NEW DELHI: The Supreme Court on Thursday acknowledged concerns that tax officials may be pressuring taxpayers to pay GST under the threat of arrest. This observation was based on data presented before the Court.
It also clarified that individuals who believe they were coerced into paying GST unfairly can approach the Writ Court (High Court or Supreme Court) for a refund.
The ruling introduces safeguards to prevent arbitrary arrests under the Central Goods and Services Tax (CGST) Act and the Customs Act.
Authorities must establish “reasons to believe” before initiating proceedings to ensure arrests are not made randomly or without proper justification.
The Court condemned the use of “threats and coercion” by enforcement officers during search and seizure operations, asserting that such officers should face departmental action.
The bench, led by Chief Justice of India Sanjiv Khanna and comprising Justices MM Sundresh and Bela M Trivedi, ruled that customs officers do not hold the status of police officers and, therefore, cannot exercise unrestricted policing powers.
Additionally, individuals can seek anticipatory bail even if no First Information Report (FIR) has been registered.
The government defended existing provisions, 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 any justification for arbitrary arrests, emphasizing that the power to arrest must be exercised with restraint and cannot be equated with the framing of charges.
The ruling mandates that cases under GST and Customs laws follow the provisions of the Criminal Procedure Code (CrPC), ensuring due process and legal protections for the accused. It also extends safeguards under other laws, including the Prevention of Money Laundering Act (PMLA).
Petitioners argued that tax officials should not have the power to arrest people for alleged tax evasion and fraud. They said this violates constitutional rights, including protection from self-incrimination (Article 20(3)) and the right to life and liberty (Article 21).
The Supreme Court ruled that enforcement officers cannot have policing powers and must follow due process.
This ruling aims to prevent harassment of businesses and traders while maintaining tax compliance within constitutional and legal boundaries.
However, the Court did not review Section 135 of the GST Act, which deals with the presumption of guilt. It referred pending cases to regular benches for further discussion, with hearings set for March 15.
The CGST Act has several rules on tax evasion and fraud. These include Section 67(1) (inspection and search), Section 69 (arrest powers), Section 70(1) (summoning for evidence), Section 132 (punishments like imprisonment), Section 135 (presumption of guilt), and Section 170 (offenses by companies).
