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Supreme Court Tells Centre: No Mandatory Arrests in All GST Cases

Last updated: 17 May 2024

The Supreme Court has directed the Centre to avoid making arrests in all Goods and Services Tax (GST) cases unless there is credible evidence and tangible material proving culpability. This statement came from a bench comprising Justices Sanjiv Khanna, MM Sundresh, and Bela M Trivedi, who emphasized that the power of arrest under the GST law is distinct from the necessity of arrest.

The bench reserved its verdict on a series of pleas challenging the constitutional validity and interpretation of provisions under the Customs Act and GST Act. They reiterated that the legislation does not mandate arrests merely for investigation purposes. "It is not necessary for you to arrest in each and every case of GST. It has to be based on credible evidence and tangible material," the bench told Additional Solicitor General SV Raju.

Supreme Court Tells Centre: No Mandatory Arrests in All GST Cases

The Justices noted that the legislation itself upholds the principle of liberty, which should not be compromised. SV Raju argued that arrests are generally made during investigations and not post-probe, asserting that they are based on substantial reasons to believe a grave offence has been committed.

The bench stressed that "adjudication must precede arrest," and will review the definitions of "reason to believe" and "grounds of arrest" under both the Customs Act and GST Act. The court acknowledged instances of misuse of arrest provisions and high-handedness by GST authorities but also noted cases of wrongdoing by taxpayers.

Petitioners challenging the arrest provisions under these laws have claimed coercion and threats to pay liabilities without due process. The Supreme Court previously advised that arrests should be based on verifiable material and not mere suspicion. They urged the Centre to avoid using "threat and coercion" in GST recovery efforts, advocating instead for voluntary compliance by taxpayers.

The court requested the Centre to provide details on notices issued and arrests made under the GST Act, indicating its intention to interpret the law to prevent harassment and uphold citizens' liberty.

Section 69 of the GST Act and Section 104 of the Customs Act grant authorities the power to arrest individuals believed to have committed offences. The Supreme Court has expressed concern over the ambiguity in these sections and aims to clarify the legal framework to protect individual freedoms.

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