The Supreme Court in its Judgment dated 27.02.2025 in Radhika Agarwal v. Union of India (2025) 2 TMI 1162; 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?
The Supreme Court has emphasised on robust safeguards and precautions while arresting any person. It inter alia, provides guidance on reason to believe leading to arrest, reasons for arrest, procedure to be followed and rights of arrested person, besides interpreting the law relating to arrest under Customs Act, 1962 and GST Laws, 2017.
As per fact, the assessee was taken into custody under Section 104(1) of the Customs Act, 1962, as well as Sections 69 and 70 of the GST Acts, on allegations of tax evasion. The petitioner challenged the arrest, arguing that it was arbitrary, as Section 104(1) of the Customs Act mandates ‘reasons to believe’ a higher standard than the ‘mere suspicion’ threshold under Section 41 of the CrPC, 1973. Additionally, it was contended that in GST related cases, arrest without prior adjudication of tax liability contravenes principles of natural justice. The procedural legalilty of the arrest was subsequently challenged before the Supreme Court.
In the instant case, a bunch of criminal appeals were taken up for disposal on legal controversy arising from the three judge bench of Supreme Court in Om Prakash and Another v. Union of India dated 30.09.2011.[2011 (9) TMI 65 - SUPREME COURT]. The challenge was regarding power to arrest under the Customs Act, 1962 and CGST Act, 2017. Prior to this decision, offences under the Customs Act were treated as non-bailable and once arrested, the accused would be detained for a few months before being released on bail. In Om Prakash case it was observed that the offences under the Customs Act and the Central Excise Act, 1944 were non-cognizable and, therefore, even if the officers had the power to arrest, they could do so only after obtaining a warrant from the Magistrate in terms of Section 41 of the Code of Criminal Procedure, 1973. It was also held that offences under the Customs Act and the Excise Act were both bailable, bearing a punishment of less than 3 years.
The reasoning in Om Prakash (supra) proceeded on the interpretation of Sections 4 and 5 of the Code and holds that Section 155 and other provisions of Chapter XII of the Code are applicable. The principle being that the customs officers and excise officers, though conferred the power of arrest under the respective enactments, the offences being non-cognizable, were not vested with powers beyond that of a police officer in charge of the police station.
Supreme Court has 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 otherwise; 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
- 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).
- Magistrate has the power to authorize detention of a person arrested under Customs in the custody of Customs officer u/s 167(2) of CrPC.
- Customs officers are required to maintain a record or diary of statutory functions including arrest.
- Arrest under Customs Act, 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 grounds 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 whether 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 not be used as a instrument to harass the person being arrested.
- 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 access 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.
- 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.
- 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. 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, therefore, 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.
The writ petition was therefore, disposed off accordingly.
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