Provisions relating to Inspection search and seizure under GST, Power of Officers conducting such Inspection search and seizure and Safeguarding provisions in interest of assessee.
👉The term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.
👉Inspection is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.
👉In Law Lexicon Dictionary, ‘seizure’, is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.
👉As per Section 67(1), Inspection can be carried out by any officer of Central tax only upon a written authorization in Form GST INS-01 given by a proper officer not below the rank of Joint Commissioner. Such proper officer can give such authorization only if he has reasons to believe that has –
(a) Taxable person has suppressed any transaction of supply;
(b) Taxable person has suppressed stock of goods in hand;
(c) Taxable person has claimed excess input tax credit;
(d) Taxable person has contravened any provisions of this Act or rules made thereunder to evade tax;
(e) Transporter or an owner or operator of a warehouse or godown or any other place, has kept goods which have escaped payment of tax or has kept his accounts or goods in a manner that is likely to cause evasion of tax.
👉CGST officer authorized by the proper officer not below the rank of Joint Commissioner shall have the powers to carry out inspection of any of the following places / premises:
(a) any place of business of a taxable person;
(b) any place of business of a person engaged in the business of transporting goods;
(c) any place of business of an owner or an operator of a warehouse or godown or any other place;
👉Proper officer not below the rank of Joint Commissioner can himself or authorize anyother CGST officer in FORM GST INS-01 (Chapter-XVII-Inspection, Search and Seizureof the CGST Rules) to carry out search and seize goods, documents, books or things.Such authorization can be given only where the proper officer has reasons to believethat any goods liable to confiscation or any documents or books or things, which in hisopinion shall be useful for or relevant to any proceedings under this Act, are secreted /hidden in any place. Where any goods, documents, books or things are liable forseizure, the proper officer or an authorised officer shall make an order of seizure inFORM GST INS-02.
👉Reason to believe is to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person, knowing the same facts, to reasonably conclude the same thing. As per Section 26 of the IPC, 1860, “A person is said to have‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.” ‘Reason to believe’ contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration. It has to be and must be that of an honest and reasonable person based on relevant material and circumstances. Reference here can be made to the judgement of Crompton Greaves Ltd Vs. State of Gujarat 120 STC 510 where in the Court observed that “these words suggest that belief must be that of a honest and reasonable person based upon reasonable grounds, and that the Commissioner may act under this section on direct or circumstantial evidence not on mere suspicion, gossip or rumour.”
👉 Although the officer is not required to state the reasons for such belief before issuing an authorization for search, but he should disclose the material on which his belief was formed. ‘Reason to believe’ need not be recorded invariably in each case.
👉An officer carrying out a search has the power to search for and seize goods (which are liable to confiscation) and documents, books or things (relevant for any proceedings under the Act) from the premises searched. During search, the officer has the power to seal or break open the door of the any premises authorized to be searched if access to the same is denied. Similarly, while carrying out search within the premises, he can break open any almirah, electronic devices, box, receptacle if access to such almirah,electronic devices, box, receptacle is denied and in which any goods, account, registers or documents are suspected to be concealed.
👉Where it is not practicable to seize any goods, the Proper officer or any authorised officer may serve a prohibitory order in FORM GST INS-03 on the owner or the custodian of the goods that he shall not remove, part with or otherwise deal with the goods except with the prior permission of such officer.
👉 The seized goods can be released on provisional basis upon execution of a bond for the value of goods in FORM GST INS-04 and furnishing of security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable, or on payment of applicable tax, interest and penalty payable.
👉The following are the safeguards provided in section 67 in respect of search and seizure:
(a) Seized goods or documents should not be retained beyond the period necessary for their examination.
(b) Photocopies of the documents can be taken by the person from whose custody documents are seized.
(c) In respect of seized goods, if a notice is not issued within 6 months of its seizure, such goods shall be returned to the person from whose possession it was seized. This period of six months can be extended on justified grounds up to a further period not exceeding 6 months.
(d) In respect of documents, books or things, which have not been relied upon for the issue of notice, it shall be returned within a period not exceeding 30 days of the issue of the said notice.
(e) An inventory of seized goods shall be prepared by the seizing officer.
(f) Certain notified categories of goods such as perishable or hazardous nature,depreciation in value of the goods with the passage of time etc..(Notification no27/2018 (CT) dtd.13.06.2018 – specifies Schedule of such goods) can be disposed of immediately after seizure. However, if the taxable person pays an amount equivalent to the market price of such goods or things or the amount of tax, interest and penalty that is or may become payable, whichever is lower, on proof of such payment, the Proper officer shall order for release such goods or things, in FORM GST INS-05.
(g) Provision of Code of Criminal Procedure 1973 relating to search and seizure shall be applicable to the GST Laws and in section 165(5) thereof, the word‘Magistrate’ should be read as ‘Commissioner ’.
👉Section 67(10) prescribes that search must be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973.Section 100 of the Code of Criminal Procedure describes the procedure for search and seizure.