SC calls for stricter regulation of warrantless arrests by revenue officers

On 27 February 2025, a three-judge bench of the Supreme Court, in Radhika Agarwal v Union of India (2025) unanimously held that the provisions of the Code of Criminal Procedure, 1973 (CrPC), and the Bharatiya Nagarik Suraksha Sanhita, 2023 “are equally applicable” to arrests made under the Central Goods and Services Tax Act, 2017, and the Customs Act, 1962. 

The Court also upheld the constitutional validity of Sections 69 and 70 of the GST Acts, which grant powers to arrest and summon. This decision places crucial checks on tax authorities, requiring them to adhere to constitutional safeguards and procedural fairness before making arrests. It limits the powers of arrest stating that they cannot be made on mere suspicion and must be backed by concrete evidence. By holding that CrPC provisions apply to custom officers, the Court effectively binds them to the same procedural constraints as police officers, even while maintaining that Customs and GST officers are not “police officers” under Indian law.

Chief Justice Sanjiv Khanna authored the majority opinion on behalf of himself and Justice M.M. Sundresh. The concurring opinion was authored by Justice Bela Trivedi. The 76-page judgement also affirmed that individuals can seek the remedy of anticipatory bail for arrests under the Customs and GST Acts.

Several media outlets (here, here and here, for instance) have characterised the decision as a timely judicial check on the power of authorities to carry out warrantless arrests in connection with revenue offences. Meanwhile, criminal law practitioner and commentator Abhinav Sekhri suggests that the judgement reiterates existing precedent to rule in favour of the Union on the important issue of whether officers carrying out arrests under revenue statutes are “police officers”. The effect of the Court answering this question in the negative is that statements recorded by revenue officers will not be treated with the same suspicion as evidence recorded by the police.  

On 15 May last year, after multiple hearings, the bench had reserved judgement in the matter, which had 281 petitions tagged to it. During arguments, the bench had observed that it was “not necessary to arrest in each and every case of GST” and that “adjudication must precede arrest.” 

Background: The evolution of arrest powers

In Om Prakash v Union of India (2011), the Court had held that “offences under the Customs Act and the Central Excise Act, 1944 were non-cognisable” and bailable. Therefore, an officer could arrest an individual only after obtaining a warrant from a Magistrate under Section 416 of the CrPC. Prior to Om Prakash, offences under the Customs Act were considered non-bailable by the courts. 

Subsequent amendments to Section 104 of the Customs Act, which deals with the power to arrest, altered this framework. The Union carried out certain amendments through the Finance Acts of 2012, 2013 and 2019 to Section 104 of the Customs Act, which deals with the power to arrest. The amendments added cognisable offences (one where an officer can arrest without warrant) and modified the conditions for arrest. The amendments also made certain offences non-bailable. 

In simple words, designated offences under the Customs Act were made  cognisable and non-bailable and all other offences under the Act became non-cognisable and bailable, unless specifically designated otherwise.

Petitioners had argued that the amendments were unconstitutional as they departed from the dictum in Om Prakash. The Court was to interpret relevant provisions of the Customs Act and GST Act in light of this judgement.

In his judgement in Radhika Agarwal on 27 February, CJI Khanna rejected the petitioners’ reliance on Om Prakash as “misconceived”, stating that the legal framework has changed. The “statutory provisions (after Om Prakash) have undergone amendments to bring them in consonance with the law of the land.” 

CrPC provisions apply to arrests under the Custom Acts

At the outset, the bench rejected the petitioner’s argument of treating customs officers as police officers by terming it “both unfounded and flawed”. It relied on State of Punjab v Barkat Ram (1961), Ramesh Chandra Mehta v State of West Bengal (1968), Illias v Collector of Customs (1968) and Tofan Singh v State of Tamil Nadu (2020)—in all these cases, the bench felt, it was “decisively held that customs officers are not police officers.” 

With that, the Court began a reading of CrPC provisions which, they said, complemented the provisions of the Customs Act “and in a way ensure better regulation.” The petitioners had relied on Directorate of Enforcement v Deepak Mahajan (1994) to argue that persons arrested under the Customs Act should directly be sent to judicial custody. However, the Court pointed out that as per Deepak Mahajan, a Magistrate has the authority under Section 167(2) of the CrPC to authorise the detention of a person arrested under the provision. 

It then relied on Union of India v Ashok Kumar Sharma (2020), where the top court had held that the arresting officer under the Drugs and Cosmetics Act, 1940, who is not a police officer, shall comply with the provisions of the CrPC. 

