RADHIKA AGARWAL versus UNION OF INDIA AND OTHERS (27/02/2025) — Supreme Court headnote

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Summary

Challenges to the power of customs and GST officers to arrest, and to the vires of Sections 69 and 70 of the GST Acts, were rejected. The Court held that the 2012, 2013 and 2019 amendments to Section 104 of the Customs Act displaced the petitioners' reliance on Om Prakash; that the Code of Criminal Procedure applies to arrests under both Acts except where excluded; that the safeguards laid down in Arvind Kejriwal for arrests under the PMLA (material, written reasons to believe, grounds of arrest in writing, judicial review) apply equally to arrests under Section 104 of the Customs Act and Section 69 of the GST Acts; and that taxpayers cannot be coerced into paying tax under threat of arrest. Bela M. Trivedi, J. concurred in a separate opinion confining judicial review of such arrests to compliance with statutory and constitutional safeguards.

Issues

Whether, after the 2012, 2013 and 2019 amendments to Section 104 of the Customs Act, 1962, the ratio of Om Prakash v. Union of India still governs the power of customs officers to arrest.
Whether customs officers are police officers, and to what extent the Code of Criminal Procedure, 1973 (including Sections 4, 5, 41-B, 41-D, 50A, 55A, 167 and 172) applies to arrests under the Customs Act and the GST Acts.
Whether the pre-conditions and safeguards for arrest laid down in Arvind Kejriwal v. Directorate of Enforcement under Section 19 of the PMLA apply to arrests under Section 104(1) of the Customs Act and Section 69 of the GST Acts.
Whether arrest under Section 69 of the GST Acts requires a prior assessment order quantifying the tax evaded, and what the Commissioner's 'reasons to believe' must contain.
Whether taxpayers may be compelled to deposit tax during search or investigation under threat of arrest, and whether a person summoned under Section 70 of the GST Acts is an accused protected by Article 20(3).
Whether anticipatory bail is available against apprehended arrest under the GST Acts.
Whether Sections 69 and 70 of the GST Acts are within Parliament's legislative competence under Article 246-A of the Constitution.
What is the scope of judicial review under Articles 32 and 226 when an arrest under a special Act is challenged (addressed in the concurring opinion of Bela M. Trivedi, J.).

