S J EXIM Services

“Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 27.02.2025

Supreme Court Ruling on Arrest Powers under GST and Customs Act–CrPC/BNSS Provisions applies

Case: Diary No. – 46616/2018

RADHIKA AGARWAL vs. UNION OF INDIA

Introduction

The Supreme Court of India, on February 27, delivered a landmark judgment concerning the powers of arrest under the Goods and Services Tax (GST) Act and the Customs Act. The ruling clarifies the application of the Code of Criminal Procedure (now Bharatiya Nagarik Suraksha Sanhita) to arrests made under these laws and sets important legal precedents.

Key Findings of the Supreme Court

Application of CrPC to GST and Customs Arrests

The Court ruled that the rights of accused persons under the Code of Criminal Procedure (CrPC) are equally applicable to arrests made under the Customs Act and the GST Act. This ensures that procedural safeguards and due process apply to individuals detained under these laws.

Parallels with the Prevention of Money Laundering Act (PMLA)

The Supreme Court referenced its ruling in the Arvind Kejriwal case concerning arrests under the Prevention of Money Laundering Act (PMLA). The Court noted that the provisions for arrest under Section 19(1) of the PMLA and Section 104 of the Customs Act are nearly identical. Consequently, the requirement that arrests under PMLA must be based on “reasons to believe” has now been extended to arrests under the GST and Customs Acts as well.

Strict Adherence to GST Department Circulars

The Court emphasized that the circulars issued by the GST department regarding arrest procedures must be strictly followed. It also rejected the argument that customs officers should be considered as police officers, reinforcing that their powers are subject to specific legal constraints.

Anticipatory Bail Under GST and Customs Acts

The Court held that the provisions for anticipatory bail apply to both the GST and Customs Acts. This means that individuals fearing arrest can approach the Court for relief even in the absence of a formal First Information Report (FIR). This ruling strengthens legal protections against arbitrary detention by tax authorities.

Concerns Over Coercion and Harassment by Tax Officials

Acknowledgment of Coercive Tactics

The Supreme Court acknowledged allegations of coercion and harassment by tax officials in tax recovery matters. Chief Justice of India (CJI) Sanjiv Khanna stated that there was some merit in claims that tax officials had applied undue pressure on individuals to pay taxes.

Legal Remedies for Victims of Coercion

The Court noted that individuals who believe they have been coerced into making payments can seek relief by filing a writ petition. Additionally, officers found guilty of such practices may face departmental action.

Reference to the Nandini Satpathy Case

The Court referenced the Nandini Satpathy case, reiterating that coercive tax collection methods are contrary to established legal principles.

Judicial Review and Observations from the Bench

Bench Composition and Verdicts

The ruling was delivered by a bench comprising CJI Sanjiv Khanna, Justice MM Sundresh, and Justice Bela M Trivedi. The verdict was given in response to 279 petitions challenging the penal provisions in the Customs Act, CGST/SGST Act, and related laws as being inconsistent with CrPC and constitutional principles. Justice Bela Trivedi delivered a concurring judgment that focused on the scope of judicial review.

Key Observations Made by the Bench

During the hearings, the bench made several critical observations:

1. No Private Complaints under the GST Act – The Court clarified that private complaints cannot be filed under the GST Act.
2. Arrests Must Not Be Made on Mere Suspicion – Officials must have substantive grounds before making an arrest.
3. Certifiable Material Requirement – Arrests under GST and Customs laws must be supported by verifiable material, which can be reviewed by a Magistrate.
4. Impact of Recent Amendments – The Court noted that while Parliament has diluted the precedent set in Om Prakash v. Union of India (2011), it has not completely overruled it.
5. Protection Against Harassment – The Court expressed concern over the ambiguity in arrest provisions under Section 69 of the GST Act and stated that it would interpret the law to strengthen individual liberties and prevent harassment.

Restrictive Nature of Arrest Powers

CJI Khanna emphasized that the laws in question confer limited powers of arrest. He observed that arrest should not be considered essential for completing an investigation, as the legislation intends to restrict, rather than encourage, arbitrary detentions. The distinction between an officer’s “power to arrest” and the “necessity of arrest” was also underscored.

Om Prakash & Anr vs Union Of India & Anr on 30 September, 2011

Introduction

The Supreme Court of India heard two sets of matters together, one relating to the Customs Act, 1962, and the other involving the Central Excise Act, 1944. ​ The common issue was whether all offences under these Acts, being non-cognizable, are also bailable. ​

 Key Provisions and Arguments

Central Excise Act, 1944

1. Section 9A: Offences under Section 9 are deemed non-cognizable. ​
2. Section 13: Power to arrest with prior approval.
3. Sections 18-21: Procedures for searches, arrests, and handling of arrested persons. ​
4. Section 155 Cr.P.C. ​: Investigation of non-cognizable cases requires a Magistrate’s order. ​

Arguments by Petitioners

The counsel argued that offences under the 1944 Act are non-cognizable and should be bailable. ​ Referred to definitions in Cr.P.C. ​ and argued that non-cognizable offences are generally bailable.

