A) ABSTRACT / HEADNOTE

The Supreme Court in Radhika Agarwal v. Union of India & Ors. (Writ Petition (Crim.) No. 336/2018; judgment dated 27 February 2025) upheld the constitutionality of the post-Om Prakash amendments to the Customs Act, 1962 and rejected challenge to arrest/summoning powers under the Central Goods and Services Tax Act, 2017 (“GST Acts”). The Court held that the Finance Acts of 2012, 2013 and 2019 substantively altered s.104 of the Customs Act  creating clearly specified categories of cognizable and non-bailable offences and therefore the earlier ratio in Om Prakash could not be mechanically applied to negate arrest powers granted by the amended statute.

The majority framed rigorous safeguards that must precede any arrest by customs/GST authorities: the reasons to believe must be recorded in writing; the reasons must refer to material/evidence and show how statutory monetary thresholds are met; grounds of arrest must be furnished in writing to the arrestee before production before a Magistrate; and Code of Criminal Procedure provisions apply unless expressly excluded.

The Court also rejected the challenge to legislative competence under Article 246-A, holding that powers to summon, arrest and prosecute tax evasion are ancillary to the power to levy GST. The separate opinion emphasised judicial restraint in reviewing arrests under special statutes, but insisted on strict statutory compliance and that judicial review be invoked where there is manifest arbitrariness or gross non-compliance.

Keywords: Customs Act s.104(4), s.104(6); GST Act s.69, s.70, s.132; Article 246-A; reasons to believe; cognizable/non-cognizable; pre-conditions to arrest.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arises from broad challenges to the power of customs and GST authorities to effect arrests and summons for offences under their special statutes. The controversy has its genesis in a three-Judge decision, Om Prakash (2011), which treated customs/excise offences as non-cognizable and restrained arrest powers unless a Magistrate’s prior authority was obtained. Subsequent legislative interventions principally the Finance Acts of 2012, 2013 and 2019 modified s.104 of the Customs Act, carving out specific monetary/subject-matter categories as cognizable and some as non-bailable, thereby altering the pre-existing landscape.

Writ petitions and numerous connected proceedings challenged:

(i) the constitutional validity of these amendments,

(ii) the exercise of arrest/summoning powers under the Customs and GST Acts,

(iii) whether Parliament/States had competence under Article 246-A to legislate penal mechanisms ancillary to GST.

The Supreme Court convened a three-Judge Bench to resolve whether the statutory scheme and its exercise comport with constitutional guarantees of liberty, the Code of Criminal Procedure and settled principles governing special enactments. The Court addressed statutory interpretation, the reach of CrPC provisions to special statutes, compatibility with precedents (including Arvind Kejriwal and Deepak Mahajan), and insisted on procedural safeguards (written reasons to believe, record of material, written grounds given to the arrestee) while upholding the impugned provisions subject to strict compliance.

D) FACTS OF THE CASE

Petitions were brought by multiple assessees/taxpayers who challenged the legality of arrests and the constitutional vires of arrest/summoning provisions in the Customs Act and the GST Acts. The petitioners relied heavily on Om Prakash (2011) to contend that, by classifying most customs offences as non-cognizable and bailable, officers could not arrest without Magistrate-issued warrants; consequently, legislative amendments that purported to enable arrests were said to be contrary to the CrPC and violative of Article 21/22.

The revenue defended the legislative changes as a necessary response to judicial divergence (High Courts), and as a legitimate exercise to curb tax evasion and protect the fiscal interest. Empirical data placed before the Court suggested patterns in arrests, payments during investigation, and recovery percentages; petitioners argued such data showed coercive use of arrest powers to extract tax payments. The Government submitted that statutory amendments specifically classified certain offences as cognizable/non-bailable and that administrative guidelines and CBIC circulars attempt to regulate arrest and bail practice.

The matters were listed with a large array of connected SLPs and writ petitions, raising not only constitutionality but also the modalities and safeguards applicable when special authorities invoke arrest powers.

