The Supreme Court on Thursday(February 27) delivered a significant ruling on the powers of arrest under the Goods and Services Tax Act and the Customs Act.
The Court held that the provisions of the Code of Criminal Procedure (now Bharatiya Nagarik Suraksha Sanhita) on the rights of accused persons are equally applicable to the arrests made both under the Customs Act and the GST Act.
The dictum in the Arvind Kejriwal case that the arrest under the Prevention of Money Laundering Act must be made only if there are "reasons to believe" has been applied in the context of GST and Customs arrests as well. Section 19(1) of the PMLA and Section 104 of the Customs Act are virtually the same, the Court noted. Both provisions deal with the power of arrest. The Court held the same for the arrest provision under the GST Act as well.
The Court also held that the circulars issued by the GST department regarding arrest must be strictly adhered to. The Court also rejected the argument that customs officers are police officers.
Anticipatory bail applicable to GST and Customs Acts.
The Court further held that the provisions relating to anticipatory bail are applicable to the GST Act and the Customs Act, and the parties can approach the Court for relief if there is an apprehension of arrest, without the FIR being registered.
The Court also observed that there was some merit in the allegations of coercion and harassment by the tax officials.
"We have commented on the basis of data with regard to allegations that there was force and coercion in the payment of taxes. We have some said that there may be some merit in it. Wherever a person is disposed to pay, he can go to the writ court and get an order. And the officers will have to be dealt with departmentally also. We have said that this cannot be permitted. This is contrary to the law. We have referred to Nandini Satpathy case in that regard," Chief Justice of India Sanjiv Khanna stated while pronouncing the verdict.
A bench of Chief Justice of India Sanjiv Khanna andJustices MM Sundresh, Bela M Trivedi made the observation while delivering verdict in a batch of 279 petitions challenging the penal provisions in the Customs Act, CGST/SGST Act, etc. as non-compatible with the CrPC and the Constitution. The orders in the case were reserved on May 16, 2024.
There are two judgments- one by CJI Khanna and a concnurring judgment by Justice Trivedi. Justice Trivedi's judgment deals with the powers of judicial review.
Notably, while the matter was being heard, the bench orally made the following key observations: (i) there can be no private complaint under the GST Act (ii) arrest should not be made on mere suspicion, (iii) GST/Customs Officer must have certifiable materialprior to arresting, which can be verified by a Magistrate, (iii) by recent amendments, Parliament whittled down the ratio of Om Prakash v. Union of India(2011), but did not completely do away with it, and (iv) citizens should not be harassed merely because there is ambiguity in arrest provisions.
It also expressed concerns about the ambiguity in Section 69 of the GST Act (dealing with power with arrest) and conveyed that it would interpret the law to "strengthen" liberty, if need be, but not allow citizens to be harassed.
During one hearing, CJI Khanna also observed that the legislation(s) in question conferred restricted powers of arrest: "sometimes we tend to believe that investigation cannot be completed until arrest. That is not the object of the legislation. It restricts the power of arrest". It was further highlighted that an officer's "power to arrest" is different from "necessity of arrest"