Provisions considered

Section 104(1), Customs Act, 1962Compared in a table with Section 19(1) of the PMLA. The Court held there is no substantive difference between 'reason to believe that a person has committed an offence' and 'guilty of an offence'; the absence of the words 'material in his possession' does not permit arrest on mere suspicion; the 'reasons to believe' threshold is higher than that under Section 41 CrPC, must reflect the cognizable/non-cognizable and bailable/non-bailable classification, and must explain with a computation how the monetary thresholds are met. Grounds of arrest must be given in writing before production before the Magistrate. (¶¶ 39, 40, 41, 42, 43, 44, 45, 46, 47)
Section 104(4) to (7), Customs Act, 1962Quoted as amended in 2012, 2013 and 2019: offences in clauses (a) to (d) of sub-section (4) are cognizable and all others non-cognizable; offences in clauses (a) to (e) of sub-section (6) are non-bailable and all others bailable. These amendments substantively modified the application of Om Prakash, so reliance on it was rejected, though arrest for a non-cognizable offence still requires a warrant. (¶¶ 7, 8, 9, 10, 11, 22, 45, 48)
Sections 4 and 5, Code of Criminal Procedure, 1973Quoted. Offences under other laws are to be investigated, inquired into and tried under the Code subject to any enactment regulating the manner of doing so, and the Code does not affect special laws absent a specific contrary provision; the Code therefore applies to the Customs Act and the GST Acts to the extent they contain no contrary or excluding provision (A.R. Antulay, Ashok Munilal Jain). (¶¶ 12, 13, 50, 51)
Sections 41-B, 41-D, 50A and 55A, Code of Criminal Procedure, 1973Though these provisions refer to police officers, the Court held that they equally bind customs officers and, by paragraph 60, GST officers: the arresting officer must bear clear identification and prepare an arrest memo; the arrestee may meet an advocate during (not throughout) interrogation, the advocate watching from a distance but not within hearing (Jugal Kishore Samra); a nominated person must be informed of the arrest and compliance entered in the officer's diary, which the Magistrate must verify; and the person having custody must take reasonable care of the arrestee's health and safety. (¶¶ 25, 26, 27, 28, 29, 60)
Sections 167 and 172, Code of Criminal Procedure, 1973Following Deepak Mahajan, Section 167(2) applies to arrests under Section 104 of the Customs Act, so a Magistrate may authorise detention in the custody of a customs officer; customs officers must maintain a case diary recording their statutory functions (informant, arrestee, information received, time of arrest, seizures, statements), and under Section 172(1B) as amended in 2009 the diary must be a duly paginated volume. (¶¶ 18, 19, 23, 24)
Section 69, Central Goods and Services Tax Act, 2017 (and State GST Acts)The Commissioner may authorise arrest only on recorded reasons to believe that the person has committed an offence in clauses (a) to (d) of Section 132(1) punishable under clause (i) or (ii) of that sub-section or sub-section (2). For arrest the Commissioner must show, on material, that the non-bailable conditions of Section 132(5) are met, with the tax computation supported by relevant material, and not on ipse dixit or in order to investigate whether the conditions are met. A formal assessment order is normally expected but is not an invariable precondition where the department has a sufficient degree of certainty. The vires challenge under Article 246-A was rejected. (¶¶ 52, 55, 56, 57, 58, 59, 71, 72, 75)
Section 132, Central Goods and Services Tax Act, 2017 (and State GST Acts)Quoted. Sub-section (4) makes all offences non-cognizable and bailable except those in sub-section (5), namely offences under clauses (a) to (d) of sub-section (1) where the amount exceeds Rs 500 lakh, which alone are cognizable and non-bailable; the provision was read in the light of Om Prakash, of which the legislature was conscious when enacting the GST Acts. (¶¶ 53, 54, 55)
Sections 70 and 74(5), Central Goods and Services Tax Act, 2017 (and State GST Acts)A person summoned under Section 70 is not per se an accused protected by Article 20(3), whose prohibitive sweep does not reach the stage of interrogation. Section 74(5) permits voluntary payment of tax before notice and confers no right on the authorities to compel payment by threat of arrest; coerced payments may be reclaimed through the courts and the department must act against the officers concerned. The vires challenge to Section 70 was rejected. (¶¶ 63, 64, 65, 67, 68, 69, 75)
Section 19(1), Prevention of Money-Laundering Act, 2002The Court restated Arvind Kejriwal: arrest requires material in the officer's possession, written reasons to believe that the arrestee is guilty, and communication of the grounds of arrest; the reasons to believe must be furnished to the arrestee subject to justified redaction decided by the court; the material must be admissible and exculpatory material cannot be ignored; and judicial review of the arrest, short of a merits review, is available before and after the complaint is filed. These principles were held equally applicable to Section 104 of the Customs Act. (¶¶ 30, 31, 32, 33, 34, 35, 36, 37, 38, 46)
Article 246-A, Constitution of IndiaQuoted. It defines both the source of power and the field of legislation for GST, obviating recourse to the Seventh Schedule (VKC Footsteps); applying the doctrine of pith and substance and the rule that a legislative field extends to all ancillary and incidental matters (R.S. Joshi v. Ajit Mills), the powers to summon, arrest and prosecute for evasion are incidental to the power to levy and collect GST, so Sections 69 and 70 of the GST Acts are within legislative competence. (¶¶ 72, 73, 74, 75)
Articles 21 and 22(1), Constitution of IndiaThe duty of customs officers to inform the arrestee of the grounds of arrest flows from Article 22(1) and Section 50 CrPC; the grounds must be given in writing before production before the Magistrate so that the arrestee can challenge the arrest and seek bail. The power to grant anticipatory bail under the Code affirms the right under Article 21 and is available on a reasonable apprehension of arrest even before an FIR; GST decisions to the contrary are not binding. (¶¶ 24, 47, 70)
Articles 32 and 226, Constitution of IndiaDealt with in the concurring opinion of Bela M. Trivedi, J. (paragraphs 2, 4, 9, 10, 12 and 13 of that opinion): judicial review of an arrest under special Acts such as the PMLA, Customs Act or GST Acts is to be exercised sparingly and confined to whether the officer was authorised, whether the reason to believe was based on material in his possession, and whether the grounds of arrest were communicated as soon as may be; the sufficiency of the material and the correctness of the facts are not for review, and minor procedural lapses should not be magnified.