E) LEGAL ISSUES RAISED

i. Whether the post-Om Prakash amendments to s.104 of the Customs Act validly empower customs officers to arrest without Magistrate warrants?
ii. Whether s.69/s.70 (and related provisions) of the GST Acts fall outside legislative competence under Article 246-A or the Seventh Schedule?
iii. What pre-conditions (statutory and procedural) must be satisfied before an authorised officer may lawfully arrest under the Customs and GST regimes?
iv. Whether customs/GST officers are “police officers” for purposes of CrPC/Evidence Act and thereby entitled to invoke Chapter XII powers without restriction?
v. Whether arrests have been or can be used coercively to compel tax payments and, if so, what remedies and safeguards are required?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsel for petitioners submitted that the amendments cannot be read to displace the protective architecture guaranteed by the CrPC and Om Prakash; statutes cannot be construed to permit arrests absent the safeguards of Chapter XII. It was contended that s.104(1) lacks the explicit requirement of material in possession and therefore permits arrests on mere reasons to believe without requisite material foundation; such a statutory design invites abuse and violative arrests. Petitioners also challenged s.69/s.70 of the GST Acts as beyond legislative competence under Article 246-A and the Seventh Schedule, and argued that compulsion via threat of arrest to extract self-payments (under s.74(5) etc.) offends rule of law and Article 21. Empirical data was used to allege coercive practice.

G) RESPONDENT’S ARGUMENTS

The counsels for the Union and revenue argued that Parliament, aware of judicial divergence, enacted specific amendments in 2012, 2013 and 2019 to classify particular offences as cognizable and/or non-bailable; these are valid exercises of legislative power to protect fiscal interests. The revenue emphasised that arrest powers are qualified by statutory thresholds (monetary limits and specified offences) and that the CrPC applies except where expressly excluded. Administrative guidelines (CBIC circulars/Instructions) further regulate arrests and bail, and arrests are not routine but exceptional. The State justified GST penal provisions as ancillary to levy and collection under Article 246-A.

H) JUDGEMENT 

The majority (CJI Sanjiv Khanna; M.M. Sundresh, J.) rejected challenges to the validity of the amendments to s.104 of the Customs Act and to ss.69/70 of the GST Acts, but framed binding interpretative safeguards to prevent arbitrariness. The Court held the legislative amendments were substantive: s.104(4) now specifies precise categories to be treated as cognizable and s.104(6) delineates which offences are non-bailable; other offences remain non-cognizable/bailable as the statute prescribes.

The majority emphasised that the CrPC remains the parent procedural code (ss.4–5), and applies unless a special statute explicitly excludes it; accordingly, CrPC safeguards (e.g., s.50 information to arrestee, diary/recording practices akin to Deepak Mahajan) must be observed. Arrests under s.104(1) require written reasons to believe which must refer to tangible material/evidence and demonstrate how statutory monetary thresholds are satisfied mere suspicion or ipse dixit by officers is impermissible.

The Court directed that grounds of arrest must be furnished in writing to the arrestee before Magistrate production to permit meaningful bail challenge. With respect to GST provisions, the majority held that Article 246-A empowers Parliament/States to legislate GST and ancillary penal provisions; powers of arrest/summoning are incidental to levy/collection and constitutionally permissible. The majority ordered adherence to CBIC circulars and mandated formulation of guidelines to prevent coercive extraction of tax via threatened arrests; it recognised affected taxpayers can seek refunds and departmental action where coercion is proved.

The separate concurring opinion (Bela M. Trivedi, J.) stressed judicial restraint: courts should exercise remedial jurisdiction in arrest challenges cautiously, intervening where manifest arbitrariness or legislative safeguards are flouted; yet the statutory safeguards must be scrupulously followed. Final directions included listing matters for final hearing and compliance with mandates in operational practice.

a. RATIO DECIDENDI

The controlling ratios are:

(i) post-amendment s.104 of the Customs Act validly creates cognizable/non-bailable categories and thus permits arrests without prior Magistrate warrants in those specified instances, subject to strict procedural safeguards;

(ii) CrPC applies to special statutes unless expressly excluded, and hence arrest powers must be exercised in consonance with CrPC principles (written reasons, material record, informing arrestee);

(iii) s.104(1) (and s.19(1) PMLA analogy) demands that reasons to believe be founded on material and indicate how monetary thresholds/ offence elements are met arrests on mere suspicion are illegal;

(iv) Article 246-A encompasses legislative competence to provide penal measures ancillary to GST levy ss.69/70 validly fall within that pith and substance. These ratios mandate an objective, documented, and reviewable decision-making process prior to arrest.

b. OBITER DICTA 

The Court observed (non-decisory but instructive):

