GST and customs prosecutions: offences, arrest, bail and compounding

Section 132(1) lists the offences. They include supplying goods or services without an invoice to evade tax, issuing an invoice without any supply so as to pass on input tax credit, availing input tax credit on such invoices or without any invoice, collecting tax and not paying it to the Government for more than three months, fraudulently obtaining a refund, and falsifying records or furnishing false information to evade tax.

The punishment depends on the amount of tax evaded, input tax credit wrongly availed or utilised, or refund wrongly taken:

Under Section 132(4) and (5), all offences under the Act are non-cognizable and bailable, except the offences in clauses (a) to (d) above five hundred lakh rupees, which are cognizable and non-bailable. Prosecution needs the Commissioner's previous sanction under Section 132(6) and Section 134, and the trial court cannot be below a Magistrate of the First Class.

Under Section 69(1), the Commissioner may, by order, authorise an officer to arrest a person if he has reasons to believe the person committed an offence in clauses (a) to (d) of Section 132(1) punishable under clause (i) or (ii), or a repeat offence. A person arrested for a non-bailable offence must be told the grounds and produced before a Magistrate within twenty-four hours; one arrested for a bailable offence must be released on bail or forwarded to the Magistrate.

In Radhika Agarwal v. Union of India (2025), the Supreme Court rejected the challenge to the arrest and summons provisions in the GST Acts and the Customs Act. It held that the CrPC applies to both Acts unless excluded, and that customs and GST officers are not police officers because they cannot file a charge sheet under Section 173 of the CrPC. Arrest must rest on reasons to believe supported by material, the grounds must be communicated, and judicial review is available. The Court applied to Section 104 Customs and Section 69 GST the principles in Arvind Kejriwal v. Directorate of Enforcement, (2024) 9 SCC 577, which in turn adopted Pankaj Bansal v. Union of India, (2024) 7 SCC 576, on grounds of arrest. It also declined to accept, as a general proposition, that the Section 132(5) power can be used only after an assessment under Section 73.

In Union of India v. Sunil Biyani (2026), the Court held that the Commissioner's Section 69 order must be communicated to the person before arrest, since it is the basis for seeking anticipatory bail. A court that dismisses a pre-arrest bail petition as not maintainable cannot grant interim protection in the same order.

Section 135 of the Customs Act covers misdeclaration of value, fraudulent evasion of duty or a prohibition, dealing in goods liable to confiscation, drawback or exemption fraud, and obtaining an instrument by fraud. Where the goods are worth more than one crore rupees, the duty evaded or the drawback exceeds fifty lakh rupees, or the goods are notified prohibited goods, the punishment is up to seven years and fine, with a minimum of one year unless the court records special reasons. Being a first offender or a mere carrier is not such a reason. Other cases carry up to three years, or fine, or both.

Under Section 104(1), a customs officer authorised by the Principal Commissioner or Commissioner may arrest a person he has reason to believe has committed an offence under Sections 132, 133, 135, 135A or 136, and must inform him of the grounds as soon as may be and take him to a Magistrate without unnecessary delay. Section 104(6) makes some offences non-bailable, including undeclared imports or exports above one crore rupees and drawback fraud above fifty lakh rupees; all others are bailable. Under Section 137(1), cognizance of a Section 135 offence needs the sanction of the Principal Commissioner or Commissioner.

Section 70 of the CGST Act and Section 108 of the Customs Act let officers summon any person to give evidence or produce documents. The person must attend and state the truth, and the inquiry is a judicial proceeding for Sections 193 and 228 of the IPC.

Because these officers are not police officers, the bar on confessions to the police does not cover statements made to them. Under Section 136 of the CGST Act, a statement made on a Section 70 summons is relevant in a prosecution only if its maker is dead, cannot be found or produced, or is examined as a witness and the court admits it in the interest of justice. In Amad Noormamad Bakali v. State of Gujarat (2026), a customs case, the Supreme Court agreed with the High Court that Section 108 statements are admissible if made voluntarily and upheld the conviction, but reduced the sentence to the period undergone. Take advice before giving any statement.

Under Section 138 of the CGST Act, the Commissioner may compound an offence before or after prosecution, but only after tax, interest and penalty are paid, and for an amount between twenty-five and one hundred per cent of the tax involved. It is not available to a person accused of issuing invoices without supply, a person already convicted, or a person who has compounded certain offences once before. Under Section 137(3) of the Customs Act, the Principal Chief Commissioner or Chief Commissioner may compound customs offences.

Anticipatory bail lies under Section 482 of the BNSS (formerly Section 438 of the CrPC) and regular bail under Section 483 of the BNSS (formerly Section 439). The amount alleged, the stage of investigation and the time in custody all bear on bail.