GST Updates

Arrest Under GST Is Not Off the Table — But It’s Not a Blank Cheque Either: The Safeguards Every Practitioner Should Know Cold

Published 30 Aug 2026· Updated 30 Aug 2026· 7 min read

(Labelled KNOWLEDGE/EXPLAINER, not NEW TODAY — the governing Supreme Court position was settled by Radhika Agarwal v. Union of India & Ors. [(2025) 6 SCC 545], and a further writ petition disposed of on its strength on 29 June 2026. A fresh professional-press explainer on this settled position was published today, prompting this refresher for practitioners.)

Every so often a client calls in genuine panic: GST officers are at the door, summons have been issued, and the word “arrest” has come up. Knowing exactly what the law does and doesn’t allow at that moment is one of the highest-value things a CA can offer a client under GST investigation — and it starts with understanding that this question is, at this point, settled law.

Section 69 of the CGST Act empowers the Commissioner, where there is “reason to believe” a person has committed specified offences under Section 132(1) — punishable under clauses (i) or (ii), or under Section 132(2) — to authorise an arrest. A three-Judge Bench of the Supreme Court, in Radhika Agarwal v. Union of India & Ors. [(2025) 6 SCC 545], comprehensively upheld the constitutional validity of this power, along with the parallel arrest power under the Customs Act, while simultaneously laying down the safeguards that constrain how it may actually be used. A more recent writ petition — Rakesh Kumar v. Union of India & Anr., disposed of by the Supreme Court on 29 June 2026 — confirms that this question is beyond further constitutional challenge: the Court simply applied Radhika Agarwal and closed the matter.

Sidebar: it’s worth remembering where this power actually comes from constitutionally. The Supreme Court grounded it in Article 246-A — arrest, summons and prosecution powers are “ancillary and incidental” to the power to levy and collect GST itself. That’s not a throwaway line; it’s the reason a challenge to the power’s basic existence was always going to be an uphill argument, however the safeguards debate played out.

What does remain very much alive is the safeguards debate — and this is where the real practice value sits. The Court was explicit that no arrest can be made until the Commissioner can actually show, on the basis of material and evidence, that the Section 132(1) conditions are satisfied and that the offence is cognizable and non-bailable. “Reason to believe” isn’t a formality — it must be explicit, tied to specific material, and carry a genuine degree of certainty, with the benefit of doubt available both before the Commissioner and any Magistrate reviewing the matter.

Two of the safeguards have particular day-to-day bite. First: Section 74(5) gives a taxpayer the option to make a voluntary payment during investigation — it does not give the department the power to extract payment by threatening arrest. The Supreme Court expressly directed that CBIC’s own Instructions (No. 01/2022-23 dated 25 May 2022, and No. 02/2022-23 dated 17 August 2022) are binding on the department and must be followed in letter and spirit — and the Court has separately called for CBIC to formulate clearer guidelines so no taxpayer is coerced into “self-payment” under the shadow of arrest. Second: on judicial review, courts will not re-weigh the department’s evidence wholesale, but will check three specific things — whether the arresting officer was actually authorised, whether the “reason to believe” was genuinely grounded in material the officer possessed, and whether the arrestee was informed of the grounds of arrest as soon as practicable after arrest.

The High Courts have already started putting real teeth into these safeguards. The Karnataka High Court, in J Ramesh Chand, held that ₹10 crore collected from a taxpayer during a search — under implicit pressure, contrary to the CBIC instructions — had to be refunded with 6% interest, because payment extracted under duress during search or investigation is, by definition, not voluntary. In a separate matter, Viral Narendra Gosalia, the same High Court granted bail relying on Radhika Agarwal‘s bail jurisprudence where the arrestee had been detained without the required notice of appearance under the BNSS.

Why It Matters

For any client facing a GST investigation with the word “arrest” in the air, the constitutional question is settled and not worth fighting — the safeguards question is where the actual leverage lies. Coercive “voluntary” payments collected during search operations are now a well-established, actively-enforced ground for full refund with interest, and this is a live, practical remedy available today, not a theoretical position.

