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TMI BlogSUPREME COURT ON ARREST PROVISIONS IN INDIRECT TAXESX X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME COURT ON ARREST PROVISIONS IN INDIRECT TAXES X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken. This section also provides for offences which shall be non-cognizable and bailable or cognizable and non-bailable. Finance Act, 2023 had amended Section 132(1) so as to decriminalize offences specified in clauses (g), (j), and (k) of the said sub-section and to increase the monetary threshold from one hundred lakh rupees to two hundred lakh rupees for launching prosecution for the offences under the said Act, except for the offences related to issuance of invoices without supply of goods or services or both. These offences relate to: * Obstruction or preventing any officer from discharging his duties * Tampering with or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... destruction of material evidence or documents * Failure to supply information required under law or supplying false information Provisions of Arrest at a glance Section 69 empowers the Commissioner of CGST or SGST to arrest any person where he has reasons to believe that such person has committed an offence under section 132(1) (a, b, c, d) and punishable under section 132(1)(i, ii) or 131(2) of CGST Act, 2017. In the administration of taxation the provisions for arrests are created to tackle the situations created by some unscrupulous tax evaders. To some these may appear very harsh but these are necessary for efficient tax administration and also act as a deterrent and instill a sense of discipline. The provisions for arrests under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Law have sufficient inbuilt safeguards to ensure that these are used only under authorization from the Commissioner. Besides this, the GST Law also stipulates that arrests can be made only in those cases where the person is involved in offences specified for the purposes of arrest and the tax amount involved in such offence is more than the specified limit. The salient points of these provisions are: * Provisions for arrests are used in exceptional circumstance and only with prior authorization from the Commissioner. * The law lays down a stringent criteria and procedure to be followed for arresting a person. A person can be arrested only if the criteria stipulated under the law for this purpose is satisfied i.e. if he has committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified offences (not any offence) and the tax amount is exceeding Rs.200 lakhs. However, the monetary limit shall not be applicable if the offences are committed again even after being convicted earlier i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount involved in the case. * Further, even though a person can be arrested for specified offences involving tax amount exceeding Rs. 200 lakhs, however, where the tax involved is less than Rs. 500 lakhs, the offences are classified as non-cognizable and bailable and all such arrested persons shall be released on Bail by Deputy/Assistant Commissioner. But in case of arrests for specified offences where the tax amount involved is more than Rs. 500lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs, the offence is classified as cognizable and non-bailable and in such cases the bail can be considered by a Judicial Magistrate only. Recent Supreme Court Judgment The Supreme Court of India, in its recent Judgment dated 27.02.2025 in RADHIKA AGARWAL VERSUS UNION OF INDIA AND OTHERS - 2025 (2) TMI 1162 - SUPREME COURT (LB), dealt with multiple issues concerning the power of arrest under the GST Acts of 2017 and Customs Act, 1962 with emphasis on whether officers under these statutes can arrest individuals without a warrant? It observed and held as follows: * Section 104(1) of Customs Act, 1962 stipulates that a customs officers may only arrest a person if they have 'reasons to believe' that he has committed an offence and not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise; this 'reasons to believe' represents a more stringent standard than 'mere suspicion' threshold as provided under section 41 of Cr. PC, 1973 for reason that unbridled exercise of power to arrest without a warrant can result in arbitrariness and errors in decision making process * Powers to summon, arrest and prosecute are ancillary and incidental to power to levy and collect GST and sections 69 and 70 of GST Acts are not ultra vires the Constitution, as GST Acts, in pith and substance, pertain to Article 246A of Constitution of India. * Customs and GST officers are not police officers and that their powers to arrest are limited and regulated by the respective Acts (i.e., Customs or GST). * Arrest under Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1962 (Section 104) or CGST Act, 2017 (section 69) can be done only when officer records 'reason to believe' leading to arrest in writing. In absence of such recording, arrest would be considered as illegal. * 'Reasons to believe' must include a computation and/or an explanation, based on factors such as goods seized, from which a conclusion of guilt can be drawn. Unbridled exercise of power to arrest without issuing a warrant can result in arbitrariness and errors in decision making process. * Not only that the 'reason to believe' is to be recorded in writing, it is the duty of the tax officer to inform the arrested person of the reasons to arrest and also share the written 'reason to believe'. * To deny and not give groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in writing to the taxpayer would be to deprive the accused of his right of bail under provisions of code. * Taxpayer has a right to challenge an arrest in court and courts can review the legal process of arrest to ensure compliance with procedural safeguards. * Arrest could be struck down if reasons recorded are found to be not valid. * Taxpayer has a right to have legal representation during the interrogation. He has right to meet advocate during interrogation to the allowed within visual distance but not within hearing distance. * On arrest, Magistrate's oversight shall safeguard against misuse of power by officer. Thus, taxpayer has to be presented before a Magistrate within 24 hours of arrest, so that Magistrate can examine w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether proper procedures safeguards were followed. * Arrest of taxpayer should not be used as a tool for investigation or coercion to force the taxpayers to admit / confess. * Arrest should be done only if such arresting is justified in terms of strong evidences of wrong doings. * For non-cognizable and bailable offences, officers cannot arrest taxpayers without prior judicial approval from a Magistrate, unless offence is a specific serious case. * All procedural safeguards such as informing reasons to arrest, providing arrest memo, legal help, producing before Magistrate etc must be followed. * Health and safety of the arrested person must be ensured as per law to ensure legality of arrest. * Arrested person must be provided ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess with case diary and other related documents justifying the arrest unless where confidentiality is required. * Arrested taxpayers prior to judgment can seek judicial review implying that relief may be claimed retrospectively for already made unlawful arrests. * GST Acts are not a complete code when it comes to provisions of search and seizure, and arrest, for provisions of Code would equally apply when they are not expressly or impliedly excluded by provisions of GST Acts. * Where even without a formal order of assessment and department/Revenue is certain that it is a case of offence under section 132 of GST law and amount of tax evaded, Commissioner may authorise arrest when he is able to ascertain and record reasons to believe. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There has to be a degree of certainty to establish that offence is committed and that such offence is non-bailable. * A person summoned under section 70 of GST Acts is not per se an accused protected under Article 20(3) of Constitution. Prohibitive sweep of Article 20(3) of Constitution does not go back to stage of interrogation. * Power to grant anticipatory bail arises when there is apprehension of arrest. This power, vested in Courts under Code, affirms the right to life and liberty under Article 21 of Constitution to protect persons from being arrested. No arrests are to be made till Commissioner is able to show and establish, on basis of material and evidence, that conditions of section 132(1) of GST Acts are satisfied and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, offences are non-bailable.
* A penalty or prosecution mechanism for levy and collection of GST and for checking its evasion, is a permissible exercise of legislative power.
* Powers to summon, arrest and prosecute are ancillary and incidental to power to levy and collect GST, thus, sections 69 and 70 of GST Acts are not ultra vires Constitution, GST Acts being in pith and substance, pertain to Article 246A of Constitution. X X X X Extracts X X X X X X X X Extracts X X X X
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