Today, On 27th February, The Supreme Court, in a landmark ruling, upheld equal rights in arrests under GST and Customs laws. Chief Justice Khanna emphasized the need for fairness and procedural safeguards in tax-related arrests. The judgment ensures that individuals accused under these laws receive equal legal protection. This ruling is expected to impact future enforcement and safeguard constitutional rights.
New Delhi: The Supreme Court of India pronounced a crucial judgment today concerning the powers of arrest by officers under the Goods and Services Tax (GST) and Customs laws.
A Special Bench with the Chief Justice Sanjiv Khanna, Justice M.M. Sundresh, and Justice Bela M. Trivedi heard in the Chief Justice’s Court to announce a judgment.
The Supreme Court issued an important ruling regarding arrest powers under the Goods and Services Tax (GST) Act and the Customs Act. The Court determined that the rights of accused individuals, as outlined in the Code of Criminal Procedure (now known as the Bharatiya Nagarik Suraksha Sanhita), apply equally to arrests made under both the Customs Act and the GST Act.
Also Read: A Person Cannot be Arrested in GST Cases, Unless Credible Evidence is found: SC
This principle has now been extended to arrests related to GST and Customs as well. The Court noted that Section 19(1) of the PMLA and Section 104 of the Customs Act are essentially identical, both addressing the authority to make arrests.
This interpretation was similarly applied to the arrest provisions under the GST Act.
The Supreme Court has delivered a judgment regarding the arrest powers of officers under GST and Customs laws. Key issues to consider include the status of officers as police, the basis for arrests based on verifiable material or suspicion, the implications of admissions, and procedural safeguards.
Chief Justice Sanjiv Khanna remarked,
“There are two judgments one by me and Justice Trivedi, both concurring. We will not re-examine the Om Prakash case. We have also rejected the argument that these officers are police officers. The Deepal Mahajan case was determined to be different. We referenced the Arvind Kejriwal case, along with Sections 132 and 104 of the Customs Act, and concluded that when certain offences are classified as cognizable and bailable, they must be made non-cognizable and non-bailable. Provisions for anticipatory bail will also apply, allowing individuals to approach the court without the need to register an FIR.”
The Chief Justice further stated,
“On the grounds of legislative mandate, we have rejected that. We have not examined the culpable mental state.”
He added,
“We have scheduled the matters for March 17. Justice Trivedi’s judgment addresses the powers of judicial review under Article 226.”
The court ruled that individuals who may face arrest under the GST and Customs Acts have the right to apply for anticipatory bail, even prior to the registration of an FIR.
This ruling stems from a lead petition filed by Radhika Agarwal in 2018.
The issue of arrest powers under GST and Customs laws has been a contentious legal matter. Authorities have been empowered to arrest individuals for tax evasion and related offenses under the Central Goods and Services Tax (CGST) Act, 2017, and the Customs Act, 1962.
However, questions have been raised regarding the procedural fairness, safeguards for the accused, and the extent to which these officers function similarly to police personnel.
The Court was reviewing a series of petitions that challenged the constitutional validity of Sections 69 and 70 of the Central Goods and Services Tax (CGST) Act, 2017.
Section 69 of the CGST Act allows GST officers to arrest individuals if they suspect an offense under Section 132(1) has been committed, while Section 70 grants them the authority to summon individuals for inquiries.
The petitioners argued that these powers exceed the limits of taxation and infringe upon fundamental rights, asserting that the provisions are criminal in nature and could not be enacted under Article 246A of the Constitution.
Under the Customs Act, 1962, customs officers are also empowered to arrest individuals suspected of offenses related to smuggling, mis-declaration, or evasion of customs duties. Specifically, Section 104 of the Act enables them to arrest a person if there are “reasons to believe” that the individual has committed a punishable offense.
The classification of offenses is based on severity, with those punishable by more than three years of imprisonment deemed cognizable and non-bailable, permitting immediate action by officers.
The petitioners contended that the arrest powers were being misused, resulting in arbitrary detentions and violations of fundamental rights. The Court’s role was to interpret the scope of these provisions, especially in light of the 2011 ruling in Om Prakash v. Union of India, which determined that offenses under the Customs Act were non-cognizable and bailable, necessitating a warrant for arrest.
However, amendments to the Customs Act in 2012, 2013, and 2019 reclassified certain offenses as cognizable and non-bailable, allowing customs officers to arrest without a warrant in specific instances. The petitioners claimed these amendments contradicted the principles established in Om Prakash and violated constitutional protections.
In a related case, State of Gujarat v. Choodamani Parmeshwaran Iyer, the Supreme Court previously stated that the power to arrest under the GST Act is statutory and should not typically be interfered with by High Courts exercising writ jurisdiction. However, it emphasized that such powers should only be exercised when there is reasonable belief that an offense has occurred.
In January 2025, the Central Board of Indirect Taxes and Customs (CBIC) revised the guidelines regarding arrest procedures under the GST framework. The new amendment requires GST officers to provide a written explanation detailing the specific “grounds of arrest” to the detained individual, ensuring they fully understand the reasons for their arrest.
Additionally, officers must obtain a written acknowledgment from the individual confirming receipt and comprehension of these grounds.
In recent cases, courts have examined whether these officers should be granted the same powers as the police and whether arrests should be based on concrete evidence or mere suspicion. The judgment will significantly impact businesses, tax professionals, and enforcement agencies alike.
Key Issues to Watch
- Legal Status of Officers – The Supreme Court may determine whether GST and Customs officers possess police-like powers under the Code of Criminal Procedure (CrPC). This will influence how their actions are scrutinized under constitutional and procedural law.
- Basis of Arrest – The ruling is expected to define whether arrests must be based on verifiable material or if mere suspicion is sufficient. This will impact how tax authorities initiate legal action against alleged offenders.
- Effect of Admissions – A significant concern is whether statements made before GST and Customs officers can be used as confessions, especially if obtained without proper safeguards.
- Procedural Safeguards – The Court may lay down specific guidelines for procedural fairness, including rights of the accused, pre-arrest conditions, and compliance with constitutional protections.
- Scope of Challenge – The judgment could determine the extent to which an arrest can be challenged before courts, ensuring that individuals have a robust mechanism to seek redressal against arbitrary actions.
The Court highlighted the necessity for exercising arrest powers under both the Customs Act and GST laws with caution, adhering to the constitutional protections provided by Article 21 (right to life and personal liberty) and Article 22 (protection against arrest and detention).
The Court stated that the reasons that justify an arrest, as noted by the arresting officer, must be grounded in credible evidence, and the basis for the arrest must be conveyed to the individual in writing. This approach ensures that the arrested person has the opportunity to contest the legality of the arrest and to apply for bail.
Case Title: Radhika Agarwal v. Union of India and Ors.
Read Judgement