GST Officers Should Not Arrest On Mere Suspicion, Verifiable Material Necessary: Supreme Court Says During Hearing

While hearing a batch of petitions challenging penal provisions of the Customs Act, GST Act, etc. as non-compatible with the CrPC and the Constitution, the Supreme Court on May 9 orally observed that a GST officer must have material, which can be verified by a Magistrate, before arrest is made and not act merely on suspicion. 

The bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi, after hearing submissions of ASG SV Raju on behalf of respondent-authorities, listed the matter for next Wednesday(May 15).

On the previous two dates, arguments were heard on behalf of the petitioners. Reports of those proceedings can be read here and here.

A gist of the proceedings on May 9 is reproduced hereunder.

Applicability of Article 20(3) of Constitution and S.25 of Evidence Act

At the outset, ASG Raju referred to Article 20(3) of the Constitution (which says that no person accused of any offense shall be compelled to be a witness against himself) to submit that unless a person is formally accused, either by FIR or complaint, he is not to be treated as "accused" for the purposes of Article 20(3). That is, the protection against self-incrimination shall only apply when a person has been formally "accused".

Next, he brought the court's attention to Section 25, Evidence Act ("No confession made to a police officer shall be proved as against a person accused of any offence"), to submit that the courts have held Customs Officers, Central Excise Officers to not be "police officers" and therefore, Section 25 does not apply.

It was his case that confessions/statements made to customs officers are neither hit by Article 20(3) nor by Section 25.

Applicability of Sections 2(l), 155(2) and 155(3) CrPC to Customs Officer

Raju pointed to the definition of "non-cognizable" offense under Section 2(l) CrPC to aver that the provision only applies to police officers, not Customs officers. In this context, his argument was that when Customs Act made an offense non-cognizable, it prevented only police officers from arresting. "It otherwise made provisions where a Customs Officers can arrest even in a non-cognizable case, that is the entire scheme of the Customs Act", said Raju.

He further submitted that Section 155(2) CrPC (which provides that a police officer shall not investigate a non-cognizable case without the order of Magistrate) does not apply to Customs Officer. In other words, the prohibition to investigate a non-cognizable case without orders of a Magistrate does not apply to Customs Officer and "Customs Officer can investigate a non-cognizable case despite the embargo under S.155(2) CrPC". Moreover, under Customs Act, the permission is required from the Commissioner, not Magistrate.

Adverting to Section 155(3) CrPC (which says that a police officer cannot arrest without warrant in a non-cognizable case), Raju contended that the provision only applies to "police officers", not Customs Officers. "That restriction is not there in Customs Act, which is a special Act, which will override this provision in view of Section 5", he said. He however conceded that Section 24, Evidence Act ("confession caused by inducement, threat or promise, when irrelevant in criminal proceeding") contains a complete bar and shall apply to all Officers.

Subsequently, Raju took the court through provisions of the Customs Act (such as Sections 100-104) which, in his submission, override by implication provisions of CrPC. With regard to arrest, it was especially highlighted that a Customs Officer exercises power under Section 104 of Customs Act, not Section 41 CrPC.

Consequences of making Chapter XII CrPC applicable to Customs cases

Raju contended that if Chapter XII CrPC is made applicable and Customs Officers are held to be "police officers", a long line of reasoning by constitutional benches would be rendered redundant. Further, cases would no longer be open to investigation until FIR is registered. If FIR is registered and person is made "accused", Article 20(3) and Section 25 would kick in.

In the context of Section 108 Customs Act, when Justice Khanna commented that the provision is not contingent on registration of FIR, and as such, Customs Officers can call persons to ask questions (as their primary purpose is to ensure compliance of the Act), Raju countered that Section 25 Evidence Act would click in for even for statements recorded under Section 108 if the FIR is registered after recording of statement. "[Section] 25 squarely applies to me whether I record it before registration of FIR or after...does not make any difference", he said.

Ratio in Om Prakash whittled down, but not fully done away with : Justice Khanna

When Raju read out Section 104(4) of Customs Act, which classifies offenses into cognizable and non-cognizable for the purposes of arrest, Justice Khanna opined that the provision was amended after the judgment in Om Prakash v. Union of India (2011) to whittle down its effect, but the ratio was consciously not fully done away with. To quote,

"If they felt that Om Prakash is not in tune with legislative intent, they could have amended it differently. They did not. Amendment was specifically to do away with impact of Om Prakash. But Parliament did not do it completely. Parliament therefore partly accepted Om Prakash and partly diluted it. They could have simply said Chapter XII [CrPC] does not apply."

GST Officers Not 'Police Officers' : ASG Raju

Proceeding to argue in relation to the GST Act, Raju contended that GST Officers are not "police officers". He referred to the dominant purpose test to submit that keeping in view the dominant purpose of GST Act, power to initiate prosecution and make arrest is "incidental". As such, GST Officers cannot be said to be "police officers".

He further argued that GST Act is a special law, conferring special powers, and therefore it excludes the application of Chapter XII CrPC.

No private complaint can be made under GST Act : Bench

During the hearing, a query was posed by Justice Trivedi as to whether there can be a private complainant under GST Act. In response, Raju said that he would have to check. However, Justices Khanna and Sundresh observed that there cannot be a "private complainant" under GST.

While Justice Sundresh commented that the same would be "very dangerous", Justice Khanna opined, "private complainant cannot be there...then that Mohd Ibrahim's case will come in...'aggrieved person' will have to come in...aggrieved person will be the government, it is the sufferer...otherwise abuse is quite rampant."

Verifiable material necessary before arrest is made : Justice Khanna

On going through the data produced by ASG Raju pertaining to arrests (as directed on last date), Justice Khanna noted that in several cases, there was zero prosecution, though number of people were arrested.

The judge expressed, "You can't arrest a person merely because you are making enquiry...you arrest after you reach the conclusion that something has happened...we are only concerned with...you must reach the conclusion that yes, A,B,C,D has happened...not on the mere suspicion...investigation will reveal whether he has done it or not".

In response, Raju agreed that law enjoins an officer to act on material, but added that the reason to believe (under Section 69) need not necessarily flow from adjudication.

Hearing the submission, Justice Khanna said, "let's accept that part, but there must be certainly material to show...and that should be verifiable by the Magistrate...and the officer must be able to certify that".

Case Title: Radhika Agarwal v. Union of India and Ors., W.P.(Crl.) No. 336/2018 (and connected matters)