(i) customs officers are not police officers for Evidence Act s.25 unless statutory power to file CrPC s.173 reports is conferred;

(ii) arrest should be exceptional, not routine drawing from Arvind Kejriwal and other authorities emphasising proportionality and reputational harm;

(iii) administrative circulars (CBIC/Instructions) are relevant and should be followed to avoid coercion;

(iv) where arrests coincide with recovery of tax via self-payment during investigation, the department must ensure no coercion, and taxpayers coerced into payment may seek refund and departmental action against errant officers;

(v) the Court signalled willingness to entertain legal challenges to specific statutory elements (e.g., s.135 culpable intent) when prosecuted. These remarks shape practical administration though they are not necessary grounds for the decision.

c. GUIDELINES 

1. Written Reasons: Before any arrest under s.104/s.69/s.132, the authorised officer must record reasons to believe in writing, explicitly referencing the material/evidence and explaining how statutory monetary thresholds or offence elements are met.

2. Material Foundation: The reasons must not be ipse dixit; they must contain computations/explanations (e.g., goods seized, market price, tax shortfall) and identify documents/witnesses relied upon.

3. Informing Arrestee: Grounds of arrest must be given in writing to the arrestee before production before the Magistrate to enable bail applications (consistency with Art.22(1) & CrPC s.50).

4. CrPC Applicability: CrPC provisions apply to the extent not specifically excluded; chapter XII principles (diary/recording, Magistrate remand mechanics) must be observed.

5. Non-Police Status: Customs officers remain non-police officers; absence of power to file s.173 reports affects characterization under Evidence Act; custodial remand may be ordered to customs custody only per CrPC s.167 mechanics.

6. CBIC/Board Instructions: Administrative circulars/guidelines (eg. CBIC Instruction 17.08.2022; Instruction No.01/2025) should be followed and refined to prevent coercion and ensure uniform practice.

7. Remedies for Coercion: If coercion to pay tax is shown, relief includes refund and departmental action; courts will entertain challenges and exercise judicial review where manifest arbitrariness exists.

I) CONCLUSION & COMMENTS

The judgment strikes a deliberate balance: it recognises Parliament’s competence to prescribe penal/non-procedural powers ancillary to fiscal statutes under Article 246-A, while simultaneously guarding fundamental liberties by insisting on clear, documented, evidence-based reasons before arrest. Practically, revenue officers retain statutory arrest powers for specified, high-threshold offences, but their discretion is narrowed by judicially enforceable procedural steps (written reasons, material references, prior record-keeping, informing the arrestee).

The decision re-orients enforcement practice away from arbitrary or coercive arrests by imposing transparency and a standard of objective satisfaction. For practitioners: anticipatory bail remains viable where statutory pre-conditions are not met; challenge to particular prosecutions will turn on whether the officer’s reasons to believe were supported by material and whether statutory/CrPC safeguards were honored.

The judgment also signals judicial deference where special statutes provide safeguards, yet preserves robust review where violations of statutory or constitutional guarantees occur. Finally, departmental adherence to CBIC/GST Investigation Wing guidelines and judicial mandates will be a critical compliance touchstone; failure to follow them may invite judicial relief and departmental consequences.

J) REFERENCES

a. Important Cases Referred

1. Om Prakash & Anr. v. Union of India & Anr., (2011) 14 SCC 1 — discussed and held inapplicable to amended statutory scheme.
2. Arvind Kejriwal v. Directorate of Enforcement, (2024) (authorities relied upon for arrest safeguards).
3. Directorate of Enforcement v. Deepak Mahajan, (1994) 3 SCC 440 — on diaries, custody and remand for special officers.
4. A.R. Antulay v. Ramdas Sriniwas Nayak, (1984) 2 SCC 500 — on applicability of CrPC to special statutes.
5. (Other precedent list in judgment: R.S. Joshi v. Ajit Mills; D.K. Basu; Gurbaksh Singh Sibbia; Makemytrip (Del HC) — see judgment.)

b. Important Statutes Referred

1. Customs Act, 1962 — ss.104(1), (4), (5), (6), (7).
2. Central Goods and Services Tax Act, 2017 — ss.67, 69, 70, 132, 162.
3. Code of Criminal Procedure, 1973 — ss.4, 5, 41, 50, 155, 167.
4. Prevention of Money Laundering Act, 2002 — s.19(1) (analogy drawn).