Power of inspection, search and seizure [ Section 67 CGST Act read with Rule 139 to 141 ] - GST Ready Reckoner - GST

Power of inspection, search and seizure [ Section 67 CGST Act Rule 139 to 141 of CGST Rules] Power Of Inspection Inspection is a softer provision that search which enables officers to access any place of business or of person engaged in transporting goods or who is an owner or an operator of a warehouse or godown. Inspection can be carried out by an officer CGST/SGST only upon a written authorization in GST INS -01 given by an officer of the rank Joint Commissioner or a above. Circumstances Where the proper officer has REASONS TO BELIEVE (not below the rank of Joint Commissioner) that - (a) a taxable person has suppressed of - any transaction relating to supply or the stock of goods in hand, or has claimed ITC in excess of his entitlement or contravene any of the provisions of this Act or rules to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place - is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act. What is meant by reasons to believe ? 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. Power of the officer The proper officer may authorise in writing any other officer to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. Power To Seize [ Section 67(2) ] Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under section 67(1) or otherwise, has reasons to believe that any goods liable to confiscation [Define in section 130(1)] or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing (in INS-02) any other officer to search and seize or may himself search and seize such goods, documents or books or things: if seizure of goods is impractical The authorised officer may serve on the owner or the custodian of the goods an order of prohibition in Form GST INS 03 that shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. The officer seizing the goods document , books or things all prepare in inventory such goods or document or books or things and get is signed by the person from whom such goods or document or books or things are seized. Release of perishable or hazardous nature goods (Section 67(8) Read with Rule 141 ) Where the goods or things seized are of perishable or hazardous nature, and 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 or may become payable by the taxable person, whichever is lower , such goods or as the case may be things shall be released forthwith, by an order in Form GST IN-05, on proof of payment. Where the taxable person fails to pay the amount referred as above in respect of the said goods or things, the Commissioner may dispose of such goods or things and the amount realized thereby shall be adjusted against the tax, interest, penalty, or other amount payable in respect of such goods or things. D isposed of goods, after seizure , by the proper officer, having regard to the perishable or hazardous nature, depreciation in value with the passage of time, constraints of storage space or any other relevant considerations of the said goods. List of goods specified by the government through Notification No. 27/2018 . Inventory of seized goods to be maintained [ Section 67(9) (10) ] An inventory of seized goods shall be made by the seizing officer Provisions of Code of Criminal Procedure 1973 relating to search and seizure shall apply- one important modification relates to of Section 165(5) of Code of Criminal Procedure instead of sending copies of any record made in course of search to the nearest Magistrate empowered to take cognizance of the offence and powers related to Magistrate to be possessed by CGST / SGST Principal Commissioner or Commissioner. Relevant Case laws Seizure of unaccounted assets , The purpose of the Act is not to proceed against unaccounted wealth. The provision of Section 67 of the Act is also not to seize assets for recovering tax. Thus, applying the principle of purposive interpretation, the power under Section 67 of CGST Act cannot be read to extend to enable seizure of assets on the ground that the same are not accounted for. [ DEEPAK KHANDELWAL PROPRIETOR M/S. SHRI SHYAM METAL VERSUS COMMISSIONER OF CGST, DELHI WEST ANR. - Delhi HC Dated 17.08.2023 ] Period of retention of documents or books [ Section 67(3) ] The documents, books or things 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 30 days of the issue of the said notice . Power To Search Survey [ Section 67(4) ] The officer authorised shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. Upon execution of Bond Copies or extracts can be released other than in case such prejudicially affect the investigation As per Section 67(5) Person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts Goods so seized under section 67(2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security Release of goods on provisional basis [ Section 67(6) Read with Rule 140 of CGST Rules] The goods so seized shall be released, on provisional basis, upon execution of a bond and furnishing of a security, in such manner and such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. Search Survey The bond for the value of the good shall be executed in Form GST INS-04 and of security shall be furnished in the form of bank guarantee equivalent to the amount of applicable tax, interest and penalty payable Rule 140(1); 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 encased. Time limit for issuance of SCN in respect of seized goods [ Section 67(7) ] The SCN in respect of seized goods is to be issued within six months from the date of seizure of goods, otherwise the goods shall be returned to the person from whose possession they were seized. Further extension of time period , the period of six months, on sufficient cause being shown can be extended by the proper officer for a further period not exceeding six months. Issue Of Receipt In case of seizure of books and documents [ section 67(11) ] 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. Power to make Sample purchase [ section 67(12) ] The Commissioner or an officer authorised by him may cause purchase of any goods or services or both by any person authorised by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier. Procedure for Inspection, Search seizure [ Rule 139 ] (1) Where the proper officer not below the rank of a Joint Commissioner has reasons to believe that a place of business or any other place is to be visited for the purposes of inspection or search or, as the case may be, seizure in accordance with the provisions of section 67, he shall issue an authorisation in FORM GST INS-01 authorising any other officer subordinate to him to conduct the inspection or search or, as the case may be, seizure of goods, documents, books or things liable to confiscation. (2) Where any goods, documents, books or things are liable for seizure under section 67(2), the proper officer or an authorised officer shall make an order of seizure in FORM GST INS-02 . (3) The proper officer or an authorised officer may entrust upon the owner or the custodian of goods, from whose custody such goods or things are seized, the custody of such goods or things for safe upkeep and the said person shall not remove, part with, or otherwise deal with the goods or things except with the previous permission of such officer. (4) Where it is not practicable to seize any such goods, the proper officer or the authorised officer may serve on the owner or the custodian of the goods, an order of prohibition in FORM GST INS-03 that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. (5) The officer seizing the goods, documents, books or things shall prepare an inventory of such goods or documents or books or things containing, inter alia, description, quantity or unit, make, mark or model, where applicable, and get it signed by the person from whom such goods or documents or books or things are seized.