Anticipatory Bail Now Available in GST & Customs Cases | Supreme Court Clarifies Powers of Arrest Under Customs Act and CGST Act

The Hon'ble Supreme Court of India in W.P.(Crl.) No.336 of 2018 (Radhika Agarwal vs. Union of India and Others), dated February 27, 2025, held that while the power of arrest under the Customs Act, 1962 and Central Goods and Services Tax Act, 2017 is valid, it must be exercised judiciously with adequate safeguards to protect the fundamental rights of an arrestee. The Court clarified the pre-conditions for such arrests, rejected constitutional challenges to the provisions, and reinforced the availability of anticipatory bail in appropriate cases.

Facts of the Case

The decision arose from a batch of writ petitions challenging the power to arrest under the Customs Act, 1962 and the Central Goods and Services Tax Act, 2017. The controversy stemmed from an earlier decision of the Supreme Court in Om Prakash and Another v. Union of India and Another (2011), which had held that offences under the Customs Act were non-cognizable and therefore even if officers had the power to arrest, they could do so only after obtaining a warrant from the Magistrate.

Before the Om Prakash decision, offences under the Customs Act were treated as non-bailable, and once arrested, accused persons would typically be detained for several months before being released on bail. The Om Prakash case changed this by observing that the offences under the Customs Act and the Central Excise Act, 1944 were non-cognizable, requiring a warrant for arrest.

The reasoning in Om Prakash proceeded on the interpretation of Sections 4 and 5 of the Code of Criminal Procedure (CrPC) and held that Section 155 and other provisions of Chapter XII of the Code are applicable. The principle established was that customs officers and excise officers, though conferred with the power of arrest under their respective enactments, were not vested with powers beyond that of a police officer in charge of a police station for non-cognizable offences.

Following the Om Prakash judgment, the legislature amended the Customs Act in 2012, 2013, and 2019, specifically designating certain offences as cognizable and non-bailable, while others remained non-cognizable and bailable. Similar provisions were incorporated into the GST Act when it was enacted.

Section 104(4) of the Customs Act, post the 2012 and 2019 amendments, specified that offences related to prohibited goods, evasion of duty exceeding fifty lakh rupees, fraudulently availing drawback or exemption from duty exceeding fifty lakh rupees, and fraudulently obtaining an instrument for purposes of the Act where duty relatable to utilization exceeds fifty lakh rupees, shall be cognizable, notwithstanding anything contained in the CrPC. Section 104(5) clarified that all other offences under the Act shall be non-cognizable.

Similarly, Section 104(6) of the Customs Act, post the 2013 and 2019 amendments, designated certain offences punishable under Section 135 as non-bailable, including those related to evasion of duty exceeding fifty lakh rupees, prohibited goods notified under Section 11, undeclared imports or exports exceeding one crore rupees, fraudulent availing of drawback exceeding fifty lakh rupees, and fraudulently obtaining instruments under the Act. Section 104(7) stated that all other offences shall be bailable.

For the GST Acts, Section 69 provides for the power of arrest where a Commissioner has reasons to believe that a person has committed offences specified in clauses (a) to (d) of sub-section (1) to Section 132, which is punishable under clauses (i) or (ii) of sub-section (1), or sub-section (2) of the said section. Section 132 deals with punishment for certain offences, with sub-section (4) declaring all offences under the Act as non-cognizable and bailable, except those specified in sub-section (5), which are cognizable and non-bailable.

The petitioners challenged these amendments and provisions, contending that they were contrary to the law laid down in Om Prakash. The petitioners also questioned the constitutional validity of Sections 69 and 70 of the GST Acts on grounds of legislative competence, arguing that Article 246-A of the Constitution did not explicitly authorize violations of GST laws to be made criminal offences.

Another contention raised was that authorities often compelled and coerced assessees to admit and make payment of tax under the threat of arrest, despite there being no assessment or adjudication of the alleged demand. The petitioners also submitted that Section 162(1) of the GST Acts permits compounding of offences, and therefore the ratio in Makemytrip (India) Private Limited v. Union of India should be applied to the GST Acts, requiring an assessment order before arrest.

The Court called upon the Revenue to submit data regarding arrests and tax collection, which indicated that the number of people arrested was normally in hundreds or more, while figures regarding tax demand and collection suggested some force in the petitioners' submission that assessees were being compelled to pay tax as a condition for not being arrested.

Issue

Whether the power of arrest under the Customs Act, 1962 and the Central Goods and Services Tax Act, 2017 is constitutionally valid, and if so, what are the safeguards for its exercise?

