the essay of 4 November 2026 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">NOVEMBER 04, 2026 </font></strong></font></font></p> <p align="center"><font color="#FF6633" face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong> Handcuffs in the Archive</strong></font></p> <p align="center"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><u>By Vijay Kumar</u></strong></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> years, GST officers possessed the power to arrest, exercised it with enthusiasm, defended it in court with conviction and justified it with PowerPoint presentations. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Last week, the Board instructed them not to use it. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In <a href="https://taxindiaonline.com/gst/details?id=35445&view=notification&type=notification" target="_blank"><strong>Instructions No. 02/2026-GST dated 30.10.2026</strong></a>, the Central Board of Indirect Taxes and Customs (CBIC) has directed its field formations that no further arrests be carried out under GST. The same instruction also significantly curtails e-way bill interceptions and verification and directs that show cause notices involving less than Rs. 10,000 should not be issued. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">For taxpayers, this is welcome news. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">For GST officers, it may require some adjustment. For lawyers, it opens an entirely new chapter of profitable confusion. And for those writing about GST, it raises several questions that the instruction admirably avoids answering. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">A Tax Revolution in Four Pages </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The remarkable feature is that the law itself has not yet changed. Section 69 of the CGST Act, which confers the power of arrest, remains comfortably in the statute book. Parliament has not yet shown it the door. The GST Council has merely recommended its omission. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Yet the Board has instructed officers not to exercise that power. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">This is rather like leaving a loaded revolver on the table and issuing a circular saying nobody should touch it. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">For once, restraint has become official policy. Even more remarkably, it has become official policy in the GST Department. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">There is an old lesson in public administration. Extraordinary powers are like antibiotics. Used sparingly, they remain effective. Used indiscriminately, they lose both effectiveness and legitimacy. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">When a power is frequently invoked, constantly defended and endlessly litigated, attention eventually shifts from its exercise to its very existence. Section 69 may be the latest illustration of that principle. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Command Doesn't Whisper </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Some officers may be tempted to treat the instruction as one of those documents that is carefully acknowledged, circulated, filed and forgotten. That would be legally adventurous. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Section 168 of the CGST Act provides <strong>: </strong></font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"<em>The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act <strong><font color="#ff0000">shall observe and follow</font> </strong>such orders, instructions or directions." </em></font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"Shall observe and follow." Not "may consider". Not "may keep in view". Not even the beloved bureaucratic expression "as far as possible". </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The section does not whisper. It commands. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In administrative law, "shall observe and follow" is roughly equivalent to the army's "left turn". Discussion ends. Movement begins. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Board has spoken. The field formations are required to listen. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">When a Request Becomes a Direction </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">If anyone has doubts about the binding nature of directions issued by superior authorities, help recently arrived from an unexpected quarter. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In a judgement last week - <a href="https://www.taxindiaonline.com/caselaw/todays_case_indirect_tax/details?id=195193&type=caselaw" target="_blank"><strong>2026-TIOL-53-SC-MISC </strong></a>- the Supreme Court expressed its displeasure that a Tribunal had not acted even after the Court had made what was described as a request. The Court clarified: </font></font></p> <blockquote><p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"If there is any request made by the Supreme Court to any Court or Tribunal, the same shall be treated as a direction..." </font></font></em></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">If a request from the Supreme Court is a direction, an instruction issued under Section 168 can scarcely be treated as a motivational quote. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The legal position is clear: the instruction is binding. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">In <a href="https://taxindiaonline.com/news/jest_gst/details?id=57105" target="_blank"><strong>Jest GST 458</strong></a>, we welcomed the GST Council's recommendation to abolish arrest powers and suggested that GST might finally be moving away from handcuffs and back towards assessment, adjudication and recovery. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">What About Those Already in Jail? </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Suppose a taxpayer was arrested last month and is currently enjoying State-sponsored accommodation. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Board now announces that no further arrests should take place. Excellent. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">But what happens to those already arrested? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Does the Department seek their release? Does it support bail? Does it continue insisting that custody remains necessary? The instruction is silent. The Government has locked the armoury and thrown away the key. The prisoners already inside are still waiting to hear whether somebody remembered to unlock their cells. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The unfortunate souls already behind bars now find themselves in a curious legal time capsule. They were arrested under a provision that the Government wishes to abolish, by officers who are now prohibited from making similar arrests, for conduct in respect of which future officers cannot arrest anybody. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Bail Hearing Problem </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The next category is even more fascinating. Imagine a bail application listed next week. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Counsel for the taxpayer: <em>"My Lord, the Board itself says there shall be no arrests." </em></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Revenue Counsel: <em> "Indeed, My Lord." </em></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Judge: <em>"Then why should I decline bail?" </em></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">At this point, the hearing may drift into unexplored constitutional waters. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The instruction does not indicate whether the Department should continue opposing bail applications. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">One can visualise the predicament. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Department's official position appears to be: </font></font></p> <blockquote><p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"Arrest is no longer desirable. But this particular person's continued custody remains absolutely essential." </font></font></em></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">That argument may require a degree of facial composure not ordinarily taught in NACIN. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Taxpayer Already on Bail </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Then comes the third category. The taxpayer who has already secured bail. Passport surrendered, sureties furnished and attendance conditions imposed. