The power to arrest under fiscal statutes such as the Customs Act, of 1962 has been the subject of extensive judicial scrutiny in India. The balance between the effective enforcement of tax laws and the protection of individual liberties has often led to significant litigation. Establishing the principles of general criminal laws in a tax statute becomes more arbitrary and disputable, since the implication of contradicting the provisions of fiscal acts is monetary loss to the government and hence, subjecting the defaulter to criminal proceedings should be undertaken with sufficient safeguards.

The recent case of Radhika Agarwal v. Union of India has brought this issue into focus, particularly concerning the interpretation of Section 104 of the Customs Act, which provides the power to arrest by the customs officers. However, to fully understand the implications of this case, it is crucial to examine the legal landscape before this judgment, including the significant precedent set in Om Prakash v. Union of India and the procedural framework that existed prior to Radhika Agarwal.

One of the most significant judicial pronouncements on arrest powers under the Customs Act, 1962, was delivered in Om Prakash v. Union of India. This case addressed key questions related to the classification of customs offences and the procedural safeguards necessary before an individual could be arrested. Additionally, this case also established the relationship between general criminal laws and the Customs Act. Therefore, analysing the ratio laid down in this case is essential to understand the decision passed in the case of Radhika Agarwal, supra.

Facts of the Case

The petitioners in the Om Prakash case were accused of smuggling and evasion of customs duties. The authorities sought to arrest them under unamended Section 104 of the Customs Act 1962, asserting that the offence was non-bailable and cognizable, thereby permitting immediate arrest. The petitioners challenged this classification, arguing that their rights were being violated and that the offences should be treated as bailable and non-cognizable, restricting the customs officers' power to arrest arbitrarily.

Findings of the Court on Principal Legal Issues -

I. Classification of Offences under the Customs Act as Cognizable or Non-Cognizable:

The issue concerning whether offences under the Customs Act, 1962, are to be treated as cognizable or non-cognizable has been the subject of detailed judicial scrutiny. The Supreme Court, while interpreting provisions of the Central Excise Act, 1944 and the Customs Act, 1962, has unequivocally held that offences under these enactments are non-cognizable.

This conclusion was drawn based on the express language of Section 104(4) of the Customs Act, 1962 and Section 9A of the Central Excise Act, 1944, both of which contain non-obstante clauses overriding the provisions of the Code of Criminal Procedure, 1973. The statutory text of Section 104(4) of the Customs Act, prior to the amendment, read as follows:

104.  Power to arrest.

.....

(4)Notwithstanding anything contained in the Code of [Criminal Procedure, 1898 (5 of 1898)] [ Now see the Code of Criminal Procedure, 1973 (2 of 1974).], an offence under this Act shall not be cognizable.

Thus, the Supreme Court interpreted that all offences under the Customs Act are to be treated as non-cognizable, and the same interpretation was applied into the corresponding provisions of the Central Excise Act.

Furthermore, the Court clarified that such offences, although non-cognizable, cannot be equated with non-cognizable and non-bailable offences under the IPC. This is because the Customs and Central Excise statutes contained its own scheme governing arrest and bail, separate from the general framework of the CrPC.

II. Nature of Offences: Bailable or Non-Bailable:

The Supreme Court went on to observe that not only are such offences non-cognizable, but they are also bailable. This conclusion was based on the cumulative reading of Section 104(4) of the Customs Act, 1962 and Section 20 of the Central Excise Act, 1944 which stipulates that the officer-in-charge of a police station shall either release the arrested person on bail or forward him to a Magistrate, in the event of non-availability of bail.

This view was expressed while indicating that the statutory objective of penal punishment under fiscal statutes like the Customs Act is primarily regulatory and not punitive, aimed more at compliance and recovery of dues. The SC concluded stating the offences under the Customs Act, 1962, and the Central Excise Act, 1944, are bailable in nature.

III. Powers of Customs Officers to Arrest Without Warrant

Another important legal consequence of the classification of such offences as non-cognizable related to the power of arrest. The Hon’ble Supreme Court held that offences under the Customs Act and Central Excise Act were non-cognizable and bailable in nature. The Court reasoned that a non-cognizable offence, as defined under Section 2(l) of the Code of Criminal Procedure, 1973, is one in which a police officer has no authority to arrest without a warrant. Hence, the Supreme Court held that Customs officers, not being "police officers" within the meaning of Section 2(o) CrPC, are not vested with the same powers of arrest as regular police officials. The Court further observed that Section 104 of the Customs Act, while empowering officers to arrest, must be read in harmony with the provisions of the CrPC, particularly Section 41, which governs the conditions precedent to effecting an arrest without a warrant.

The rationale adopted in Om Prakash was that where the statute itself classifies the offence as non-cognizable, the arrest cannot be made without obtaining a warrant from a Magistrate.

Following this judgement, concerns arose that these economic offences and offenders might exploit the revenue due to the virtue that these offences are bailable in nature. Therefore, vide Finance Act 2013, Section 135 of the Customs Act, 1962 providing for categorisation of offences as bailable or non-bailable based on the quantum of evasion was amended, making certain serious offences, such as those involving fraudulent evasion of duty exceeding ₹50 lakh, non-bailable and also inserted Section 104(6) that defines non-bailable offences. A similar amendment was made in the Central Excise Act, and later, when GST came into force, the Act highlighted the bailable and non-bailable offences in detail. The amended provision is as follows:

Section 104(6) - Notwithstanding anything contained in the Code of Criminal Procedure, 1973, (2 of 1974) an offence punishable under section 135 relating to—

(a) evasion or attempted evasion of duty exceeding fifty lakh rupees; or

…..

shall be non-bailable.

In Radhika Agarwal, the Supreme Court revisited the principles laid down in Om Prakash (2011), which had held all offences under the Customs Act as non-cognizable and bailable. However, the Court observed that post the 2013 amendments, certain serious offences like duty evasion above ₹50 lakh are now cognizable and non-bailable under Section 135 and 104(6) of the Customs Act, thereby indicating that ratio laid in Om Prakash case, was no longer a good law to that extent.

The Court in the present case has introduced stricter safeguards, such as arrest must be based on a written, reasoned “reason to believe,” backed by material evidence, and conform to procedural protections under the CrPC and D.K. Basu guidelines. The Court also indicated that arrests cannot be done coercively for tax recovery and emphasised judicial oversight, ensuring that customs authorities act within constitutional and statutory bounds, thereby shifting the enforcement approach from mere compliance to one rooted in due process and accountability.

The Radhika Agarwal judgment underscores the importance of judicial oversight in cases involving arrest under fiscal statutes. While the decision in Om Prakash v. Union of India earlier examined the nature of such offences and their implications, the Court in Radhika Agarwal clarified that subsequent legislative amendments, which have since altered the legal position. Consequently, the Om Prakash ruling no longer holds precedential value or binding authority.

The Radhika Agarwal case serves as a reaffirmation of individual liberty protections while ensuring that customs authorities operate within a legally sound framework. Moving forward, courts are likely to continue examining these issues to strike a balance between tax enforcement, personal liberty, and the Constitution.

About the authors: Rishab J is an Associate Partner and Bhagavath P is an Associate with Shivadass & Shivadass (Law Chambers).

The contents and comments of this document do not necessarily reflect the views/ position of Shivadass and Shivadass (Law Chambers) but remain solely of the author(s).

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