1. Section 2(a) Cr.P.C. ​: Defines “bailable offence.” ​
2. Section 2(c) Cr.P.C.: Defines “cognizable offence.” ​
3. Section 2(l) Cr.P.C.: Defines “non-cognizable offence.” ​

Arguments by Respondents

Mr. Mohan Parasaran (ASG): Officers under the Excise Act are not police officers. ​ The power to arrest is necessary for effective duty collection. ​ Offences under Section 9(1)(d)(i) are non-bailable due to the severity of punishment.

Court’s Analysis

Central Excise Act, 1944

1. Non-cognizable Offences: All offences under Section 9 are non-cognizable. ​
2. Bailability: The court agreed with the petitioners that offences under the 1944 Act are bailable, based on the provisions of Sections 9, 9A, and 20 of the Act.

Customs Act, 1962

1. Section 104(4): Offences under the Act are non-cognizable. ​
2. Section 104(3): Customs officers have the power to release on bail. ​
3. The court applied the same reasoning as for the Central Excise Act and held that offences under the Customs Act are also bailable.

Court’s Order

The Supreme Court held that:

1. Offences under the Central Excise Act, 1944, are bailable. ​
2. Offences under the Customs Act, 1962, are bailable. ​

Conclusion

The court allowed the writ petitions, determining that offences under both the Central Excise Act, 1944, and the Customs Act, 1962, are bailable. ​ The judgment emphasized the legislative intent and the procedural safeguards provided under the respective Acts.

Conclusion on Radhika Agarwal Vs Union of India matter

The Supreme Court’s ruling is a significant step toward ensuring procedural fairness in tax-related arrests under the GST and Customs Acts. By reinforcing legal safeguards, recognizing the risk of coercion, and upholding the right to anticipatory bail, the judgment strengthens the legal rights of individuals and businesses while balancing the enforcement powers of tax authorities. This ruling sets a vital precedent in ensuring that arrest powers under financial laws are exercised with due diligence and respect for constitutional liberties.

COERCION BY GST OFFICIALS

Right to Legal Remedies for Taxpayers

The Court stated that any individual who feels coerced into making GST payments has the right to approach a writ court for relief. This affirmation provides taxpayers with a legal avenue to challenge undue pressure from tax authorities.

Accountability of Tax Officials

The Court further ruled that tax officers engaging in coercion should be subjected to departmental action. Emphasizing the importance of legal compliance, the Supreme Court stated that such practices violate the principles of justice and due process.

Judicial Bench and Judgment

A bench comprising Chief Justice of India Sanjiv Khanna, Justice MM Sundresh, and Justice Bela M Trivedi delivered the verdict. The ruling was issued as part of a batch of petitions concerning the powers of arrest under the GST Act and the Customs Act.

Reference to the Nandini Satpathy Case

Chief Justice Sanjiv Khanna, while delivering the judgment, cited the Nandini Satpathy case, reinforcing the principle that coercion in legal procedures is impermissible. He reiterated that forcing individuals to pay taxes under duress is contrary to law and must be addressed through legal channels.

The Nandini Satpathy Case: A Landmark Judgment on Self-Incrimination under Constitutional Law

Introduction

The Nandini Satpathy case is a landmark judgment by the Supreme Court of India that reinforced the constitutional right against self-incrimination under Article 20(3) of the Indian Constitution. The case arose when Nandini Satpathy, a former Chief Minister of Odisha, was summoned for interrogation and refused to answer certain questions, invoking her fundamental right.

Background of the Case

Nandini Satpathy was accused of corruption and called for questioning under the Prevention of Corruption Act. During the investigation, she was asked to answer numerous questions, some of which she refused, citing her constitutional rights. This led to legal proceedings where the scope of Article 20(3) of the Constitution was critically examined.

Arguments by the Parties

Arguments by the Prosecution

1. Obligation to Answer Questions: The prosecution argued that Satpathy, as a public servant, had a duty to answer the questions posed by the investigating officers.
2. Scope of Interrogation: It was contended that mere questioning did not amount to compelling an accused to be a witness against themselves.
3. Public Interest: The state emphasized that non-cooperation in an investigation of corruption charges would hinder law enforcement and accountability.

Arguments by the Defense (Nandini Satpathy’s Counsel)

1. Right Against Self-Incrimination: The defense argued that compelling Satpathy to answer the questions would violate Article 20(3) of the Indian Constitution, which states that no person accused of an offense shall be compelled to be a witness against themselves.
2. Scope of Protection: It was emphasized that protection under Article 20(3) extends not only to oral statements but also to written responses that may be self-incriminating.
3. Right to Silence: The defense contended that the right to remain silent was integral to the concept of fair trial and due process.

Legal Principles Established

1. Expansive Interpretation of Article 20(3): The Supreme Court held that the right against self-incrimination must be interpreted broadly, covering both verbal and written statements.
2. Compulsion Defined: The Court ruled that compelling an accused person to answer questions against their will violates constitutional protections.
3. Scope Beyond the Courtroom: The judgment clarified that the right against self-incrimination is applicable not only in trials but also at the stage of police investigations and preliminary inquiries.

