Supreme Court Seeks Data Of GST Arrests, Says Citizens' Harassment Won't Be Allowed Due To Any Ambiguity In Arrest Provisions

While hearing a batch of petitions challenging penal provisions of GST Act, Customs Act, etc. as non-compatible with the CrPC and the Constitution, the Supreme Court on Thursday (May 2) expressed concerns about the ambiguity in Section 69 of the GST Act (dealing with power with arrest) and conveyed that it would interpret the law to "strengthen" liberty, if need be, but not allow citizens to be harassed.

The Bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi asked Additional Solicitor General SV Raju (appearing for Revenue) to furnish data regarding the number of notices issued under the Central Goods and Services Tax Act, 2017 (in past 3 years) with respect to amounts exceeding Rs. 1 crore and Rs. 5 crores, as well as the number of arrests made during the time.

The matter, a batch of 281 petitions, was last listed yesterday, when the court heard issues raised with respect to the Customs Act. A report on the said proceedings can be read here.

Today, Senior Advocate Siddharth Luthra led arguments (for the petitioners) in the context of the GST Act, contrasting the provisions thereof with those under the Customs Act.

Arrest should be preceded by adjudication : Siddharth Luthra

Luthra began by asserting that arrest under the GST Act is to be preceded by adjudication of the amount considered due and payable on the part of a taxpayer. It was submitted that the primary question to be considered is whether the liberty of an individual can be trifled with until material particulars of the offence are made out.

In response, J Khanna said, "what you are arguing...till the assessment is made and the amount is quantified, no arrest can be made because of the provisions...may be difficult to accept". 

Luthra, however, asserted that there is an entire mechanism to determine what amount has been retained: "Till this determination takes place, it would be a fallacy to assume that the test of reason to believe is met in terms of Section 69".

Citizen's harassment and fake cases

Next, Luthra pointed out that sometimes arrests are not made, but people are harassed with notices, threatening arrest. Considering the same, Khanna J turned to ASG Raju and raised concern, "What happens is the harassment...which the citizens suffer. We will not permit that. If there is, if we find there is ambiguity, if we have to strengthen, we will interpret the law as strengthens liberty".

Subsequently during the hearing, the bench observed that there can be cases of fraud (such as those involving fake bills) and thus, genuine cases need to be distinguished insofar as question of arrest is concerned. In this regard, Raju claimed that authorities were not making arrests in genuine cases, but the same was met with opposition from Luthra.

Distinguishing "ability to investigate" from "power to arrest", Luthra submitted that there are two modes of material collection available to authorities - one, the returns filed before them, and two, they can call for information under the Act. However, that does not entail moving to the stage of arrest.

The senior counsel gave example of Flipkart to say that the platform's management was arrested and required to move for anticipatory bail on the ground that there was a "mismatch" three levels down (in connection with a service provider), even though returns of GST were shown.

The exchange led the court to ask Raju to furnish data on the number of notices issued under GST Act in the last 3 years for amount exceeding 1 crore and 5 crores. The ASG was asked to apprise as to how many prosecutions were initiated, compared to how many arrests were made.

Are officers under GST Act 'police officers'?

To contend that officers under the Customs/GST Act are police officers, and therefore, the provisions under Chapter XII CrPC apply, Luthra was heard citing the judgment in State of Punjab v. Barkat Ram (1961). He recapitulated the position under erstwhile Sea and Land Customs Act that acts of officers exercising power under the Customs Act are not in the nature of criminal prosecution. They are in the nature of determination of liability and therefore, such officers do not act as Police Officers, he said.

Luthra added that while the officers may have similar powers, they are not people who file report under Section 173(2) CrPC. Notably, in Barkat Ram's case, Justice Subba Rao had dissented and equated a customs officer to a police officer. 

Moving on, Luthra referred to the decisions in Raja Ram Jaiswal v. State of Bihar (1963) (where a view contrary to that in Barkat Ram was taken) and the Constitutional Bench decision in Romesh Chandra Mehta v. State of West Bengal (1968).