Key Takeaways

The constitutional validity of Section 69 (arrest power) and Section 70 (summons power) of the CGST Act stands conclusively settled by Radhika Agarwal v. Union of India & Ors. [(2025) 6 SCC 545] — a challenge on this ground alone is not worth pursuing.
Arrest requires the Commissioner to show, on the basis of material and evidence, that the specific Section 132(1) conditions are met and that the offence is both cognizable and non-bailable — a bare recitation of the statutory language is not enough.
Section 74(5) is an option for the taxpayer, not a lever for the department — any payment extracted under the implicit or explicit threat of arrest during search, inspection or investigation is not voluntary and is refundable with interest.
CBIC Instruction Nos. 01/2022-23 and 02/2022-23 are binding on the department, and courts are actively enforcing them, including ordering refunds with 6% interest where they were disregarded.
Anticipatory bail remains available in appropriate GST cases even before an FIR is registered, following the Constitution Bench principles in Sushila Aggarwal v. State (NCT of Delhi) [(2020) 5 SCC 1], provided the facts and a reasonable apprehension of arrest are clear.
Judicial review of a GST arrest’s legality is narrow — courts check authorisation, the material basis for “reason to believe,” and communication of arrest grounds, but will not re-weigh the department’s evidence on the merits at that stage.

Practical Implications

Every CA advising a client under GST investigation should have a standing checklist ready the moment arrest is mentioned: confirm the arresting/authorising officer’s competence, demand the specific material underlying the “reason to believe,” insist on the CBIC instructions being followed if any payment is being pressed during search, and document the timeline and manner of any payment made during the investigation in case a duress-refund claim becomes necessary later. Clients should be advised, calmly and in advance of any investigation reaching this stage, that a threatened arrest is not itself lawful ground to make an immediate payment.

Action Checklist

For any client under active GST investigation, request in writing the specific material and reasoning underlying any “reason to believe” the department is asserting, before advising on next steps.
If a client reports pressure to make a “voluntary” payment during search or inspection, document the circumstances contemporaneously — this is the exact fact pattern courts are treating as coercive and refundable with interest.
Where an arrest has occurred, immediately verify whether the grounds of arrest were communicated as required, and whether the arresting officer held valid Commissioner authorisation.
For clients facing imminent risk of arrest with a clear factual basis for apprehension, evaluate anticipatory bail under the Sushila Aggarwal framework rather than waiting for an FIR or arrest to occur.
Keep CBIC Instruction Nos. 01/2022-23 and 02/2022-23 on hand as a standing reference document for every GST search/investigation engagement, and cite them explicitly in any correspondence pushing back on coercive payment demands.

Relevant Sections / Rules / Notifications

Article 246-A, Constitution of India (legislative competence for GST, including ancillary powers)
Section 69, CGST Act, 2017 (power to arrest)
Section 70, CGST Act, 2017 (power to summon)
Section 74(5), CGST Act, 2017 (voluntary payment option during investigation)
Section 132, CGST Act, 2017 (punishment for certain offences)
CBIC Instruction No. 01/2022-23 (GST-Investigation), dated 25 May 2022 (deposit of tax during search/inspection/investigation)
CBIC Instruction No. 02/2022-23 (GST-Investigation), dated 17 August 2022 (guidelines for arrest and bail)
Referenced: Radhika Agarwal v. Union of India & Ors. [(2025) 6 SCC 545]; Sushila Aggarwal v. State (NCT of Delhi) [(2020) 5 SCC 1]; Rakesh Kumar v. Union of India & Anr., Writ Petition (Criminal) No. 439 of 2024 (Supreme Court, disposed 29 June 2026); J Ramesh Chand and Viral Narendra Gosalia (Karnataka High Court)

FAQs

Q: Can the GST department arrest a taxpayer simply because a large demand has been raised?

A: No. The Commissioner must have “reason to believe,” grounded in actual material, that the specific offences under Section 132(1) have been committed and are cognizable and non-bailable — the existence of a tax demand alone does not meet this threshold.

Q: Is a payment made during a GST search always considered voluntary?

A: Not automatically. If the payment was made under implicit or explicit pressure connected to a threat of arrest or continued search, courts have held it is not voluntary and have ordered refund with interest, as in the Karnataka High Court’s J Ramesh Chand ruling.

Q: Can a taxpayer seek anticipatory bail before any FIR is registered in a GST matter?

A: Yes, in appropriate cases — the Supreme Court in Radhika Agarwal confirmed that anticipatory bail can be sought once the facts are clear and there is a reasonable basis for apprehending arrest, without waiting for an FIR, following the Constitution Bench’s Sushila Aggarwal principles.

Internal Links

Today’s Intelligence — 30 August 2026
GST / Enforcement & Investigation hub — /category/gst/

None this cycle — first Finoscape explainer on GST arrest-power safeguards specifically.

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational educational purposes and does not constitute legal advice. A client facing an actual GST investigation, search, or arrest should seek immediate, case-specific legal representation rather than relying on this explainer alone.