Supreme Court Reserves Judgment On Petitions Challenging Provisions Of CGST/SGST & Customs Act

The Supreme Court on May 16 reserved judgment in a batch of petitions challenging the constitutional validity and interpretation of the provisions of CGST/SGST Act & Customs Act.

The matter was before a bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi, which began hearing it on May 1.

While various lawyers led arguments on behalf of the petitioners, including Senior Advocates Vikram Chaudhri and Siddharth Luthra, the respondent-authorities were represented by Solicitor General Tushar Mehta and ASG SV Raju.

Some important observations made by the bench during previous hearings are: (i) there can be no private complaint under the GST Act (ii) arrest should not be made on mere suspicion, (iii) GST/Customs Officer must have certifiable material prior to arresting, which can be verified by a Magistrate, (iii) by recent amendments, Parliament whittled down the ratio of Om Prakash v. Union of India (2011), but did not completely do away with it (iv) citizens should not be harassed merely because there is ambiguity in arrest provisions.

On May 16, at the outset, Justice Khanna issued a clarification regarding the scope of the hearing: "there are some cases in which the issue of shifting of onus on mens rea and the requirement of proof beyond reasonable doubt have been raised. We are not going to examine that. They only arise once prosecution begins".

Thereafter, arguments were led by ASG Raju on behalf of respondent-authorities. The ASG took the court through provisions of the CGST Act and Customs Act, as well as a catena of judgments. He argued that the threshold of arrest is higher in CGST and Customs Act, but release on bail is on a lower pedestal. Justice Khanna responded to the contention, saying that it reflected the Parliament's intention to preserve liberty.

"When the legislature itself puts liberty of individual on higher pedestal, it may be a little difficult to accept...to dilute it, may not be appropriate for the court", said Justice Khanna.

The judge also observed that the legislation(s) in question confer restricted powers of arrest: "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". It was further highlighted that an officer's "power to arrest" is different from "necessity of arrest".

During the hearing, a query was put to the ASG by Justice Sundresh, as to how he interpreted the phrase "committed an offense" under the legislation(s). The ASG answered that the authorities can arrest even on suspicion, however the standard has to be more than "mere suspicion" and less than "grave suspicion", not beyond reasonable doubt. In this regard, Justice Khanna posed to the ASG, "are we not putting too many standards which are not measurable?"

Justice Sundresh also questioned as to whether following Commissioner's "reasons to believe", arrest by the authorities is automatic/invariable or there is exercise of discretion. The ASG said in reply that there has to be "necessity of arrest". He cited the following instances to clarify what would amount to necessity: "disclosure of grave offense, supposing the involvement is running into several hundreds of crores, he may be arrested. That's a necessity. Another is likelihood of tampering...next is non-cooperation, you require his presence which otherwise cannot be obtained".

The hearing concluded with certain counsels for petitioners making rejoinder submissions.

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