Supreme Court on GST Arrests: Sections 69 & 70 Valid, but Arrest Only on Recorded Reasons to Believe; No Coercive Recovery; Anticipatory Bail Available [2025 INSC 272]

A three-Judge Bench of the Supreme Court upheld the power to summon and arrest under Sections 69 and 70 of the GST Acts, but laid down strict safeguards: the Commissioner may authorise arrest only when the "reasons to believe", based on material, show that a cognizable and non-bailable offence under Section 132(5) is made out – an offence under clauses (a) to (d) of Section 132(1) involving more than Rs. 5 crore – and not on mere suspicion or to investigate. Taxpayers cannot be coerced to pay tax under threat of arrest, anticipatory bail is available even before an FIR or complaint, and the grounds of arrest must be given in writing (paras 52–70, 75, 77).

Headnote

Goods and Services Tax — Power of arrest and summons — Reasons to believe — Cognizable and non-bailable offences — Anticipatory bail — Coercive recovery during search — CGST Act, 2017 and State GST Acts, Ss. 67(10), 69, 70, 74(5), 79, 132(1), 132(4), 132(5); Code of Criminal Procedure, 1973, Ss. 4, 5, 438; Constitution of India, Arts. 20(3), 21, 22(1), 246A.

Whether Sections 69 and 70 of the GST Acts are beyond legislative competence, and what pre-conditions govern arrest — Held, (i) the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect GST under Art. 246A; the vires challenge fails; (ii) an arrest can be authorised only when the Commissioner's recorded reasons to believe, based on material, show that the person has committed an offence under clauses (a) to (d) of S. 132(1) punishable under clause (i) – i.e., cognizable and non-bailable under S. 132(5) – and not on suspicion or merely to investigate; (iii) a formal assessment is not a sine qua non, but there must be a sufficient degree of certainty, and the benefit of doubt applies; (iv) the safeguards laid down for the Customs Act, including furnishing grounds of arrest in writing, apply equally; (v) assessees cannot be compelled to pay tax under threat of arrest – S. 74(5) is an option, not a power of the department – and those coerced may seek refund; (vi) anticipatory bail may be sought on a reasonable apprehension of arrest even before an FIR; (vii) a person summoned under S. 70 is not per se an accused protected by Art. 20(3).

(Paras 52–62, 63–70, 72–75, 77–78)

Judgment Intelligence

Key Holdings

• Sections 69 and 70 of the GST Acts are within legislative competence under Article 246A; powers to summon, arrest and prosecute are ancillary to the power to levy and collect GST (paras 72–75).
• Only offences under clauses (a) to (d) of Section 132(1) punishable under clause (i) (amount exceeding Rs. 500 lakh) are cognizable and non-bailable; all other GST offences are non-cognizable and bailable (paras 55–56).
• Arrest requires recorded reasons to believe, based on material, that the conditions of Section 132(5) are satisfied – not suspicion, and not arrest "to investigate" (paras 56–58).
• A completed assessment is not always necessary, but there must be a sufficient degree of certainty about the offence and the amount; benefit of doubt applies (para 59).
• Safeguards on records, grounds of arrest and rights of the arrestee laid down for the Customs Act apply equally to the GST Acts (para 60).
• Tax cannot be extracted by threatening arrest; coerced assessees may approach courts for refund and action may be taken against officers (paras 67–68).
• Anticipatory bail can be sought on reasonable apprehension of arrest even before an FIR; contrary GST decisions are not binding (para 70).

Brief Facts

A batch of writ petitions and criminal appeals challenged the provisions of the Customs Act, 1962 and the GST Acts conferring powers of summons and arrest, and sought clarity on the safeguards governing their exercise. The controversy stemmed from the earlier three-Judge Bench decision in Om Prakash v. Union of India on arrest under the Customs and Central Excise laws (para 2 of the main judgment). Petitioners alleged that assessees were compelled to pay tax under threat of arrest without any assessment, and challenged Sections 69 and 70 of the GST Acts as beyond the competence of Parliament under Article 246A (paras 63, 72).

