Supreme Court Overrules Previous Decisions on Anticipatory Bail under GST Act

Case: Diary No. – 46616/2018

RADHIKA AGARWAL vs. UNION OF INDIA

Introduction

The Supreme Court of India has overruled its previous judgments that had held that anticipatory bail applications were not maintainable in cases related to offences under the Goods and Services Tax (GST) Act. The landmark ruling clarifies the legal position on anticipatory bail under the GST Act, reinforcing the fundamental right to life and liberty under Article 21 of the Constitution.

Background of the Case

A three-judge bench comprising Chief Justice of India Sanjiv Khanna, Justice MM Sundresh, and Justice Bela Trivedi overruled the judgments of two-judge benches in the cases of:

State of Gujarat v. Choodamani Parmeshwaran Iyer and Another
Bharat Bhushan v. Director General of GST Intelligence, Nagpur Zonal Unit Through Its Investigating Officer

These decisions had previously held that a person summoned under the GST Act could not file an anticipatory bail application and that their only remedy was to seek relief through a writ petition under Article 226 of the Constitution.

Key Judgment: Radhika Agarwal vs. Union of India

The recent case of Radhika Agarwal vs. Union of India provided an opportunity for the Supreme Court to examine multiple issues relating to the arrest procedure under both the GST Act and the Customs Act. The judgment, authored by Chief Justice Khanna, reaffirmed the power of courts to grant anticipatory bail, recognizing it as an essential safeguard against arbitrary arrest.

The Court ruled that the provisions of the Code of Criminal Procedure (now known as the Bharatiya Nagarik Suraksha Sanhita) concerning the rights of accused individuals are equally applicable to arrests made under both the Customs Act and the GST Act. Additionally, the Court emphasized that the circulars issued by the GST department regarding arrest procedures must be strictly followed. It also rejected the contention that customs officers qualify as police officers.

The Supreme Court further clarified that an arrest under the Goods and Services Tax (GST) Act cannot be made solely based on suspicion. Such an arrest must not be conducted merely to ascertain whether a cognizable and non-bailable offense has been committed.

The Court held that an arrest must be based on a reasonable belief, supported by material evidence, that the conditions outlined in sub-section (5) of Section 132 of the GST Act are met. This necessitates a clear satisfaction that a cognizable and non-bailable offense has indeed been committed. Moreover, while recording the “reasons to believe,” the Commissioner must explicitly state their satisfaction and refer to the material evidence substantiating the commission of a non-bailable offense as specified in clauses (a) to (d) of sub-section (1) of Section 132. The determination of the tax amount involved, as per the monetary thresholds under clause (i) of sub-section (1), which renders the offense cognizable and non-bailable, must be backed by relevant and sufficient material.

Furthermore, as per Instruction 02/2022-23 GST (Investigation) dated 17.08.2022, an individual nominated or authorized by the arrested person must be informed immediately, and this fact must be recorded in the arrest memo. The date and time of the arrest should also be documented in the arrest memo. Additionally, a copy of the arrest memo must be provided to the arrested person with proper acknowledgment. The circular also stipulates other procedural safeguards, including mandatory medical examination, the duty to ensure the health and safety of the arrested individual, and specific protocols to be followed when arresting a woman.

Power to Grant Anticipatory Bail

The Court emphasized that the power to grant anticipatory bail arises when there is an apprehension of arrest. This power, conferred upon courts under the Criminal Procedure Code (CrPC), serves as a safeguard for personal liberty as guaranteed under Article 21 of the Constitution.

The Court cited Gurbaksh Singh Sibbia vs. State of Punjab [(1980) 2 SCC 565], where it was held that an application for anticipatory bail must be considered when the applicant demonstrates a reasonable apprehension of arrest based on specific facts, rather than vague or generalized fears.

Clarification on Filing Anticipatory Bail Applications

The Supreme Court clarified that it is not mandatory for an anticipatory bail application to be filed only after the registration of a First Information Report (FIR). As long as the applicant has a legitimate and reasonable basis to fear arrest, anticipatory bail may be sought.

This principle was reaffirmed by a five-judge Constitution Bench in Sushila Aggarwal and Others v. State (NCT of Delhi) and Another [(2020) 5 SCC 1], which held that anticipatory bail should not be denied merely due to the absence of an FIR.

Application of Anticipatory Bail to Offences under the Customs Act

In addition to its ruling on the GST Act, the Supreme Court also held that the provision of anticipatory bail is applicable to offences under the Customs Act. The Court emphasized that registration of a case and the existence of case diary entries are not prerequisites for entertaining an application for anticipatory bail under Sections 438 and 439 of the CrPC. This position was supported by the precedent set in Directorate of Enforcement v. Deepak Mahajan [(1994) 3 SCC 440].

Conclusion

This ruling marks a significant shift in the legal landscape concerning anticipatory bail under the GST Act and the Customs Act. By overruling earlier judgments that restricted access to anticipatory bail, the Supreme Court has reinforced the fundamental right to liberty and ensured greater judicial protection against arbitrary arrests. The decision upholds the principles enshrined in Article 21 of the Constitution and provides much-needed clarity on the applicability of anticipatory bail provisions in economic offences.

Earlier Article/Post: Supreme Court Ruling on Arrest Powers under GST and Customs Act-CrPC/BNSS Provisions applies

Earlier Article/Post: Supreme Court Upholds Powers to arrest Under Customs & GST Laws

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Source: Supreme Court of India

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