GST Act, emphasizing the balance between effective law enforcement and the protection of individual rights. The Court's interpretation reinforces the procedural safeguards necessary to prevent misuse of arrest powers while upholding the legislative intent behind the amendments.