Chapter 12 of the Code deals with the power of the police officers to investigate. The bench noted that the customs officers “do not undertake an investigation akin” to the Chapter but “enjoy analogous powers such as the power to investigate, arrest, seize, interrogate, etc under the Customs Act.” They are obligated to “inform the arrestee about their grounds of arrest” including the maintenance of records such as “time of arrest, seizure details, and statements recorded during the course of detection of the offence.”

The bench also clarified the applicability of provisions under Chapter 5 of the CrPC. They observed that Section 41B, which outlines the procedures of arrest and the duties of an arresting officer, is applicable to a customs officer. Further, Section 41D which grants an arrested person the right to meet with an advocate would also apply. Lastly, under Section 50A, the customs officer is also obligated to provide information regarding the arrest and the place of arrest to any friend, relative or other person associated with the arrested individual. Lastly, the officer who has custody of the arrested individual should “take reasonable care of their health and safety” under Section 55A.

GST arrests: Evidence, not suspicion

Provisions similar to those in the Customs Act had been challenged in relation to the GST framework, specifically concerning the powers granted to GST officers for arrest. 

The judgement observed that the “reasoning and the ratio on the applicability of the Code [CrPC] to the Customs Act would equally apply to the GST Acts (Central and States).” The bench emphasised that while the GSTs provide for search, seizure and arrest, it is not a complete code, and thus, provisions of the CrPC would “equally apply” unless expressly or impliedly excluded by the GST Act. 

CJI Khanna noted that Section 67(10) of the GST Act states that provisions of the CrPC are applicable with the modification that the word “Magistrate” under Section 165(5) is read as “Commissioner”. Moreover, he pointed out that, under Section 69, the Deputy Commissioner or Assistant Commissioner has the same powers as an officer in charge of a police station to release someone on bail in non-cognisable and bailable offences. Section 69 deals with the power to arrest. 

The threshold for arrest under GST

Delving deeper into Section 69, the bench added that a Commissioner may authorise an arrest if there is “reason to believe” a person has committed an offence specified in Section 132 of the GST Act. The Commissioner may authorise any central or state tax officer to arrest the person. 

The judgement makes a critical distinction—certain serious offences, such as issuing fake invoices or collecting tax without depositing it, become non-bailable and cognisable only if the tax amount involved exceeds ₹500 lakh (as per Section 132(5)). For smaller tax amounts, the offences remain bailable and non-cognisable. 

However, the Court firmly held that for an arrest to be lawful, the Commissioner must “state his satisfaction and refer to the ‘material’ forming the basis of his finding”. Arrest cannot be made “on suspicion alone” and there must be evidence to support the “reason to believe” that a non-bailable offence under Section 132(5) has been committed. 

On the point of tax assessment before arrest, the petitioners had relied on the Delhi High Court’s judgement in MakeMyTrip (India) Private Limited v Union of India (2016), which interpreted the power of arrest under the Finance Act, 1994. They argued that officers cannot exercise powers under Section 132(5) unless the procedure under Section 73 (determination of tax liability) is completed and an assessment order has been passed quantifying the tax evasion.

The Court rejected this argument, calling it a “broad proposition”. In some cases, even “without a formal order of assessment”, if the department is certain that the amount of tax evaded constitutes an offence, the Commissioner may authorise arrest after recording his “reasons to believe” based on material and evidence. This shift aims to enhance the government’s ability to act quickly against tax fraud and ensure compliance.

While upholding enforcement powers under the GST Act, the Court stressed that safeguards against misuse must be strictly followed. It held that both the Commissioner and Magistrate must apply the “benefit of doubt” principle when reviewing an arrest. 

Another key takeaway from the judgement was the applicability of anticipatory bail. The Court clarified that it “is not essential” that applications seeking anticipatory bail could be made only after an FIR was filed. If “there is a reasonable basis for apprehending arrest,” an individual can seek relief from the court even before an FIR is registered. This provides an additional safeguard for taxpayers concerned about arbitrary enforcement actions.

Tax recovery can’t be forced

The petitioners argued that taxpayers are often forced to make payments “in view of the threat of arrest.” The judgement condemned such actions, stating that threat to arrest amounts to “violation of fundamental rights and the law of the land.”

The bench observed that circulars issued by the GST department, such as those dealing with the medical examination of an arrested person or the procedure for arresting a woman, are “binding and should be adhered to in letter and spirit.” The bench further suggested that it is “desirable” that the Central Board of Indirect Taxes and Customs “promptly formulate clear guidelines to ensure that no taxpayer is threatened with the power of arrest for recovery of tax in the garb of self-payment.”