Issues

1. Whether the provisions of the Code of Criminal Procedure apply to arrests under the GST Acts, and what safeguards govern such arrests?
2. What are the pre-conditions for an arrest under Section 69 read with Section 132 of the GST Acts?
3. Whether arrest can be made without an assessment order quantifying the tax evaded?
4. Whether assessees can be coerced to pay tax during search or investigation?
5. Whether anticipatory bail is available before an FIR or complaint?
6. Whether Sections 69 and 70 of the GST Acts are constitutionally valid?

Court's Findings

Application of the Code: The reasoning on the applicability of the Code to the Customs Act applies to the GST Acts as well, in view of Sections 4 and 5 of the Code and Section 67(10) of the GST Acts (paras 50–51).

Pre-conditions for arrest: Section 132(4) makes all GST offences non-cognizable and bailable except those in Section 132(5). The Commissioner must show, through recorded reasons to believe referring to the material, that a non-bailable offence under clauses (a) to (d) of Section 132(1) is made out and that the monetary threshold under clause (i) is crossed. Arrest cannot proceed on suspicion or to investigate whether the conditions are met (paras 55–58).

Assessment not a pre-condition: The Court did not accept as a broad proposition that arrest requires a prior assessment; but where there is none, the Revenue must be certain, with a sufficient degree of certainty, that the offence is committed and is non-bailable (para 59).

Safeguards and CBIC instructions: The obligations of the arresting officer and the rights of the arrestee (as laid down for customs) apply. The Court noted CBIC Instruction No. 02/2022-23 dated 17.08.2022 (arrest only when intent to evade is evident and mens rea palpable; no arrest in technical cases) and Instruction No. 01/2025-GST dated 13.01.2025 (grounds of arrest to be furnished in writing), and directed that they be read with the judgment (paras 60–62).

No coercive recovery: Referring to CBIC Instruction No. 01/2022-23 dated 25.05.2022, the Court held that Section 74(5) gives an option to the assessee and no right to the authorities to extract tax by threatening arrest; coerced payments may be refunded (paras 63–68).

Summons and anticipatory bail: A person summoned under Section 70 is not per se an accused under Article 20(3). Anticipatory bail is available on reasonable apprehension of arrest even before an FIR (paras 69–70).

Vires of Sections 69 and 70: Article 246A, read with the doctrine of pith and substance and the widest construction of legislative fields, covers provisions to prevent evasion; the challenge fails. The challenge to Section 135 was not examined as no prosecution had been initiated (paras 72–76).

Final Outcome / Directions (paras 77–78)

• Challenge to constitutional validity and to the power of arrest under the Customs Act and GST Acts rejected and dismissed, with elucidation and clarification on the pre-conditions and on when and how the power of arrest is to be exercised.
• Matters directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal.

Separate Opinion

Justice Bela M. Trivedi, concurring, cautioned that judicial review of arrests under special Acts such as the PMLA, Customs Act and GST Acts should be exercised sparingly – confined to checking whether statutory and constitutional safeguards were complied with – and not used to examine the sufficiency of the material at the nascent stage of investigation, unless there is manifest arbitrariness or gross non-compliance (paras 9–13 of the concurring opinion).

Legal Principle

The power of arrest under the GST Acts is valid but is not routine: it can be exercised only for cognizable, non-bailable offences under Section 132(5), on recorded reasons to believe founded on material, with all procedural safeguards; and it cannot be used as a tool to extract tax.

