SEIZURE DURING SEARCH PROCEEDINGS - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

7. SEIZURE DURING SEARCH PROCEEDINGS 7.1. Legal Frame work for Seizure during Search Proceedings: The legal provisions pertaining to Seizure during Search proceedings are contained in: (i) Provisos to Section 67(2), Section 67(3), Section 67(5), Section 67(6), Section 67(7), Section 67(8) and Section 67(9) of the CGST Act, 2017. (ii) Rule 139(2), Rule 139(3), Rule 139(4) and Rule 139(5), Rule 140 and Rule 141 of the CGST Rules, 2017. (iii) The Seizure Authorization is issued in Form GST INS 01. The Order of Seizure is issued in Form GST INS 02. The Order of Prohibition is issued in Form GST INS 03. The Bond for Provisional Release of goods is called Form GST INS 04. The Release Order of goods is issued in Form GST INS 05. 7.2. Reasons to believe for Seizure during Search Proceedings: (I) For authorizing or carrying out Search, reasons to believe have to be formed by the Proper officer. A Search Authorization is issued in Form GST INS 01 by the Proper Officer if he has reasons to believe that goods liable to confiscation and documents or books or things which, in the opinion of the Proper officer, shall be useful for or relevant to any proceedings under the CGST Act, 2017, are secreted in any place. (II) The Search Authorization in Form GST INS 01 issued by the Proper officer itself permits the seizure of such goods, documents, books or things if they are found during the Search proceedings. 7.3. What can be seized during Search Proceedings: The following can be seized during Search proceedings- (i) Goods liable to confiscation which are secreted in any place and are found during Search. (ii) Documents or books or things which are useful for or relevant to any proceedings under the CGST Act, 2017, which are secreted in any place and are found during Search. 7.4. Manner of Seizure during Search Proceedings: During Search proceedings, goods or documents or books or things are seized under an Order of Seizure in Form GST INS 02. The Order of Seizure contains the following important details: (i) Document Identification Number (DIN) of the Order of Seizure. (ii) Address of the premises at which seizure has taken place. (iii) Details of the Goods or documents or books or things which are seized. (iv) Names and addresses of Panchas. 7.5. Preparation of Inventory: (I) Detailed inventory should be prepared of the seizures made at the premises itself. It is necessary to record the exact place from where seizures have been made as it helps to establish the ownership at a later stage. The details of all the marks of identification found on the goods under seizure should be mentioned while preparing the inventory and full signature of the person in charge of the premises being searched and that of the Authorised officer with date and his office seal should be taken. The pages of all the seized documents should be got numbered. The blank pages should be cancelled and numbered. The signatures of the witnesses on first and last pages of the numbered files/registers should also be obtained. (II) All extracts taken should be properly authenticated. In the case of seizure of loose papers, they should be arranged in bundles in a folder or stitched on the left-hand top. Each paper should be numbered, signed by the authorized representative of the taxpayer, the authorised officer and the witnesses. However, where the number of papers is large, the pages can be numbered and sealed on a side. In the inventory, it may be mentioned that a particular bundle of papers contains specific number of pages. (III) After the inventory has been prepared, the seized documents etc. should be packed in separate packages and handed over to an officer designated by the leader of the search party. It will be more appropriate if the seized documents etc. are kept in a trunk belonging to the Department or in a particular almirah, which has been taken into custody by the search party. 7.6. Order of Prohibition in case of goods which are not seized: (I) In certain situations, it may not be practicable to seize the goods which have been found during Search. In such cases, an Order of Prohibition in Form GST INS 03 is served on the owner or custodian of goods. (II) The Order of Prohibition contains the following important details: (i) Document Identification Number (DIN) of the Order of Prohibition. (ii) Address of the premises where the goods have been found. (iii) Name and designation of the Authorized officer. (iv) Name and address of the Panchas. (v) Details of the Goods in respect of which Order of Prohibition is issued. (III) The Order of Prohibition also contains the directions that the owner or custodian of goods shall not remove, part with, or otherwise deal with the goods except with previous permission of the Proper officer. 7.7. Manner in which goods or things shall be dealt with immediately after their seizure: (I) Generally, the seized goods or things are kept in the custody of the Department after their seizure. However, in some situations, the seized goods or things are entrusted for safe custody upon the owner or custodian from whom they have been seized. (II) The person who is entrusted with safe custody of the goods or things is directed not to remove, part with, or otherwise deal with the goods or things except with previous permission of the Proper Officer. (III) The document under which the custody of the goods or things is given, is called Supardginama . The Supardginama forms a part of the Order of Seizure in Form GST INS 02. This part of the Order of Seizure is left unfilled in cases where the custody of the seized goods or things is being taken by the Department itself. (IV) Seized goods should be inspected from time to time by the officers to ensure the safety of the goods, particularly when the seized goods have been handed over under Supardginama. (V) Similar precautions are required to be taken even in respect of goods placed under detention. 