SEARCH AND SEIZURE UNDER GST LAW (PART-2)

[Dr. Sanjiv Agarwal]

This article covers confiscation of goods and matters relating to seizure and its provisional release under the GST law.

Situations for Confiscation

Under section 67(2) of the CGST Act, 2017, search can be ordered where the CGST/SGST officer has reasons to believe that goods are liable to confiscation. In terms of section 130 of CGST Act, 2017, goods become liable to confiscation when any person does the following acts:

1. supplies any goods in contravention of any of the provisions of this Act or rules made there under leading to evasion of tax;
2. does not account for any goods on which he is liable to pay tax under this Act;
3. supplies any goods liable to tax under this Act without having applied for registration;
4. contravenes any of the provisions of the GST Act or rules made there under with intent to evade payment of tax.
5. uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made there under unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance.

As per section 67(11) of CGST Act, 2017, where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution.

Retention of seized items

As per second proviso to section 67(2), the goods, documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under the GST law.

Copies of document seized

In terms of section 67(5), the person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts there from in the presence of an officer at such time and place as allowed. However, where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

Return of documents etc. seized

According to section 67(3) of the GST Act, 2017 the documents, books or things or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

As per section 67(7) the seized goods are liable to be returned to the person from whom they were seized. Where any goods are seized and no notice in respect thereof is given within sixty days of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized and the aforesaid period of sixty days may be extended by the competent authority for a further period not exceeding sixty days at a time subject to a maximum of six months, on sufficient cause being shown.

Rule 140 of CGST Rules, 2017 deals with bond and security for release of seized goods. The seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in FORM GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. The “applicable tax” shall include central tax and State tax or central tax and the Union territory tax, as the case may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act, 2017.

In terms of Rule 140(2) of CGST Rules, 2017, in case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine, if any, payable in respect of such goods.

The goods so seized shall be released on a provisional basis, upon:

1. execution of bond in Form GST INS -04 for the value of the goods and
2. furnishing of security in the form of bank guarantee equal to the amount of applicable tax (incl. SGST / UTGST / IGST / Cess) + interest + penalty or on payment of applicable tax, interest and penalty payable, as the case may be.

Once the goods are provisionally released and where the person fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the liabilities in respect of such goods.

Provisional release of goods has to be mandatorily taken by the concerned person within one month of executing the bond. In case of failure to do so, the proper officer has the power to dispose off the said goods as per Notification No. 27/2018-Central Tax dated 13.06.2018 [S. No. 17 of the Schedule appended to such notification].

(To be continued…)