The Customs Act, 1962; and, the Central Goods and Services Tax Act, 2017, have been enacted by the parliament to empower the Government to collect tax from the importers and the public. However, since these Acts levy taxes on the people, the natural tendency of the people to evade the taxes payable under the Act also comes it. And therefore, the legislature has provided these Acts with certain deterrent provisions to prevent evasion of taxes by the tax evaders. Section 104 of the Customs Act and Section 69 of the CGST Act, lay down procedures for arrest, for the specified offences mentioned in the Acts therein.
The Customs Act, 1962 is a self-contained Act and a special enactment which also provides arrest power within itself. Section 104 of the Act empowers a Customs Officer to arrest a person if he has “reasons to believe” that such person has committed any offence punishable under Sections 132 or 133 or 135 or 135A or 136. As per Section 104, offences under the Customs Act have been placed in two categories i.e. (i) bailable/non-bailable; and (ii) cognizable/non-cognizable. Sub-section 4 of Section 104 states that offences relating to
Moreover, as per sub-section of Section 104, offences punishable under Section 135 relating to
These provisions of arrest have been further streamlined by the Central Board of Excise and Customs (now, Central Board of Indirect Taxes and Customs) vide its Circular No. 38/2013-Customs dated 17.09.2013, which were again changed through Circular No. 28/2015-Customs dated 23.10.2015, wherein arrest was to be effected only in exceptional cases which included the following:
(a) Cases involving unauthorised importation in baggage/ cases under Transfer of Residence Rules, where the CIF value of the goods involved is Rs. 20,00,000/- (Rupees Twenty Lakh) or more;
(b) Cases of outright smuggling of high value goods such as precious metal, restricted items or prohibited items or goods or offence involving foreign currency where the value of offending goods is Rs. 20,00,000/- (Rupees Twenty Lakh) or more;
(c) Cases related to importation of trade goods (i.e. appraising cases) involving wilful mis-declaration in description of goods/concealment of goods/goods covered under section 123 of Customs Act, 1962 with a view to import restricted or prohibited items and where the CIF value of the offending goods is Rs. 1,00,00,000/- (Rupees one crore) or more;
(d) Fraudulent availment of drawback or attempt to avail of drawback or any exemption from duty provided under the Customs Act, 1962, if the amount of drawback or exemption from duty is Rs. 1,00,00,000/- (Rupees One Crore) or more. In cases related to exportation of trade goods (i.e. appraising cases) involving (i) wilful mis-declaration in value / description ; (ii) concealment of restricted goods or goods notified under section 11 of the Customs Act, 1962, where FOB value of the offending goods is Rs. 1,00,00,000/- (Rupees One Crore) or more.
Similarly, the CGST Act, 2017 is another special enactment by the parliament and has given power of arrest to the GST Officers. As per Section 69 of the Act, the Commissioner of GST can authorise any officer of central tax to arrest a person if he has “reasons to believe” that the person has committed an offence attracting a punishment prescribed under Section 132 of the Act. Section 132 provides that specified offences involving tax evasion in excess of INR 50,000,000 (Indian Rupees Fifty million) will be cognizable and non-bailable, and that officials can proceed with arrest as per the procedure laid out under Section 69 of the CGST Act.
Provisions within the two Acts:
An empowered officer under the two legislations means, “an officer designated with special powers by general order or by special order, by the Commissioner of Customs under the Customs Act or by the GST Commissioner under the CGST Act and/or the corresponding states goods and services tax laws (SGST Acts).” Further, “reasonable belief” which is required on part of the authorising officer is an evidentiary criterion wherein something more than a suspicion is required , and, the facts and circumstances are sufficient to establish guilt. As per Section 26 of the IPC, 1860, “a person is said to have ‘reasons to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.” Therefore, persons involved should not be arrested unless the exigencies of certain situations demand their immediate arrest.
Now, it is a well-settled law that the provisions of Section 167 of the Criminal Procedure Code apply to persons arrested under sub-sections 1 and 2 of section 104 of the Act. Having regard to the Constitution; the settled provision of the Criminal Procedure Code (stated in Sections 57 and 167); and the provisions of the Customs Act, it has also been made necessary for the authorised officer to practice utmost care while complying with the procedures of the Customs Act. As, the Customs Act enjoins the authorised officer to take the arrested person to a magistrate without unnecessary delay, and even provides for release of such person on bail. Consequently, it lies upon the magistrate before whom the person is produced, to apply his judicial mind to determine whether the arrest is in accordance with law. Nonetheless, it has also been held by the Hon’ble Kerala High Court, that registration of F.I.R is not necessary before arresting a person under section 104 of the Customs Act. And that, section 154-157 and Sections 173(2) of the Code do not apply to a case under the Customs Act.