Ultimately, he drew the court's attention to Tofan Singh v. State of Tamil Nadu (2020), which was in the context of a statement under Section 67 of Narcotic Drugs and Psychotropic Substances Act. By a 2:1 majority, the bench in Tofan Singh had held that officers of the Central & State agencies appointed under NDPS Act are police officers and therefore the 'confessional' statements recorded by them under Section 67 are not admissible.

Going through the precedents, Justice Khanna opined that based on the ratio of Tofan Singh, the concerned officers will not be police officers. The judge also remarked, "a statute cannot be declared as invalid only on the ground that it violates or is contrary to certain protections given in another statute".

Insofar as Luthra's contention that protection under Article 20(3) of the Constitution (against self-incrimination) is available at all times, Justice Khanna noted that the bar under the Article is restrictive: "It is only with regard to statements made after you become an accused".

GST Act is unique: Justice Sanjiv Khanna

The judge further posed to the senior counsel if it was possible to uphold two separate procedures under the GST Act: "GST Act is somewhat unique. It's not a replica of any other Act. So can we not hold that there are 2 procedures which are available - one is to file a private complaint by a public servant in discharge of his duties...the other is to register an FIR and in case FIR is registered, the procedure prescribed will apply, subject to condition that there cannot be any prosecution without sanction which will include investigation...there will be no arrest without the permission of the Commissioner".

Giving no specific answer, Luthra tried to impress upon the court that the safeguards under CrPC ought to apply (until the provisions are specifically excluded), to protect liberty.

Insofar as the petitioners' contention regarding maintenance of case diary, Justice Khanna said, "the main purpose which the adjudicator does is to determine tax...whether there is any tax liability, or non-refund, etc. Now to expect him to, at that stage, also follow the route of a police diary...this is very difficult. It will be a very impossible condition".

Judicial oversight and access to legal counsel during interrogation

Towards the end, a submission was made that there should be judicial oversight of investigation. The following exchange took place on whether persons should have access to their counsels during investigation:

J Khanna: CrPC also says when you are under interrogation, you can be allowed to meet your counsel. Where is the question of not being allowed to meet counsel once he's arrested?

Raju: As far as meeting of counsel, during live interrogation, no...thereafter, he can meet. Otherwise, what will happen, every question he will go and ask the lawyer...

J Khanna: We are not determining that...we are only saying during the course of interrogation, he should be allowed. That's what CrPC itself provides. Why should he not be allowed?

Luthra: A lawyer has to be within sight and hearing. That's the principle

J Khanna: Not hearing...sight, not hearing

Raju: He (lawyer) will say (to person) I will give a thumbs up, you say yes...there can be...not while interrogation is going on

J Sundresh: You're right, during interrogation, he (lawyer) will not come. But when you consider application for bail, or he requests for bail, or when you take a decision that he should not be granted bail...to that extent, he has to be...that's the distinction

Raju: [He may say] give me 10-15 minutes...in that 10-15 minutes, he goes and meets the lawyer and takes instructions

Luthra (smiling): On the lighter note, I am jealous my friend is watching too many movies...I don't know how he gets the time

J Sundresh (to Raju): What we are suggesting is that the interaction is not between the lawyer and your client...it is only opportunity for the lawyer to argue before them to say that he should be admitted in bail. That [they] are entitled to

Luthra: If I was to accept Mr. Raju's argument as correct, Article 20 would be out of the window. A man has a right against self-incrimination. Investigation does not mean extraction of a confession. That is what is being done.

Justice Khanna's following observation in the context of a prayer for presence of advocate at the time of recording of statement under Section 161 CrPC also seeks mention - "It's never been granted. There have been some cases where we have granted in cases of customs, etc. But you have to be in visual distance, not audio distance. (Section) 161 we have never granted because that statement cannot be relied upon."

The matter is next listed on May 8.

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