Held by the Court

The Hon'ble Supreme Court in the W.P.(Crl.) No.336 of 2018 held that:

1. The amendments made to the Customs Act in 2012, 2013, and 2019 were substantive and were introduced to effectively modify the application of Om Prakash. These amendments designated specified offences as cognizable and non-bailable, while also imposing certain pre-conditions and stipulations for making arrests. Consequently, the petitioners' reliance on Om Prakash was no longer valid. The Court noted that these amendments promote and protect the life and liberty of citizens and correct earlier prevalent wrongdoings which diminished constitutional and statutory rights.

   
   

2. For the Customs Act, Section 104(4) specifies only certain categories of offences as cognizable (offences related to prohibited goods and evasion or attempted evasion of duty exceeding fifty lakh rupees). Section 104(5) clarifies that all other offences are non-cognizable. Similarly, Section 104(6) designates specific offences as non-bailable, while Section 104(7) states that all other offences are bailable. The net effect of these amendments is that only when the conditions of sub-section (5) to Section 132 are satisfied, and the offence falls under clauses (a) to (d) of sub-section (1) to Section 132 of the GST Acts, can the offence be treated as non-bailable.

   
   

3. For arrests under the Customs Act, the Commissioner must satisfactorily show, through reasons to believe recorded, that the person has committed a non-bailable offence specified in clauses (a) to (d) of Section 104(6). The "reasons to believe" must be explicit and refer to material and evidence underlying such opinion. The grounds of arrest must be given in writing to the arrestee before production before the Magistrate.

   
   

4. The Court rejected the contention that customs officers are police officers, affirming previous Constitution Bench decisions in State of Punjab v. Barkat Ram, Ramesh Chandra Mehta v. State of West Bengal, and Illias v. Collector of Customs, recently reaffirmed in Tofan Singh v. State of Tamil Nadu.

   
   

5. The Court held that principles applicable to the Prevention of Money Laundering Act, 2002 as established in Arvind Kejriwal v. Directorate of Enforcement are equally applicable to the power of arrest under Section 104 of the Customs Act. The Court emphasized that the threshold for arrest under Section 104(1) of the Customs Act is higher than that under Section 41 of the CrPC, requiring "reasons to believe" rather than mere "reasonable suspicion."

   
   

6. For the GST Acts, Section 132(4) designates most offences as non-cognizable and bailable, except for those under Section 132(5) which are cognizable and non-bailable. The Court observed that arrests should not be made in cases of technical nature or where demand of tax is based on differences of interpretation of law. While normally assessment proceedings would quantify the tax evaded and establish violations, there could be cases where even without a formal assessment order, the department is certain about offences under clauses (a) to (d) with sufficient certainty.

   
   

7. The Court rejected the vires challenge to Sections 69 and 70 of the GST Acts, holding that Article 246-A of the Constitution is a comprehensive provision defining both source of power and field of legislation for GST. The Parliament's power to make laws regarding GST includes, as a necessary corollary, the power to enact provisions against tax evasion, including powers to summon, arrest, and prosecute. Applying the doctrine of pith and substance, the Court held that powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect goods and services tax.

   
   

8. Regarding the practice of extracting tax payments under threat of arrest, the Court observed that the data submitted by the Revenue indicated some force in the petitioners' submission. The Court clarified that Section 74(5) of the GST Acts gives an option to the assessee to voluntarily pay tax and does not confer any right on tax authorities to compel or extract tax by threatening arrest. Such practices would be unacceptable and violative of the rule of law. The Court noted that assessees would be entitled to move courts seeking refund of tax deposited under threat, force, or coercion.

   
   

9. The Court affirmed various safeguards for arrestees, including maintaining proper records, providing grounds of arrest in writing, following D.K. Basu guidelines, allowing the right to meet an advocate during interrogation (though not throughout), and informing a nominated person immediately about the arrest.

   
   

10. On anticipatory bail, the Court clarified that the power to grant it arises when there is apprehension of arrest. This power affirms the right to life and liberty under Article 21 of the Constitution. Following Gurbaksh Singh Sibbia v. State of Punjab and Sushila Aggarwal v. State (NCT of Delhi), the Court held that applications for anticipatory bail based on facts that are not vague should be considered to evaluate the threat and seriousness of apprehension. It is not essential that such applications be moved only after an FIR is filed, as long as facts are clear and there is a reasonable basis for apprehending arrest. The Court specifically mentioned that some previous decisions in the context of GST Acts contrary to this position should not be treated as binding.

    
    

11. The Court rejected the contention that Section 162(1) of the GST Acts permitting compounding of offences requires an assessment order under Section 74 before arrest. While the Court acknowledged the Makemytrip decision regarding service tax, it noted the decision itself carved exceptions for habitual evaders. The Court emphasized that there is a difference between compounding of offences and arrest of a person.

