Supreme Court reiterates validity of Section 69 CGST Act: Arrest powers of GST authorities sustained

Background of the case: Rakesh Kumar Vs Union of India & Anr.

In Rakesh Kumar Vs Union of India & Anr. (Supreme Court of India), the assessee approached the Supreme Court under writ jurisdiction challenging the power of arrest conferred on GST authorities under Section 69 of the Central Goods and Services Tax Act, 2017. The principal contention was that the provision allegedly violated constitutional safeguards and therefore ought to be struck down or read down.

The matter did not involve a factual examination of the assessee’s individual GST transactions; rather, it was a direct constitutional attack on the statutory provision itself.

Nature of the writ petition

  • The petition was framed as a constitutional challenge to Section 69 of the CGST Act, 2017.
  • The relief sought was essentially a declaration that the provision is unconstitutional, or that the scope of arrest powers should be curtailed judicially.
  • No separate or distinct factual matrix was pressed that could materially distinguish the case from earlier precedents on the same provision.

The Supreme Court was required to determine the following central issue:

Whether Section 69 of the Central Goods and Services Tax Act, 2017, which confers power on GST officers to arrest persons suspected of committing certain GST offences, withstands scrutiny under the Constitution of India.

Thus, the challenge was directed only at the legislative competence and constitutional compatibility of Section 69, not at the manner in which the provision had been applied in any particular investigation.

Statutory framework: Understanding Section 69 CGST Act

Scope and objective of Section 69

Section 69 of the Central Goods and Services Tax (CGST) Act, 2017 provides the statutory mechanism enabling senior GST authorities to direct arrest in specific cases associated with serious GST contraventions.

The key features of this provision may be outlined as follows:

  • The Commissioner must have “reasons to believe” that a person has committed an offence described in Section 132 of the CGST Act.
  • Only in relation to those specified offences, and subject to prescribed monetary limits and conditions, can the Commissioner authorise an arrest.
  • The power is therefore not general or unfettered, but linked expressly to the offence categories laid down in Section 132.

Offence categories linked to arrest under Section 69

The arrest power under Section 69 is triggered only for certain serious offences, inter alia, including:

  • Issuance of invoices or bills without any underlying supply of goods or services, with the objective of enabling wrongful input tax credit or other benefits.
  • Availing or passing on fraudulent input tax credit, contrary to law.
  • Collecting GST but failing to deposit it with the Government beyond the time and manner prescribed, when the amount involved crosses defined thresholds.
  • Other specified offences under Section 132 that meet the statutory criteria for arrest.

The provision is calibrated with monetary thresholds and offence classifications, which determine whether an offence is cognizable, non-cognizable, bailable, or non-bailable.

Procedure for arrest and classification of offences

Section 69 draws a clear procedural distinction between cognizable/non-bailable offences and non-cognizable/bailable offences:

  1. Cognizable and non-bailable offences

    • Where the alleged act falls within this category under Section 132, the authorised GST officer may arrest the person.
    • After the arrest, the person must be produced before a Magistrate within 24 hours, in line with constitutional and criminal procedural safeguards.
    • The regular criminal law process under the Code of Criminal Procedure continues thereafter.