Legislature competent to make penal provisions under GST

Lastly, the petitioners had also challenged the constitutionality of Section 69 and 70 of the GST Act. These provisions criminalise violations of the GST Act. Petitioners argued that Parliament and legislatures are only competent to make laws on collecting GST under Article 246A and not penal laws. They contended that powers to summon, arrest, and prosecute are beyond “legislative competence”.

The Court rejected this argument. The judgement held that Article 246A is a “special provision” that defines the “source of power and the field of legislation” for GST. “The Parliament, under Article 246A,” the Court observed, “…has the power to make laws regarding GST and, as a necessary corollary, enact provisions against tax evasion. Article 246A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies.” 

The bench held that the petitioner’s interpretation was “narrow or pedantic”, observing that the power to arrest and summon is essential to ensure  smooth collection of tax and preventing evasion. It cited Union of India v VKC Footsteps (India) Private Ltd (2021) and R.S. Joshi v Ajit Mills Ltd (1977), where the Supreme Court had held that tax laws inherently include enforcement mechanisms. Therefore, all necessary measures to enforce GST compliance, including penalties and prosecution, fall within Parliament’s legislative competence. 

PMLA parallels: Same safeguards apply

The judgement then drew parallels between Section 104(1) of the Customs Act and Section 19 of the Prevention of Money Laundering Act (PMLA). Both deal with the power to arrest an individual. Notably, the Court observed that the principles laid down in Arvind Kejriwal v Directorate of Enforcement (2024), would also apply in arrests made under the Customs Act. 

In Arvind Kejriwal, the Court had granted interim bail to former Delhi Chief Minister Arvind Kejriwal in a PMLA case. The judgement, which was also authored by CJI Khanna, had held that the legality of an arrest by the Enforcement Directorate (ED) was subject to judicial review. 

Arvind Kejriwal held that the power of arrest under Section 19 had stringent safeguards “to protect the life and liberty of individuals”. These safeguards include: 

1. There should be “material” in possession with the ED
2. There should be “reasons to believe” that the accused was guilty under the PMLA based on the material, with the reasons to arrest recorded in writing 
3. The grounds for arrest should be communicated to the accused. 

The judgement observed that Section 104(1) of the Customs Act “incorporates safeguards similar” to those in Section 19(1) of PMLA. The provision stipulates that the customs officer should have “reasons to believe” that an individual has “committed” an offence under the Customs Act. Moreover, there was “substantively no difference between a person being guilty of an offence [Section 19] and a person committing an offence [Section 104]”. 

The concurring judgement

Justice Trivedi’s concurring opinion observed that the power of judicial review in determining the validity of an arrest under Articles 32 and 226 should be exercised “very cautiously”. This power of judicial review in cases of arrest, she said, was applicable in Special Laws such as PMLA, the Unlawful Activities (Prevention) Act, the Foreign Exchange Regulation Act, the Customs Act, and GST Acts. She reasoned that “any liberal approach in construing the stringent provisions of the Special Acts may frustrate the very purpose and objective of the Acts,” particularly since offences under these laws “are of very serious nature affecting the financial systems and in turn the sovereignty and integrity of the nation.” 

She observed that judicial intervention should be exercised “only in exceptional cases” when an arrest is mala fide, unauthorised or in violation of statutory safeguards. Moreover, she noted that “punitive and preventive detention” are both allowed under the Constitution. She explained that Article 21 allows the deprivation of liberty if it is “in accordance with the procedure established by law”. Article 22 further prevents arbitrary deprivation of liberty by mandating that the arrested individual should be informed of the grounds of arrest. 

Justice Trivedi warned against “frequent or casual interference of the courts in the functioning of the authorised officers.” She emphasised that minor procedural lapses by the arresting officer  should not be “seen with a magnifying glass” as doing so “may ultimately end up granting undue advantage or benefit to the person accused of very serious offences under the Special Acts.”

One issue which the Court did not examine was Section 135 of the GST Act, which deals with the presumption of culpable mental state on the part of the accused. “We are not examining the said aspect as prosecution has not been initiated in any of these cases. If any person is aggrieved and is advised to challenge the said Section, he/she may do so before the High Court,” the judgement stated. 

The Court then referred the individual matters back to regular benches for “final hearing and disposal”. On 18 March 2025, a bench of CJI Khanna and Justices P.V. Sanjay Kumar and K.V. Viswanathan disposed of most of the writ petitions. Some of the cases were withdrawn, while others were directed to be listed and heard as individual cases.