Petitions challenging CGST, SGST & Customs Act Penal Provisions: Supreme Court reserves Judgment

On May 16, the Supreme Court reserved its judgment on a series of petitions challenging the constitutional validity and interpretation of penal provisions in the Central Goods and Services Tax Act, State Goods and Services Ta Act and the Customs Act.

The case was heard by a bench comprising Justices Sanjiv Khanna, MM Sundresh, and Bela M. Trivedi, beginning on May 1. Senior Advocates Vikram Chaudhri and Siddharth Luthra led arguments for the petitioners, while Solicitor General Tushar Mehta and Additional Solicitor General SV Raju represented the respondent authorities. During the previous hearings, the bench made several important observations: private complaints under the GST Act are not permissible; arrests should not be made on mere suspicion;

GST/Customs Officers must have verifiable material before making an arrest, which can be checked by a Magistrate; recent amendments have modified but not entirely overturned the precedent set by Om Prakash v. Union of India (2011); and citizens should not be harassed due to ambiguities in arrest provisions. At the outset on May 16, Justice Khanna clarified that the scope of the hearing did not include issues regarding the shifting of onus on mens rea or the requirement of proof beyond a reasonable doubt, as these arise only once prosecution begins. ASG Raju then led arguments for the respondent authorities, explaining the provisions of the CGST Act and Customs Act and referencing multiple judgments.

He argued that while the threshold for arrest under these acts is high, the criteria for release on bail are lower. Justice Khanna remarked that this reflects Parliament’s intent to prioritize individual liberty. Justice Khanna emphasized that the legislation confers restricted powers of arrest, stating, “sometimes we tend to believe that investigation cannot be completed until arrest. That is not the object of the legislation. It restricts the power of arrest.” He further highlighted the distinction between an officer’s “power to arrest” and the “necessity of arrest.”

During the hearing, Justice Sundresh questioned the ASG on the interpretation of “committed an offense” under the legislation. The ASG responded that while authorities can arrest on suspicion, it must be more than “mere suspicion” but less than “grave suspicion,” and not beyond reasonable doubt. Justice Khanna then queried whether this created too many non-measurable standards. Justice Sundresh also asked whether an arrest following the Commissioner’s “reasons to believe” is automatic or discretionary. The ASG replied that there must be a “necessity of arrest,” citing instances such as the disclosure of a grave offense involving large sums, likelihood of tampering, or non-cooperation. The hearing concluded with some petitioners’ counsels presenting rejoinder submissions.

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