However, Section 104 of the Act, only prescribes the conditions in which the power of arrest may be exercised, it does not prescribe any procedure whatsoever for the grant or refusal of bail to persons accused of offences under the sections thereof or for their subsequent custody or trial thereafter. Accordingly, in order to grant bail (except in the case of arrest under section 135), the officer is bound to follow the provisions of the Code, as sub-section 3 of Section 104 states that where an officer of customs has arrested any person under sub-section (1), he shall, for the purpose of the releasing such person on bail or otherwise, have the same power and be subject to the same provisions as the officer-in-charge of a police station has and is subject to under the Code of Criminal Procedure, 1898 (5 of 1898).
A detailed perusal of the concerned sections of the CGST Act alongside the Customs Act leads the readers to the conclusion that, the provision for arrest under Section 69 of the CGST Act although similar is distinct from provision of arrest under Section 104 the Customs Act. As the offences under the CGST Act differ in nature to those committed under the Customs Act.
The specified offences under Section 132 of the CGST Act are as follows:
(a) supply of any goods or services or both without issue of any invoice, in violation of the provisions of the Act or the rules made thereunder, with the intention to evade tax;
(b) Issue of any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) availment of input tax credit using such invoice or bill referred to in clause (b);
(d) collection of any amount as tax and failure to pay the same to the Government beyond a period of 3 (three) months from the date on which such payment becomes due.
Recent holdings against the CGST Act:
On May 27 2019, a vacation bench of the Hon’ble Supreme Court in a case dismissed a challenge brought against the verdict of the Telangana High Court upholding the GST authorities' power of arrest. The high court in the case had observed that sub-section (1) of Section 69 of the Act empowers the Commissioner to order the arrest of a person, when such a person is believed to have committed a cognizable and non bailable offence. It had also held that such persons under the Act do not have the right of pre-arrest bail either.
The Bombay High Court however, in a case before it gave a contrasting opinion wherein, it held that arrest can be made only as per the procedures in the Criminal Procedure Code, and granted pre-arrest bail on similar charges. This decision by the high court has been challenged by the Centre, contending that the judgment had the effect of nullifying Section 69(1) of the CGST Act.
Consequently, the Hon’ble Supreme Court in a case, vide its order dated 29 May 2019, without touching the order of the Bombay High Court, has held that the position regarding the arrest provisions under the CGST Act and the corresponding SGST Acts will be clarified by a three-judge Bench of the Supreme Court before whom all similar matters shall be placed.
Arrest and prosecution being grave matters, need to be clear in a manner that there is no room for misinterpretation. The constant changes and additions in the law, although helpful in strengthening the provisions also show the absence of a uniform provision.
However, that being said, it can also not be disregarded that the power of arrest under Customs Act although questioned plenty of times, has been upheld by the Hon’ble Supreme Court and the different high courts of the states. Hence, a study of the arrest power under the CGST Act will lead to the conclusion that though the provisions under both the Acts are strikingly similar to each other, the nature of the offences within the Acts are distinct and not alike.
The lacunae in the provisions of the CGST Act, as to whether the prosecution should supersede the assessment proceedings (barring exceptional cases); whether it is rightful to deny access to the seized documents under Section 67(5) of the Act; whether transactions are susceptible even though applicable GST has been paid by the supplier and why an arrest has been made without issuance of the show cause notice, need to be resolved. Consequently, these proceedings also hold a larger question as to whether the ratio laid down under the “Make My Trip Case” which got affirmed by Supreme Court is applicable on the case under Section 132 of the CGST Act.
The offences specified under the two Acts are economic offences and distort the economy. Therefore, in the words of the Hon’ble Supreme Court, in the interest of the community it is only right that the final authorities should have sufficient powers to prevent tax evasion. And though, there is a definite need on part of the apex court to remove the loopholes in the law, the power of arrest given to the concerned officers under the CGST Act, cannot altogether be disabled.
 Section 104(5), The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)
 Section 104(7), The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)
 Ayoob M.K. v. Suprerintendent, Customs Intelligence Unit, Cochin, 1984 Cr. L. J. 949 (Ker.)
 INDIA CONST. art. 22, cl. 2.
 Section 104(2), The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)
 Section 104(3), The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)
 Kishin S. Loungani v. Union of India, (2017) 352 ELT 433 (Ker.)
 Section 104(6), The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)
 Dalam Chand v. Union of India, 1982 Cr. L.J. 747 (Del.)
 P.V. Ramanna Reddy v. Union of India, SLP(Crl) No.-004430 / 2019
 Union of India v. Sapna Jain & Ors., SLP(Crl) No.-004322-004324/2019
 Union of India & Ors. v M/s Make My Trip (India) Pvt. Ltd. C.A. Nos. 8080/2018
 Pooran Mal v. Director of Inspection, A.I.R. 1974 S.C. 348 (India)