GST Investigation Wing issues Guidelines for Arrest and Bail under GST Provisions

Introduction  

The Central Board of Indirect Taxes and Customs (‘CBIC’) has issued Instruction[i] (‘Amended Instruction’), amending its earlier Instruction No. 2/2022-23 dated 17.08.2022 (‘Old Instruction’), which contained guidelines related to arrest and bail under the Central Goods and Services Tax Act, 2017 (‘CGST Act’). The Amended Instruction aims to align with the judicial directions with regard to the manner in which arrest is made under the CGST Act.

Background

The Old Instruction issued guidelines for arrest and bail in relation to offences punishable under the CGST Act. The key provisions included:

A. Conditions Precedent to Arrest

Para 3 of the Old Instruction includes the conditions precedent to arrest, which are summarised below:

• The reasons to believe for arresting a person under s. 69 of the CGST Act, the offences punishable under s.132 of the CGST Act must be based on credible evidence demonstrating deliberate tax evasion.

• Even if all legal conditions are fulfilled, factors such as tampering with evidence, intimidating witnesses, or non-cooperation should be taken into consideration by the competent authority.

• Arrests should not be made in a mechanical manner, especially in cases involving technical or interpretational disputes of law.

B. Procedure for Arrest

Para 4 of the Old Instruction enumerates the procedure for arrest, which is summarised below:

• The Principal Commissioner/Commissioner, after considering the nature of the offence, the role of the accused and the evidence available, may authorise an officer to make an arrest.

• The arrest memo must comply with the Hon’ble Supreme Court's directions in the D.K. Basu v. State of West Bengal[ii] and indicate the relevant section(s) of the CGST Act or other applicable laws. At the same time, inapplicable provisions must be struck off.

C. Other guidelines:

Other parts of the Old Instruction included guidelines enumerating post-arrest formalities, bail reporting mechanisms, and related processes.

Amendments Introduced by Instruction No. 01/2025 – GST

The Amended Instruction was issued following the Hon’ble Delhi High Court ruling in Kshitij Ghildiyal v. Directorate General of GST Intelligence, Delhi[iii], where it was held that the ‘grounds of arrest’ must be communicated in writing to the arrested person. This decision followed the judgments of the Supreme Court in Prabir Purkayastha v. State (NCT of Delhi)[iv] and Pankaj Bansal v. Union of India & Ors.[v], where the Court emphasised the distinction between ‘reasons for arrest’ and ‘grounds of arrest.’ The Supreme Court clarified that the ‘reasons for arrest’ are general in nature, and the ‘grounds of arrest’ are specific to the accused while providing detailed facts to justify the arrest.

In light of the above, the Amended Instruction has provided an amendment to Para 4.2.1 of the Old Instruction to be read as:

‘Para 4.2.1 - The grounds of arrest must be explained to the arrested person and furnished to him in writing as an Annexure to the Arrest Memo. Acknowledgement of the same should be taken from the arrested person at the time of service of the Arrest Memo.’

The amendment replaces the earlier requirement, which only mandated oral communication of the ‘grounds of arrest,’ to now require written communication along with the accused's acknowledgement of receipt.

Our Analysis

The amendments under Instruction No. 01/2025-GST signify CBIC’s commitment to align GST enforcement practices with constitutional principles and judicial guidance. The clear distinction between ‘reasons for arrest’ and ‘grounds of arrest’ addresses long-standing concerns about arbitrary detentions, strengthening procedural safeguards and enhancing accountability.

Mandatory written disclosure of arrest grounds ensures transparency, empowering individuals to defend themselves effectively. This measure also upholds the principles of natural justice and reinforces trust in the tax administration system.

However, challenges in implementation persist. Ensuring uniform compliance with these updated guidelines, providing adequate training to officers, and addressing procedural delays in filing prosecution complaints remain critical areas for further improvement. A robust mechanism to monitor adherence across jurisdictions will be essential to realize the full potential of these reforms.

End Notes

[i] No. 01/2025-GST dated 13.01.2025.

[ii] 1997(1) SCC 416.

[iii] 2024 SCC OnLine Del 8949.

[iv] 2024 SCC OnLine SC 934.

[v] 2024 SCC OnLine SC 1244.

Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.