Held

The 2012, 2013 and 2019 amendments to Section 104 of the Customs Act, which designate specified offences as cognizable and non-bailable and impose pre-conditions for arrest, substantively modified the application of Om Prakash v. Union of India; reliance on that decision to contend that a customs officer needs a Magistrate's warrant before any arrest is misconceived. Offences outside Section 104(4) remain non-cognizable, however, and cannot be the subject of arrest without a warrant. (¶¶ 4, 8, 10, 11, 22, 45, 48)
Customs officers are not police officers (Barkat Ram, Ramesh Chandra Mehta, Illias and Tofan Singh followed), but by virtue of Sections 4 and 5 of the Code its provisions apply to offences under the Customs Act and the GST Acts wherever those Acts contain no contrary provision; the GST Acts are not a complete code on search, seizure and arrest. Accordingly Sections 41-B, 41-D, 50A and 55A of the Code, the duty to maintain a paginated case diary and the directions in D.K. Basu bind officers making arrests under both Acts, and these requirements complement rather than conflict with the special Acts. (¶¶ 13, 14, 15, 16, 23, 24, 25, 26, 27, 28, 29, 50, 60)
There is no substantive inconsistency between Section 19(1) of the PMLA and Section 104(1) of the Customs Act: 'committed an offence' means the same as 'guilty of an offence', and although Section 104(1) does not mention 'material in his possession', a customs officer cannot conclude that an offence was committed out of thin air or on mere suspicion. The 'reasons to believe' standard is more stringent than the 'reasonable suspicion' of Section 41 of the Code and must record why arrest is made for the specific offence, including how the monetary thresholds in Section 104(4) and (6) are met, so as to permit judicial review. The principles in Arvind Kejriwal, including the furnishing of the reasons to believe and judicial review of the arrest, apply equally to arrests under Section 104. (¶¶ 40, 41, 42, 43, 44, 45, 46)
Under Section 104(1) the grounds of arrest must be given to the arrestee in writing before he is produced before the Magistrate under Section 104(2), so that he can contest the arrest and seek bail; to withhold them would deprive him of his statutory right and offend Article 22(1). (¶ 47)
Under Section 69 of the GST Acts arrest may be authorised only if the Commissioner records reasons to believe, supported by material and evidence, that the person has committed a non-bailable offence under clauses (a) to (d) of Section 132(1) exceeding the Rs 500 lakh threshold in clause (i); the computation of tax must be supported by relevant material, the exercise must be undertaken objectively and not on mere ipse dixit, arrest cannot be made merely to investigate whether the conditions are met, and the principle of benefit of doubt applies before both the Commissioner and the Magistrate. Failure to satisfy these requirements makes the arrest illegal. (¶¶ 55, 56, 57, 58, 59)
The power of arrest under the GST Acts must be used with great circumspection and never casually, on suspicion or for investigation (Makemytrip approved to that extent). A prior assessment order quantifying the evasion is not an invariable precondition: normally assessment will quantify the amount, but where the department is certain, with a sufficient degree of certainty and without a formal order, that an offence under clauses (a) to (d) of Section 132(1) attracting clause (i) is made out, the Commissioner may authorise arrest on explicit recorded reasons referring to the underlying material. The contention that arrest must await quantification so as to permit compounding under Section 162 was rejected, compounding and arrest being distinct. (¶¶ 58, 59, 71)
The CBIC instructions of 17.08.2022 (guidelines for arrest and bail, including that the existence of a power to arrest is distinct from the justification for exercising it and that arrest is not to be resorted to in cases of a technical nature) and of 13.01.2025 (grounds of arrest to be furnished in writing as an annexure to the arrest memo, with acknowledgement) bind the department and are to be read with the directions in this and earlier judgments. (¶¶ 61, 62)
Section 74(5) of the GST Acts gives the assessee an option to pay voluntarily and confers no right on the authorities to compel or extract tax by threatening arrest; the Revenue's own data, showing arrests inversely related to recoveries, lent force to the complaint that assessees are made to pay as a condition of not being arrested, which would violate the rule of law. Payments made under threat, force or coercion may be recovered through the courts, the department must act against the officers concerned, and the CBIC should promptly frame clear guidelines against such threats. A person summoned under Section 70 is nevertheless not per se an accused protected by Article 20(3). (¶¶ 63, 65, 66, 67, 68, 69)
Anticipatory bail is available where there is a reasonable apprehension of arrest under the GST Acts, even before an FIR or complaint is filed, following Gurbaksh Singh Sibbia and the Constitution Bench in Sushila Aggarwal; decisions under the GST Acts to the contrary (Choodamani Parmeshwaran Iyer and Bharat Bhushan) are not to be treated as binding. (¶ 70)
Article 246-A is the source of power and field of legislation for GST; applying pith and substance and the rule that legislative powers extend to ancillary and incidental matters, the powers to summon, arrest and prosecute for evasion are incidental to the power to levy and collect GST, and Sections 69 and 70 of the GST Acts are constitutionally valid. The challenge to Section 135 was left open as no prosecution had been initiated. In her concurring opinion, Bela M. Trivedi, J. held that judicial review under Articles 32 and 226 of an arrest under special Acts should be exercised very cautiously and be confined to compliance with the statutory and constitutional safeguards (authorised officer, reasons to believe based on material, communication of grounds of arrest), not to the sufficiency of the material, and that minor procedural lapses should not be magnified. (¶¶ 72, 73, 75, 76, 77)

Result

Challenges to the constitutional validity of Sections 69 and 70 of the GST Acts and to the power of customs and GST officers to arrest rejected, with clarification of the pre-conditions and the manner in which the power of arrest is to be exercised; the respondent authorities directed to comply with this judgment and Arvind Kejriwal. The matters directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal.