SC Limits Arrest Powers Under CGST, Customs Acts | Key Judgement Highlights

10-03-2025

03:47 AM

1 min read

What’s in Today’s Article?

The Supreme Court, in Radhika Agarwal v. Union of India, ruled that officials exercising arrest, search, and seizure powers under the Customs Act, 1962, and the CGST Act, 2017, must adhere to the same restrictions as police under the CrPC, 1973.
This aims to curb misuse of these provisions. The ruling aligns with the Court’s broader effort to limit prosecuting agencies' powers, as seen in Arvind Kejriwal v. Directorate of Enforcement (2025), where the SC set conditions for legal arrests under the PMLA, 2002, and extended them to Customs and CGST Act cases.

The Supreme Court clarified that while officials under the Customs Act and CGST Act are not police officers, they exercise similar investigative powers, including arrest, search, seizure, and interrogation.

The Court ruled that these officials cannot exceed the powers of a police officer in charge of a police station and must follow the same procedural restrictions.

The Court explained that Sections 4 and 5 of the CrPC apply to special laws unless the special act explicitly overrides them.
This ensures that CrPC provisions govern arrests under the Customs and CGST Acts where no contrary provisions exist.

Customs and CGST officers must adhere to key procedural safeguards, including:
- Presentation before a magistrate within 24 hours of arrest.
- Informing a family member or friend about the arrest.
- Allowing the arrestee to have an advocate present in the vicinity during interrogation.

Under Section 104(4) of the Customs Act, certain offences, such as smuggling prohibited goods or evading customs duty over ₹50 lakh, are cognizable, allowing a customs officer to arrest without a warrant.
Section 104(5) classifies all other offences as non-cognizable, requiring a magistrate’s approval for arrest and investigation.
Similarly, Section 132 of the CGST Act distinguishes between cognizable and non-cognizable offences, prescribing punishments accordingly.

In Arvind Kejriwal v. Directorate of Enforcement (2025), the SC ruled that arrest without a warrant is an extreme power, requiring strict safeguards under Section 19 of the PMLA.
These include:
- Possession of material evidence before arrest.
- A recorded "reason to believe" that the person is guilty.
- Informing the arrestee of the grounds for arrest to allow legal recourse.
The SC extended these safeguards to Customs and CGST officials in Radhika Agarwal v. Union of India, warning that unchecked arrest powers could violate constitutional rights.

The SC held that arrests can only be made if the officer has material evidence supporting their belief in the arrestee’s guilt.
They must document their reasoning in writing and cannot ignore evidence that may exonerate the accused.
In Radhika Agarwal, the SC emphasized that mere suspicion is insufficient for an arrest.

The officer must record in writing their “reasons to believe” that the arrestee is guilty, ensuring that the decision is linked to actual case material.
While courts cannot evaluate the merits of these reasons, they can check if they are clear and logically connected to the case.
The SC clarified that even though the Customs Act and CGST Act do not explicitly require this, it is an implicit necessity due to their power to authorize cognizable arrests.

The SC ruled that the arrestee must be informed of the reasons for their arrest, including the officer’s “reason to believe” in their guilt.
This ensures that the accused can effectively challenge the arrest or apply for bail. Without this, the arrestee would be at a legal disadvantage.
The court in Radhika Agarwal reaffirmed this principle, ensuring procedural fairness.

Retaining Arrest Powers
- The Supreme Court refused to strike down the powers of arrest under the CGST and Customs Acts, as requested by the petitioners.
Coercion to Pay Taxes
- The SC acknowledged concerns that tax officials misuse arrest powers to compel assessees to pay overdue taxes under the threat of detention.
- It ruled that such coercion is illegal and impermissible.
Legal Remedies for Affected Individuals
- The court held that individuals who were forced or threatened into paying taxes can approach the courts to seek a refund of the amount deposited under duress.
- Additionally, the concerned tax officials may face disciplinary action.
Guidelines to Prevent Misuse
- To curb such practices, the SC directed the Central Board of Indirect Taxes and Customs (CBIC) to form guidelines ensuring that taxpayers are not threatened with arrest in tax recovery matters.

Q1. What did the Supreme Court rule on CGST and Customs arrests?

Ans. The SC ruled officials must follow CrPC restrictions, preventing arbitrary arrests under CGST and Customs Acts.

Q2. What safeguards did the SC impose on arrests?

Ans. Officers need material evidence, a documented “reason to believe,” and must inform arrestees of charges for legal recourse.

Q3. Can tax officials coerce payment using arrest threats?

Ans. No, the SC ruled such coercion is illegal, allowing victims to seek refunds and disciplinary action against officials.

Q4. How does the ruling affect the power of tax officials?

Ans. The ruling limits unchecked arrest powers, ensuring tax officials adhere to legal safeguards under the CrPC.

Q5. What did the SC direct CBIC to do?

Ans. The SC ordered CBIC to issue guidelines preventing misuse of arrest powers in tax recovery cases.

Source: IE | EY | SO