Supreme Court Balances Arrest Powers and Taxpayer Rights Under Customs, GST Acts

Judicial Safeguards Introduced to Prevent Arbitrary Arrests

In a landmark judgment, the Supreme Court of India has upheld the authority of officials to make arrests under the Customs Act and GST Acts while simultaneously introducing judicial safeguards to ensure protection against arbitrary detention. This decision comes as the apex court ruled on 281 petitions challenging the validity and enforcement of these powers.

A bench led by Chief Justice of India Sanjiv Khanna reaffirmed that officers under these laws exercise powers analogous to police officers when conducting arrests, searches, and seizures. The court also clarified that these officials must adhere to the same legal restrictions applicable to police authorities under the Code of Criminal Procedure, 1973 (CrPC).

Court’s Verdict: Ensuring Procedural Safeguards

The ruling came in response to concerns that tax authorities were allegedly forcing taxpayers to make voluntary payments under the threat of arrest. The court categorically stated that if any taxpayer feels coerced into paying Goods and Services Tax (GST), they have the right to approach the writ court for a refund of the tax amount paid under duress.

“We would observe that in case there is a breach of law, and the assessees are put under threat by force or coercion, the assessees would be entitled to move the courts and seek a refund of tax deposited by them,” the bench stated.

The Supreme Court also directed that any officers found indulging in coercion should face departmental action, ensuring accountability within the enforcement agencies.

Case Precedents and Key Judicial Observations

• Radhika Agarwal v. Union of India: The SC ruled that Customs officers cannot make arbitrary arrests based on mere suspicion. Instead, substantial material evidence must be present before an arrest can be made.
• Arvind Kejriwal v. Directorate of Enforcement (2025): The court laid down preconditions for the Director of Enforcement before making arrests under Customs and GST laws, ensuring legal thresholds are met.
• GST Laws Not a Complete Code: The court acknowledged that the GST Acts lack comprehensive provisions regarding search, seizure, and arrest, reinforcing the need for procedural adherence.

Clarification on Customs Act and Burden of Evidence

A key aspect of the ruling was the court’s interpretation of Section 104(1) of the Customs Act, which does not explicitly require officials to possess material evidence before making an arrest. However, the Supreme Court clarified that:

“The absence of an explicit requirement for material evidence does not mean that a Customs officer can conclude an offence has been committed based on suspicion alone,” the court stated.

This ensures that no arbitrary detentions occur and that arrests are backed by concrete evidence, reinforcing the fundamental rights of individuals under the Constitution of India.

Legal Recourse for Taxpayers and Stricter Oversight on Enforcement Agencies

The Supreme Court’s ruling has major implications for businesses and individuals facing tax enforcement actions:

• Taxpayers subjected to coercion can seek judicial relief, including refunds of any GST payments made under pressure.
• Tax authorities cannot arrest individuals without substantial evidence, reducing the scope of misuse of power.
• Officers engaging in coercion will be held accountable through departmental action, ensuring a check on excessive use of power.

With this judgment, the Supreme Court has sought to balance the enforcement powers of tax authorities with the constitutional rights of taxpayers, establishing clearer boundaries for compliance and law enforcement under the Customs and GST Acts.