The Supreme Court on Thursday upheld the constitutional validity of the provisions granting powers to Customs and Goods and Services Tax (GST) officials to makes arrests. .A Bench of Chief Justice of India (CJI) Sanjiv Khanna and Justices Bela M Trivedi and MM Sundresh held, "...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 Court was deciding on a batch of petitions challenging the constitutional validity of Sections 69 and 70 of the Central Goods and Services Tax (CGST) Act, 2017.Section 69 of the CGST Act empowers GST officers to arrest individuals if they believe an offence under Section 132(1) has been committed, while Section 70 grants them the authority to summon individuals for inquiries. The petitioners contended that these powers go beyond the scope of taxation and infringe upon fundamental rights. The key contention was that the provisions are criminal in nature and could not have been enacted under Article 246A of the Constitution.Under the Customs Act, 1962, customs officers have the power to arrest individuals suspected of committing offences related to smuggling, mis-declaration, or evasion of customs duties. Section 104 of the Act empowers them to arrest a person if there are "reasons to believe" that the individual has committed an offence punishable under the Act. However, the power to arrest is classified based on the severity of the offence. Those punishable with imprisonment of more than three years are considered cognizable and non-bailable, allowing officers to take immediate action. .The petitioners argued that the powers of arrest were being misused, leading to arbitrary detentions and violations of fundamental rights. The Court was tasked with interpreting the scope of these provisions, particularly in light of the 2011 decision in Om Prakash v. Union of India, which had held that offences under the Customs Act were non-cognizable and bailable, requiring a warrant for arrest.However, subsequent amendments to the Customs Act in 2012, 2013, and 2019 had reclassified certain offences as cognizable and non-bailable, allowing customs officers to arrest without a warrant in specific cases. The petitioners contended that these amendments were inconsistent with the principles laid down in Om Prakash and violated constitutional safeguards..In a related case, State of Gujarat v. Choodamani Parmeshwaran Iyer, the Supreme Court has previously held that the power to arrest under the GST Act is statutory and should not be ordinarily interfered with by High Courts under writ jurisdiction. However, it emphasised that such powers must be exercised only when there is a reasonable belief that an offence has been committed.In January 2025, the Central Board of Indirect Taxes and Customs (CBIC) amended the guidelines concerning the arrest procedures under the Goods and Services Tax (GST) framework. This amendment mandates that GST officers must provide a written explanation of the specific "grounds of arrest" to the individual being detained, ensuring that the arrested person fully understands the reasons for their arrest. Additionally, officers are required to obtain a written acknowledgment from the individual confirming receipt and comprehension of these grounds..Upholding Om Prakash The Court decisively upheld the Om Prakash ruling, which established that offenses under the Customs Act were primarily non-cognizable and bailable, requiring a warrant for arrest. The Court noted that the legislature has, in subsequent amendments, effectively endorsed this interpretation..Customs Act amendments and safeguardsThe Court noted that the 2012, 2013, and 2019 amendments to the Customs Act had explicitly classified certain offences as cognizable and non-bailable, while others remained non-cognizable and bailable. This classification was in line with the legislative intent to balance enforcement needs with individual rights.The Court upheld the amendments, stating that they provided sufficient safeguards against arbitrary arrests. For instance, Section 104(1) of the Customs Act requires that an officer must have "reasons to believe" that a person has committed an offence before making an arrest. The Court emphasised that this standard is higher than the "reasonable suspicion" threshold under the Code of Criminal Procedure (CrPC)."The threshold for arrest under Section 104(1) of the Customs Act is higher than that under Section 41 of the Code. Section 41 allows the police to arrest a person without a warrant, if a “reasonable complaint has been made”, or “credible information has been received”, or “a reasonable suspicion exists” that the person has committed a cognizable offence. In contrast, Section 104(1) sets a higher threshold, stipulating that a customs officers may only arrest a person if they have “reasons to believe” that a person has committed an offence," the Court found. .GST Act provisionsThe Court applied similar reasoning to the GST Acts, noting that Section 69 of the GST Acts allows for arrest only in cases of serious offences involving tax evasion or fraud exceeding specified monetary thresholds. The Court stressed that arrests under the GST Acts should not be routine and must be based on credible material..Customs officers are not police officersThe Court also addressed the argument that Customs officers should be treated as police officers, firmly rejecting this notion. "In a line of decisions of this Court — State of Punjab v. Barkat Ram, Ramesh Chandra Mehta v. State of West Bengal, and Illias v. Collector of Customs — it has been decisively held that customs officers are not police officers," the judgment stated, referencing several Constitution Bench judgments..Applicability of CrPC to Customs and GST lawsThe Court held that the CrPC is applicable to the Customs Act and GST laws unless expressly or impliedly excluded by the special statutes. This is in line with Sections 4 and 5 of the CrPC, which state that offences under any other law (other than the Indian Penal Code) shall be investigated, inquired into and tried according to the CrPC, unless the special law provides otherwise.The Court emphasised that the Customs Act and GST laws are not complete codes in themselves regarding arrest, search and seizure, and thus, the provisions of the CrPC apply where these statutes are silent."We would, therefore, agree with the contention that the GST Acts are not a complete code when it comes to the provisions of search and seizure, and arrest, for the provisions of the Code would equally apply when they are not expressly or impliedly excluded by provisions of the GST Acts," the judgment said..Safeguards and judicial reviewThe Court emphasised that the power of arrest under both the Customs Act and GST laws must be exercised with due caution and in compliance with the constitutional safeguards under Article 21 (right to life and personal liberty) and Article 22 (protection against arrest and detention).The Court held that the reasons to believe, as recorded by the arresting officer, must be based on credible material and the grounds of arrest must be communicated to the arrestee in writing. This is to ensure that the arrestee can challenge the legality of the arrest and seek bail..Voluntary payments and coercionThe Court addressed concerns that taxpayers were being coerced into making voluntary payments under threat of arrest. It clarified that while voluntary payments are permissible under Section 74(5) of the GST Acts, they must not be made under duress. "However, it is to be noted that the figures with regard to the tax demand and the tax collected would, in fact, indicate some force in the petitioners’ submission that the assessees are compelled to pay tax as a condition for not being arrested. Sub-section (5) to Section 74 of the GST Acts gives an option to the assessee and does not confer any right on the tax authorities to compel or extract tax by threatening arrest. This would be unacceptable and violative of the rule of law," the judgment said..Justice Trivedi authored a judgment concurring with the view of the majority judgment authored by CJI Khanna..[Read Judgment]