Relevant Sections

• Section 104(1), (4), (5), (6) and (7) of the Customs Act, 1962

• Section 69, 70, 73, 74, 132(1), (4), (5) and (6), 162(1) of the Central Goods and Services Tax Act, 2017

• Section 2(c), 2(l), 4, 5, 41, 41-B, 41-D, 50A, 55A, 155, 167, 172, 173 and 438 of the Code of Criminal Procedure, 1973

• Article 21, 22, 32, 226 and 246-A of the Constitution of India

Cases Referred

1. Om Prakash and Another v. Union of India and Another (2011) 14 SCC 1 - The Supreme Court held that offences under the Customs Act were non-cognizable and required a warrant for arrest.

   
   

2. Directorate of Enforcement v. Deepak Mahajan (1994) 3 SCC 440 - This case addressed whether persons arrested under the Customs Act, on being produced before a Magistrate, can be committed to the custody of a customs officer. It also held that a person summoned under an economic law is not per se an accused protected under Article 20(3) of the Constitution.

   
   

3. Arvind Kejriwal v. Directorate of Enforcement (2025) 2 SCC 248 - The Court held that power of arrest under PMLA is fenced with pre-conditions and requires "reasons to believe" to be disclosed to arrestee. The Court elaborated on judicial review of arrests and emphasized that reasons to believe must be based on admissible evidence.

   
   

4. State of Punjab v. Barkat Ram (1962) 3 SCR 338, Ramesh Chandra Mehta v. State of West Bengal (1969) 2 SCR 461, and Illias v. Collector of Customs (1969) 2 SCR 613 - These Constitution Bench judgments held that customs officers are not police officers.

   
   

5. Tofan Singh v. State of Tamil Nadu (2021) 4 SCC 1 - This judgment affirmed that customs officers are not police officers and laid down the test for determining when an officer can be deemed a police officer.

   
   

6. Union of India v. Ashok Kumar Sharma (2021) 12 SCC 674 - This judgment examined the interplay between the Code of Criminal Procedure and special statutes, particularly the Drugs and Cosmetics Act, 1940.

   
   

7. Makemytrip (India) Private Limited and Another v. Union of India and Others (2016) SCC OnLine Del 4951 - This decision interpreted the power of arrest under the Finance Act, 1994 relating to service tax, stating that power of arrest should be used with great circumspection and not casually.

   
   

8. Union of India v. VKC Footsteps (India) Private Ltd. (2022) 2 SCC 603 - This case noted that Article 246-A defines the source of power and field of legislation for GST, obviating the need to travel to the Seventh Schedule.

   
   

9. Additional Secretary to the Government of India v. Smt. Alka Subhash Gadia (1992) Supp (1) SCC 496 - This case discussed the law on preventive detention and limitations of judicial review in such cases.

   
   

10. Union of India v. Padam Narain Aggarwal (2008) 13 SCC 305 - This case observed that the power to arrest a person by a Custom officer is statutory and cannot be interfered with, but must be exercised on objective facts of commission of enumerated offences.

    
    

11. Vijay Madanlal Choudhary and Others v. Union of India and Others (2022) SCC OnLine SC 929 - This judgment held that safeguards in the PMLA for arrest are stringent and of higher standard.

    
    

12. Gurbaksh Singh Sibbia and Others v. State of Punjab (1980) 2 SCC 565 - This judgment held that applications for anticipatory bail should be considered even without an FIR if there is reasonable apprehension of arrest.

    
    

13. Sushila Aggarwal and others v. State (NCT of Delhi) and Another (2020) 5 SCC 1 - This Constitution Bench judgment confirmed principles regarding anticipatory bail.

    
    

14. Poolpandi and Others v. Superintendent, Central Excise and Others (1992) 3 SCC 259 and Dukhishyam Benupani v. Arun Kumar Bajoria (1998) 1 SCC 52 - These cases established that the prohibitive sweep of Article 20(3) of the Constitution does not extend to the stage of interrogation.

    
    

15. Nandini Satpati v. P.L. Dani and Another (1978) 2 SCC 424 - This case discussed the meaning of "compelled testimony" in the context of Article 20(3).

    
    

16. R.S. Joshi, Sales Tax Officer v. Ajit Mills Limited (1977) 4 SCC 98 - This Constitution Bench judgment held that all powers necessary for levy and collection of tax and for seeing that tax is not evaded are comprised within legislative ambit as ancillary or incidental.

    
    

17. Adri Dharan Das v. State of W.B. (2005) 4 SCC 303 - This case explained that arrest is part of the process of investigation intended to secure several purposes, including questioning the accused, preventing tampering with evidence, and maintaining law and order.

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