The Supreme Court has upheld the constitutional validity of GST Arrest Provisions and held that BNSS/CrPC Protections for Arrested Persons Apply to GST & Customs Acts.
The bench, comprising Chief Justice of India Sanjiv Khanna and Justices MM Sundresh and Bela M Trivedi, underscored that GST officials must strictly adhere to departmental circulars regarding arrests. The Court also dismissed the argument that customs officers function as police officers.
During the hearing, Senior Advocate Sujit Ghosh, addressing the bench, argued that arrests were being made at the drop of a hat, with coercion and threats becoming a part of the Department’s modus operandi. He pointed out that summons under Section 70 were being used to carry out inquiries, but arrests were made immediately, often at night.
Legal Contentions and Constitutional Framework
Focusing on the constitutional aspect, Ghosh referred to Article 246A of the Constitution and its interpretation by the Supreme Court in Mohit Minerals (2019), where the court held that:
- It is not a general power or entry.
- It can lead to incidental encroachments but cannot be a law onto itself.
- The phrase “with respect to” should be read expansively.
Ghosh argued that if the power of arrest was incidental in nature, there would have been no need for specific provisions like Entry 93 of the Central List and Entry 64 of the State List, which deal with offenses. He contended that the Constitution’s structure mandates that offenses be treated as a separate subject matter rather than being subsumed under the tax framework.
Arbitrary Arrests and Absence of Safeguards
The senior counsel further highlighted that most cases pertained to input tax credit issues rather than direct tax violations. He criticized the government for not implementing Sections 42 and 43 of the CGST Act, which were meant to safeguard taxpayers. Instead, a temporary mechanism through Form GSTR-3B was introduced, leaving buyers vulnerable. Ghosh asserted that without the safeguards of Sections 42 and 43, the arrest provisions under Section 69 become unreasonable.
Additionally, Ghosh invoked Article 21 of the Constitution, emphasizing that the right to liberty necessitates stringent checks before arrest. He proposed that the phrase “reasons to believe” in Section 69 be replaced with “reasons to be recorded in writing,” as judicial review of the former is limited.
“If an arrest takes place after proper adjudication, the proportionality test is met. However, arresting someone merely on suspicion makes the provision under Section 69 disproportionate,” Ghosh argued. He pointed out that courts could only assess whether there was relevant material to justify the formation of belief, but without written reasons, oversight was minimal.
