“Persons Can Seek Anticipatory Bail In Cases Related To GST, Customs Even In Absence Of FIR”: Supreme Court

The Supreme Court on Thursday issued an important decision regarding the authority to make arrests under the Goods and Services Tax (GST) Act and the Customs Act.

The Court ruled that the rights of accused persons under the Code of Criminal Procedure (now Bharatiya Nagarik Suraksha Sanhita) also apply when someone is arrested under the Customs Act or the GST Act.

The Court applied the ruling from the Arvind Kejriwal case, which stated that an arrest under The Prevention of Money Laundering Act (PMLA) should only be made if there are “reasons to believe” that it is necessary. It noted that Section 19(1) of the PMLA and Section 104 of the Customs Act are nearly identical, as both deal with the power of arrest. The Court also extended this principle to arrests under the GST Act.

The Court ruled that the GST department’s circulars on arrests must be strictly followed. It also rejected the claim that customs officers should be considered police officers.

Anticipatory bail applicable to GST and Customs Acts.

The Court ruled that anticipatory bail applies to cases under the GST Act and the Customs Act. This means that if someone fears being arrested, they can seek bail from the Court even if no FIR has been filed. It acknowledged that there might be some truth to complaints about tax officials using pressure and harassment.

Chief Justice of India, Sanjiv Khanna, said that based on the data, there were claims of force and coercion in tax payments, and the Court found some merit in these allegations. He explained that if someone feels forced to pay, they can approach the court and seek relief.

The responsible officers will also face departmental action. The Court made it clear that such practices are not allowed and go against the law. It also referred to the Nandini Satpathy case to support its stance.

A Supreme Court bench, led by Chief Justice of India Sanjiv Khanna and Justices MM Sundresh and Bela M Trivedi, delivered a verdict on a group of 279 petitions. These petitions challenged the penalty provisions in laws like the Customs Act and the GST Acts (CGST/SGST), arguing that they were not in line with the Criminal Procedure Code (CrPC) and the Constitution. The court had reserved its decision on May 16, 2024.

There are 2 judgments in this case—one by CJI Khanna and another by Justice Trivedi, who agreed with the decision but focused specifically on the powers of judicial review.

Key Observations:

– Under the GST Act, private individuals cannot file complaints.

– Arrests should not be made based only on suspicion.

– A GST or Customs officer must have solid, verifiable evidence before making an arrest, and this evidence should be presented before a Magistrate.

– Parliament has recently amended the law, reducing the impact of the 2011 Om Prakash v. Union of India case, but not completely overruling it.

– Citizens should not face harassment due to unclear arrest provisions.

The court also raised concerns about the lack of clarity in Section 69 of the GST Act, which deals with the power to arrest. It stressed that if necessary, it would interpret the law in a way that protects individual liberty while ensuring fair enforcement.

During the hearings, CJI Khanna pointed out that the laws in question only grant limited powers of arrest. He noted that many believe an investigation cannot be completed without making an arrest, but that is not the purpose of these laws.

The court emphasized that an officer’s “power to arrest” is different from the “necessity of arrest.”

Further updates will follow once the full judgment is out.

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