7.8. Manner in which documents or books shall be dealt with immediately after their seizure: (I) Unlike in the case of seized goods or things, there is no provision to entrust the custody of seized documents or books with any person. Documents or books have to be necessarily kept in the custody of the Department itself after their seizure. (II) The person from whose custody documents are seized, shall be allowed to make copies or take extracts of the seized documents so that his business operations are not affected. (III) However, the permission to make copies or take extracts can be refused by the Proper officer, if in the opinion of the Proper Officer, giving the copies or extracts will prejudicially affect the investigation. (IV) This situation generally arises when a number of leads are being explored simultaneously and divulging the information contained in the seized documents may expose or reveal the further course of action which may be taken by the Department. (V) The Proper Officer who may refuse to give this permission is the Additional Commissioner or Joint Commissioner of Central Tax according to Circular No. 3/3/2017-GST dated 05.07.2017. 7.9. Return of seized documents or books or things: (I) The seized documents or books or things should be retained only for so long as may be necessary for their examination and for any inquiry or proceedings. The seized documents or books or things should be returned at the following stages: The copies of seized documents or books or things which are relied upon in the Show Cause Notice will be given back as part of the Show Cause Notice. The seized documents or books or things which are not relied upon in the Show Cause Notice should be returned within 30 days of the issue of the Show Cause Notice. (II) A preliminary scrutiny of documents at the premises of search would be desirable so as to minimize the documents being seized. Seizure of unnecessary documents during search may create avoidable problems for the Department at a later stage and therefore, must be avoided. 7.10. Provisional release of seized goods: (I) The seized goods can be provisionally released on the request of owner or custodian of the goods from whom they were seized. There are two requirements for Provisional release of seized goods: (a) Bond has to be executed by the owner or custodian of the goods in Form GST INS 04 equivalent to the value of goods. (b) Security has to be furnished by the owner or custodian of the goods in the form of a Bank Guarantee equivalent to the amount of Tax and Cess, Interest and Penalty payable in respect of the goods. (II) The person to whom the seized goods are provisionally released will be directed to produce them on the date and place specified by the Proper officer. (III) The Proper officer for this purpose is the Additional Commissioner or Joint Commissioner of Central Tax according to Circular No.3/3/2017 GST dated 05.07.2017. (IV) If the goods are not produced on the specified date and place, the Bank Guarantee shall be encashed and adjusted against the Tax and Cess, Interest and Penalty payable in respect of the goods. 7.11. Final release of notified goods: (I) Under the procedure for expedited release of notified goods, the notified goods are finally released to the person from whom they were seized. (II) The owner or custodian from whom the notified goods were seized shall be required to pay an amount which is the lower of: (i) Market price of the goods; (ii) Amount of Tax and Cess, Interest and Penalty payable in respect of the goods. (III) After the payment is made by the owner or custodian, the notified goods shall be finally released to him by a Release Order in Form GST INS 05. Unlike in the case of Provisional release of goods, no request has to be made by the owner or custodian for Final release of notified goods. It is the Department itself which will ascertain whether the seized goods are notified goods and if so, inform the owner or the custodian to pay the specified amount. 7.12. Final disposal of notified goods: (I) The seized notified goods shall be finally released after the owner or custodian makes the payment of the specified amount. (II) However, if the payment of the specified amount is not made by the owner or custodian of the seized notified goods, the Release Order in Form GST INS 05 cannot be issued. In this situation, the Proper officer shall finally dispose the seized notified goods. (III) The amount realized on Final disposal of the seized notified goods shall be adjusted against the Tax and Cess, Interest and Penalty payable in respect of the goods. 7.13. Issue of Show Cause Notice within six months of seizure or within extended period: (I) The power of seizure is an extraordinary power based on the reasonable belief, therefore, the law provides that the enquiry should ordinarily be completed within six months. But visualizing at the same time that the enquiry may not be completed within the said period in certain cases owing to one difficulty or other, the law in terms of the relevant proviso authorize the Proper officer to extend the prescribed time for a period not exceeding six months on sufficient cause being shown and after following the principles of natural justice. The Proper officer for this purpose is the Principal Commissioner/Commissioner of Central Tax according to Circular No.3/3/2017 GST dated 05.07.2017. 7.14. Return of seized goods: (I) If Show Cause Notice is not issued within six months or period as extended from the date of seizure, then the seized goods are required to be returned back/ released unconditionally to the person from whom they were seized, irrespective of whether the same were provisionally released, or finally released on payment of specified amount (if they are Notified goods), or finally disposed (if they are Notified goods) within the period of six months. (II) The return/ release of the seized goods will not affect the legal proceedings, except to the extent that no redemption fine can be imposed after the goods are returned.