In a landmark judgment, the Supreme Court of India has ruled that anticipatory bail can be granted in cases under the Goods and Services Tax (GST) Act, overturning previous decisions that restricted such relief. The ruling, delivered by a bench comprising Chief Justice Sanjiv Khanna, Justice MM Sundresh and Justice Bela M Trivedi, marks a significant shift in the interpretation of bail provisions under tax laws and reinforces constitutional safeguards against arbitrary detention.
Background of the Case
The case, Radhika Agarwal vs. Union of India (W.P.(Crl.) No. 336 of 2018), along with several connected matters, arose from legal uncertainty over whether offences under the GST Act were bailable or non-bailable. The petitioner, Radhika Agarwal, challenged the prevailing interpretation that denied anticipatory bail to individuals accused of tax evasion under the GST regime. The government contended that offences under the GST Act, particularly involving amounts exceeding ₹50 lakh, were cognizable and non-bailable, warranting stricter enforcement measures.
Legal Issues Involved
The case primarily revolved around the following legal questions:
Whether anticipatory bail can be granted for offences under the GST Act.
Whether the ruling in Om Prakash v. Union of India (2011), which classified Customs Act offences as bailable and non-cognizable, applied to GST cases.
Whether tax enforcement officers had the power to arrest without prior approval from a magistrate.
Whether the fundamental rights under Article 21 (Right to Life and Liberty) were being violated due to arbitrary arrests under the GST Act.
Key Observations of the Court
Before arriving at its decision, the Supreme Court made several critical observations regarding the nature of economic offences and the principles of justice:
The bench emphasized that taxation laws should not be interpreted in a manner that curtails personal liberty unnecessarily. “The power to arrest is a drastic measure and must be exercised with caution, keeping in mind the fundamental rights of citizens,” the court stated, underscoring that the mere existence of arrest powers should not translate into their unregulated use by enforcement agencies.
The Court observed that while tax evasion is a serious economic offence, it should not be equated with heinous crimes such as murder or terrorism, where strict bail restrictions are warranted. “While financial irregularities must be addressed with firmness, they do not inherently justify the denial of personal liberty before a fair trial,” the judgment noted. The ruling underscored that pre-trial detention must be justified and should not serve as a punitive measure.
Moreover, the bench clarified that amendments to the Customs Act and GST Act reflect a legislative intent to ensure a balanced approach in tax enforcement. The court noted, “The legislature has consciously created statutory safeguards against arbitrary arrests, and such safeguards must be upheld to prevent undue hardship to individuals.”
The judgment further reinforced the principle that anticipatory bail serves as a safeguard against wrongful prosecution and executive overreach. “Judicial oversight is necessary to ensure that enforcement authorities act within the confines of the law while upholding the principles of natural justice and proportionality,” the bench declared, highlighting the need for accountability in tax enforcement.
Supreme Court’s Decision
The Supreme Court, in its judgment, held that anticipatory bail must be available for GST offences, rejecting the argument that tax enforcement officers should have unrestricted arrest powers. The bench noted that Om Prakash v. Union of India had already set a precedent that certain economic offences could not be treated as non-bailable unless explicitly specified by the legislature.
