SC upholds the constitutional validity of power to arrest under Customs and GST law

This Tax Alert summarizes recent ruling of the Supreme Court (SC)^[1] dealing with the constitutional validity of the provisions concerning power to arrest under the Customs and Goods and Services Tax (GST) law.

The key observations of the SC are:

• The debate over the power to arrest primarily originates from the Om Prakash case^[2], which previously required a magistrate's approval for arrests. Amendments in 2012, 2013, and 2019 overhauled this framework, making certain offences cognizable and non-bailable with specific conditions for arrest. 
• Additionally, the judiciary has emphasized the need for stringent safeguards when arresting without a warrant, necessitating concrete evidence and clear reasons for such actions.
• While the petitioners argue that tax evasion must be quantified before arrest, this is not always necessary. If the department is certain of an offence and the tax evasion falls within specified limits, the Commissioner can authorize an arrest, provided there are explicit recorded reasons for this belief.
• The power to levy and collect GST under Article 246A includes incidental and ancillary powers, which extend to summon, arrest, and prosecute. Therefore, challenge to the constitutional validity of Sections 69 and 70 of the CGST Act is rejected.
• The powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation, or non-compliance of the statutory safeguards provided under the special Acts.

For the aforesaid reasons, SC quashed the challenge to the constitutional validity concerning the power to arrest under Customs and GST law, while also establishing safeguards to protect assessees from threat of arrest by the tax officers. 

Comments:

• Businesses may take note of the procedural protections highlighted by the SC and ensure that they are aware of their rights when facing prosecution under the taxing statutes.
• SC reaffirmed that legislative entries in the Constitution should be interpreted broadly. With this ruling, the apex court has strengthened the enforcement mechanism under GST.
• SC had earlier ruled (supra) that anticipatory bail cannot be filed before the power of arrest under Section 69(1) of the CGST Act has been invoked. The said decision is overruled by this judgement and the Court has clarified that an application for anticipatory bail can be filed at any time when there is an apprehension of arrest. 

^[1] TS-96-SC-2025-GST
^[2] (2011) 14 SCC 1