GST arrest power is exceptional, requiring credible material and liberty safeguards; custodial protection was granted on the facts discussed.

Under the CGST regime, arrest during investigation is an exceptional coercive measure and must rest on credible material, not merely on summons or the fact of ongoing inquiry. The analysis emphasises that such power should be used with circumspection, consistently with constitutional liberty and criminal-procedure safeguards, and only where there is material showing active involvement in serious tax evasion, risk of absconding, habitual conduct, or other immediate necessity. On the facts discussed, no direct material linked Petitioner No. 1 to the alleged refund irregularity, and repeated appearance to summons weighed against custody. Protection against custodial arrest was therefore granted to Petitioner No. 1 while investigation could continue.

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Issues: (i) Whether the power of arrest under the CGST regime can be exercised during investigation before determination of tax liability and only in exceptional circumstances; (ii) whether the petitioners were entitled to protection against custody and coercive arrest.

Issue (i): Whether the power of arrest under the CGST regime can be exercised during investigation before determination of tax liability and only in exceptional circumstances.

Analysis: The arrest power under the CGST framework is not to be used routinely or as a tool of intimidation. It must be exercised with circumspection, and the safeguards flowing from criminal procedure and constitutional liberty apply. The reasoning treated arrest as a drastic measure, justified only where there is credible material showing active involvement in serious tax evasion, or where the person is a habitual offender, likely to abscond, or is otherwise shown to warrant immediate coercive action. The Court also emphasized that summons and investigation do not by themselves justify arrest, and that the statutory scheme must be read consistently with the protections of personal liberty.

Conclusion: Arrest during investigation is permissible only in exceptional cases on credible material, and not as a matter of routine or before there is sufficient basis showing commission of the offence.

Issue (ii): Whether the petitioners were entitled to protection against custody and coercive arrest.

Analysis: On the material placed, the Court found no direct evidence linking the petitioners to the alleged illegal refund or showing that Petitioner No. 1 had a proprietary or financial role in the exporting entities. It further found that the investigation had not produced material justifying immediate custody, while the petitioner had repeatedly appeared pursuant to summons. In these circumstances, the Court considered it appropriate to prevent custodial action against Petitioner No. 1 without prior approval, while leaving the investigation open to proceed in accordance with law.

Conclusion: Protection against custody was granted to Petitioner No. 1, while the investigation was permitted to continue.

Final Conclusion: The petition resulted in partial relief by restraining custodial action against Petitioner No. 1, while leaving the respondents free to continue the investigation and proceed according to law.

Ratio Decidendi: Under the GST regime, arrest is an exceptional coercive measure that must rest on credible material and be exercised consistently with constitutional liberty and criminal-procedure safeguards.

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