Prevailing Legal Provisions at the Time

1. Article 20(3) of the Constitution: Protects individuals from being compelled to testify against themselves.
2. Section 161(2) of the CrPC: States that no person is bound to answer questions that would expose them to criminal charges.
3. Evidence Act, 1872: Section 25 bars the use of coerced confessions in court proceedings.

Supreme Court Judgment

The Supreme Court ruled in favor of Nandini Satpathy, reinforcing the protection against self-incrimination. The key takeaways from the judgment include:

1. Right to Silence: The accused has the right to remain silent during an investigation.
2. Interrogation Limits: Investigators cannot forcefully extract answers that may be self-incriminating.
3. Application to All Accused Persons: The protection under Article 20(3) is available to all individuals, including those being interrogated before formal charges are filed.

Conclusion

The Nandini Satpathy case remains a crucial precedent in Indian jurisprudence, affirming the fundamental right against self-incrimination. This ruling has had a lasting impact on criminal investigations, ensuring that individuals are not coerced into self-incrimination by law enforcement agencies. The judgment strengthened constitutional protections and set a benchmark for fair investigative practices in India.

Conclusion on Radhika Agarwal Vs Union of India matter

The Supreme Court’s ruling is a significant step toward ensuring procedural fairness in tax-related arrests under the GST and Customs Acts. By reinforcing legal safeguards, recognizing the risk of coercion, and upholding the right to anticipatory bail, the judgment strengthens the legal rights of individuals and businesses while balancing the enforcement powers of tax authorities. This ruling sets a vital precedent in ensuring that arrest powers under financial laws are exercised with due diligence and respect for constitutional liberties.

This Article is Authored by: Mr. Ravi Shekhar Jha, BALLB/Mob: +91-9999005379 & his email id is intelconsul@gmail.com

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: Supreme Court of India

Download Order Copy Below

Connect with us for more-

@ Team S J EXIM SERVICES, New Delhi, IN

CP: Ms. Shubhra Jha, Founder

Tel: +91-11-4999 2707 I +91-9999005693

Web: www.sjexim.services

EMAIL: operations@sjexim.services  I shubhra@sjexim.services

Facebook: www.facebook.com/sjeximservices

LinkedIn: https://www.linkedin.com/company/90794255/admin/feed/posts/

YouTube: https://www.youtube.com/@sjeximIndia

Subscribe our WhatsApp Channel: https://whatsapp.com/channel/0029VaTxDT8JZg4CHEOSoK47

Subscribe our Telegram Channel: https://t.me/sjeximindia

Disclaimer:

1. The authors view are based on his/her interpretation of the relevant information/documents, applicable law, and government policy and there is no assurance that a court or tribunal or regulatory body or other governmental authority may not interpret it differently.

2.  We are not responsible for updating or revising this article on account of any change in law or interpretation thereof or a change in events or circumstances informed or occurring after the date of this article unless specifically requested for it.

3. Our advice should not be taken or used out of context or reproduced for any other purpose or transaction. Views expressed in this update are strictly personal, based on our understanding of the underlying law.

4. We are not responsible for any injury, loss or cost arising to any person who refers to this update and acts or refrains from any act accordingly. We would suggest that detailed legal advice must be sought before relying on this update.

NOTE: All Inquiries/Consulting/Advisory/Assignments are solicited via email only & it is a PAID Service only!

#LawFirm #Lawyers #Arbitration #ArbitrationLaw #ADR #India #Law #LegalUpdates #NewDelhi #IndirectTax #IndirectTaxLaw #CBIC #FTP #CommercialLaw #CorporateLaw #ConstitutionalLaw #BarandBench #InternationalArbitration #InternationalCommercialArbitration #WTO #TBT #QCO #BIS #UnitedNations #UNO #DutyDrawback #CustomsAct #Advisory #ProBonoConsulting #IndiaCustomsAtWork #Facebook #Twitter #Instagram #LinkedIn #Tumblr #WhatsAppChannel #WhatsApp #YouTubeChannel #YouTube #KPMG #Deloitte #ErnstandYoung #GrantThornton #EY #PWC #BDO #Consulting #SettlementCase #DGFT #CII #FICCI #IndianChamberofCommerce #InternationalChamberofCommerce #PHDChamberofCommerce #FTP #FTP2023 #Compliance #CDSCO #HighCourts #SupremeCourt #DPIIT #CESTAT #CAAR #AdvanceRuling #CEX #Appeal #Refunds #IGSTRefund #Google #GoogleSearch #GoogleSEO #AIFTA #FTA #ASEAN #CustomsAdvanceRuling #JICA #JETROIndia #KITAIndia #KOTRAIndia #Multinationalcompanies #JapaninIndia #KoreainIndia #GovtofIndia #MinistryofcommerceIndia #TradeDeals #FTA #RulesofOrigin #SJEXIMServices #NewDelhi #India #Ministryofsteel #SteelQCO