Precedents Relied Upon

• Om Prakash v. Union of India (three Judges) – Considered · Discussed at paras 2, 48, 55: the GST legislature was aware of this ruling when enacting Section 132(4)–(5).
• Arvind Kejriwal v. Directorate of Enforcement – Applied · Discussed at paras 46, 60: principles on "reasons to believe" and arrest applied to customs and GST.
• Makemytrip (India) Pvt. Ltd. v. Union of India, 2016 SCC OnLine Del 4951 (Delhi High Court) – Approved in part · Discussed at paras 58–59, 71: arrest to be used with circumspection; but assessment not always a pre-condition.
• Ashok Munilal Jain v. Assistant Director, ED, (2018) 16 SCC 158 – Relied upon · Discussed at para 51: the Code applies to special statutes unless excluded.
• Gurbaksh Singh Sibbia v. State of Punjab and Sushila Aggarwal v. State (NCT of Delhi), (2020) 5 SCC 1 – Followed · Discussed at para 70: anticipatory bail on reasonable apprehension, even before FIR.
• State of Gujarat v. Choodamani Parmeshwaran Iyer, 2023 SCC OnLine SC 1043 and Bharat Bhushan v. DGGI – Held not binding to the extent contrary · Discussed at para 70.
• Union of India v. VKC Footsteps (India) Pvt. Ltd., (2022) 2 SCC 603 and R.S. Joshi v. Ajit Mills Ltd., (1977) 4 SCC 98 (seven Judges) – Relied upon · Discussed at paras 74–75: Article 246A and ancillary powers to prevent evasion.
• Poolpandi v. Superintendent, Central Excise, (1992) 3 SCC 259 – Relied upon · Discussed at para 69: Article 20(3) does not extend to the stage of interrogation.

Important Paragraphs of the Judgment

Para 57: "The aforesaid exercise should be undertaken in right earnest and objectively, and not on mere ipse dixit without foundational reasoning and material. The arrest must proceed on the belief supported by reasons relying on material that the conditions specified in sub-section (5) of Section 132 are satisfied, and not on suspicion alone. An arrest cannot be made to merely investigate whether the conditions are being met…"

Para 59: "…But there could be cases where even without a formal order of assessment, the department/Revenue is certain that it is a case of offence under clauses (a) to (d) to sub-section (1) of Section 132 and the amount of tax evaded, etc. falls within clause (i) of sub-section (1) to Section 132 of the GST Acts with sufficient degree of certainty. In such cases, the Commissioner may authorise arrest when he is able to ascertain and record reasons to believe… The principle of benefit of doubt would equally be applicable and should not be ignored either by the Commissioner or by the Magistrate when the accused is produced before the Magistrate."

Para 67: "…Sub-section (5) to Section 74 of the GST Acts gives an option to the assessee and does not confer any right on the tax authorities to compel or extract tax by threatening arrest. This would be unacceptable and violative of the rule of law."

Para 68: "We would observe that in case there is a breach of law, and the assessees are put under threat, force or coercion, the assessees would be entitled to move the courts and seek a refund of tax deposited by them. The department would also take appropriate action against the officers in such cases."

Para 75: "…The GST Acts, in pith and substance, pertain to Article 246-A of the Constitution and the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid, the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected."

What the Ruling Means: Practical Impact

• Arrest is the exception: Only fake-invoice, fraudulent ITC, supply without invoice and tax-collected-not-paid cases above Rs. 5 crore can lead to arrest; everything else is bailable and non-cognizable.
• Insist on written reasons and grounds: Taxpayers can challenge an arrest if the reasons to believe are not recorded on material, or if the grounds of arrest are not furnished in writing.
• Payments during search must be voluntary: Any deposit through DRC-03 made under threat can be challenged and refunded; officers may face action.
• Anticipatory bail: Persons with a reasonable apprehension of arrest can approach the court even before a complaint is filed.
• Summons are not accusations: Persons summoned under Section 70 must cooperate; the protection of Article 20(3) does not apply at that stage.

Frequently Asked Questions

When can GST officers arrest a person after Radhika Agarwal?

Only when the Commissioner records reasons to believe, based on material, that an offence under clauses (a) to (d) of Section 132(1) involving more than Rs. 500 lakh – a cognizable and non-bailable offence under Section 132(5) – has been committed (paras 55–57).

Is an assessment order necessary before a GST arrest?

Not always. But without an assessment, the department must have a sufficient degree of certainty about the offence and the amount, and the benefit of doubt applies (para 59).

Can GST officers force payment of tax during a search?

No. Section 74(5) is the assessee’s option. Extracting tax by threatening arrest violates the rule of law; coerced payments can be refunded (paras 67–68).

Is anticipatory bail available in GST cases before an FIR?

Yes. Anticipatory bail can be sought on a reasonable apprehension of arrest even before an FIR or complaint (para 70).

Did the Supreme Court strike down Sections 69 and 70 of the CGST Act?

No. It upheld them as within Parliament’s competence under Article 246A (para 75).

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