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">What now? Do these conditions continue indefinitely? Will prosecutors insist upon them? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Can taxpayers seek modification on the basis that the Government itself no longer believes GST arrests should occur? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The instruction maintains a dignified silence. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">This is not merely a theoretical question. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Consider what happened in the Andhra Pradesh High Court shortly after the last GST Council's meeting. While the Council had already recommended abolition of GST arrest powers, the DGGI was pursuing cancellation of bail in a GST matter, arguing that economic offences constituted a distinct class and required a different approach to liberty. The Court declined to cancel the bail. <a href="https://www.taxindiaonline.com/caselaw/todays_case_indirect_tax/details?id=195192&type=caselaw"><strong>2026-TIOL-1195-HC-AP-GST </strong></a></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Department can hardly be faulted. Section 69 remained very much in force and the Board's instruction had not yet been issued. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The chronology is fascinating. </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">8 October : the Council recommended abolition of arrest powers. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">12 October : Revenue was still defending incarceration. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">30 October : the Board instructed officers not to make further arrests. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">While one arm of the GST establishment was preparing for a future without arrests, another was still defending the consequences of past arrests. </font></font></p> <blockquote><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The handcuffs remain. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The arguments remain. </font></font></p><p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The precedents remain. </font></font></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">But the power that justified them is already halfway out of the door. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Files Awaiting Arrest </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">There is another frequently overlooked category. The arrest files. Investigation reports, Approval notes, Legal opinions, Draft arrest memos, Arrest proposals. Perhaps even arrest teams patiently awaiting deployment. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">What becomes of these files? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Do they migrate from "Urgent" to "Historical"? Will future GST academies display them beneath a plaque reading: </font></font></p> <blockquote><p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"Arrest Proposal. Circa 2026. Once common." </font></font></em></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">One can only speculate. </font></font></p> <p align="justify"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2026/je311261.JPG" style="height:324px; width:331px"/></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Federal Footnote </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">An additional curiosity deserves attention. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Board has requested the GST Council Secretariat to circulate the instruction to State GST authorities so that similar instructions may be issued within their respective jurisdictions. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The word "request" suddenly becomes interesting. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court has recently clarified that its request is to be treated as a direction. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">However, GST lawyers will immediately recall another celebrated Supreme Court pronouncement which held that recommendations of the GST Council are recommendations and not binding commands. That raises an intriguing question. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">If the GST Council's recommendation to abolish arrests is not legally binding on the States, can a State decline to follow the new policy and continue exercising its arrest powers while the Centre has instructed its own officers to stand down? </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The constitutional answer appears to be yes. The practical answer is considerably more complicated. The Constitution permits diversity. Markets are often less accommodating. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">One is reminded of an observation made by the late Sushil Modi, former Finance Minister of Bihar, in a TIOL Congress. GST was designed not merely as a legal arrangement but as a common economic market. Businesses have an inconvenient habit of preferring predictability. If most GST administrations across the country signal that tax disputes will be resolved through assessment, adjudication and recovery, while one administration becomes known for arrests and custodial adventures, taxpayers are unlikely to regard that distinction as a unique selling proposition. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Legally, the States may have a choice. Economically, the choice may be far narrower. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Few States can afford a reputation that says: </font></font></p> <blockquote><p align="justify"><em><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">"In most parts of India, a GST dispute may result in a show cause notice. Here, it may result in State-sponsored boarding and lodging." </font></font></em></p></blockquote> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The GST Council may issue only recommendations. But recommendations adopted by the Union and all the States possess a political and economic force of their own. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">After all, every State participated in the recommendation to do away with GST arrests. Having collectively concluded that arrests are unnecessary, it may now be difficult for any individual State to explain why they remain indispensable. </font></font></p> <p align="justify"><font color="#006600"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Applause </font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">For years, taxpayers have argued that tax administration should focus on assessment, adjudication and recovery rather than incarceration. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The Board has not merely listened; it has acted. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">That should be applauded. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Yet there remains one irony. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The instruction brilliantly explains what should happen to tomorrow's arrests. The courts, meanwhile, are still dealing with yesterday's arrests. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">It says very little about yesterday's prisoners, today's bail hearings, existing bail conditions, pending prosecutions or arrest files already travelling through the administrative pipeline. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Perhaps those questions are presently travelling through the system in a file marked "Pending Clarification". </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Until then, GST exists in a curious constitutional twilight. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The handcuffs remain legal. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The officers may not use them. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The prisoners remain in custody. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">The lawyers remain employed. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">And the columnists remain grateful. </font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Somewhere in a GST office, an arrest file approved last week has been moved from the "urgent" tray to the "pending clarification" tray and is quietly wondering whether it still has a future. </font></font></p> <p align="justify"><font color="#ff0000"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Until next week</font></font></font></p> <p align="justify"><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif">Comments/feedback welcome at <a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a> or 9848111243 (WhatsApp) </font></font></p> </body> </html>