SC implements new safeguards against arrest under GST and Customs Act

The Supreme Court of India has introduced important safeguards against arrests under the Central Goods and Services Tax (CGST) Act and the Customs Act. The court ruled that authorities must provide clear “reasons to believe” before taking any legal action. The decision prevents enforcement officers from using force or threats during search and seizure operations.

A three-judge bench, led by Chief Justice of India Sanjiv Khanna, made this ruling on Thursday. The court stated that individuals can seek pre-arrest bail even if no First Information Report (FIR) has been registered. It also confirmed that provisions of the Criminal Procedure Code (CrPC) will apply to GST and Customs cases.

The court criticized tax officers for using threats and coercion during investigations. It ordered that officers who misuse their powers should face departmental action. The ruling also clarified that customs officers do not have the same powers as police officers and cannot exercise unrestricted policing authority.

Protecting businesses from harassment

The Supreme Court ruled that safeguards used in other financial laws, such as the Prevention of Money Laundering Act (PMLA), will now apply to GST and Customs cases. This means that authorities must clearly document their reasons before making an arrest.

Many businesses and traders had complained about harassment by tax officers. The court responded by stating that no officer should use pressure or threats to recover taxes. Any officer found guilty of such actions will face strict disciplinary action.

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The ruling followed detailed arguments on the arrest powers given under GST and Customs laws. Petitioners challenged these powers, arguing that they violate constitutional rights under Article 20(3) (protection against self-incrimination) and Article 21 (right to personal liberty).

The petitioners also argued that proceedings before the Directorate of Revenue Intelligence (DRI) under the Customs Act do not follow the Criminal Procedure Code (CrPC). They claimed that tax laws should not grant enforcement officers the same powers as the police.

The government defended these laws, stating that arrests under the CGST Act are based on an officer’s assessment of “more than suspicion but less than grave suspicion.” However, the Supreme Court rejected this reasoning. The judges ruled that arrests should only be made when there is strong legal justification.

This verdict is expected to change how GST and Customs laws are enforced. It strengthens judicial oversight, ensuring that businesses and traders are not unfairly targeted. At the same time, it allows tax authorities to take action within proper legal limits.

The court did not review Section 135 of the GST Act, which deals with assumptions about a person’s mental state in tax cases. However, it referred several related cases to regular benches for further discussion. These cases will be heard on March 15.

The Supreme Court’s ruling aims to protect people from unjust arrests under GST and Customs laws. By requiring authorities to record clear reasons for legal action, the decision ensures fairness in tax enforcement. This verdict strengthens constitutional rights while maintaining proper tax compliance.