Sec 67 – Power of inspection,search and seizure

You are here :Home>Bare Law>Sec 67 – Power of inspection,search and seizure
Sec 67 – Power of inspection,search and seizure 2017-04-16T23:19:13+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Bare Law Sec 67 – Power of inspection,search and seizure

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • Ashish BadalaCA Ashish Badala
    Moderator
    Post count: 184
    Topics: 181
    Replies: 3
    Been thanked: 5 times
    #1373 |

    (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that–
    (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder 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,
    he may authorise in writing any other officer of central tax 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.

    (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation 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 any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:
    Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:
    Provided further that the 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 proceedings under this Act.

    (3) The documents, books or things referred to in sub-section (2) 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.

    (4) The officer authorised under sub-section (2) 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.

    (5) The person from whose custody any documents are seized under sub-section (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

    (6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.

    (7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:
    Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.

    (8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed.

    (9) Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such goods in such manner as may be prescribed.

    (10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.

    (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, 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.

    (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.

    Priya MadrechaPriya Madrecha
    Moderator
    Post count: 280
    Topics: 4
    Replies: 276
    Been thanked: 1 time

    67.1 Analysis
    (i)    When the proper officer not below rank of Joint Commissioner ‘has reason to believe’ that the taxable person has suppressed any transaction of supply of goods or services or both or information relating to stock in hand or claimed excess input tax credit or has contravened any of the statutory provisions, with an intent to evade taxes, the action is initiated under this section.
    The phrase ‘reason to believe’ has been interpreted by various courts distinguishing it from ‘reason to suspect’. In the case of Crompton Greaves Ltd. vs. State of Gujarat, 120 STC 510 the Court observed that, “these words suggest that belief must be that of 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 rumor. The powers under the present section are wide but not plenary; the words of the section are ‘reason to believe’ and not ‘reason to suspect’.”
    (ii)    The power can also be exercised when there is a reason to believe that any person engaged in the business of transportation of goods or an owner or operator of a warehouse or godown or any other place is storing goods, which have escaped tax payment or has kept his accounts or goods in a manner likely to cause tax evasion.
    (iii)    Under such circumstances, he can authorize another officer in writing to:
    (a)    Inspect any place of business of the taxable person who has evaded tax or of the transporter who transported such tax evading goods or godown/warehouse in which such tax evaded goods or accounts relating thereto have been stored.
    (b)    Search and seize the goods or any documents or books or things which are liable for confiscation including anything concealed and which will be useful or relevant in the proceedings under this Act.
    (c)    Seal or break open the door of any premises, storage, box, electronic device or receptacle where goods, books of accounts etc. are concealed and when access to the same is denied to the officer.
    (d)    If it is not practicable to seize the goods, then the Officer may serve an order on owner or custodian of the goods for not removing, part or deal with the goods without his prior permission.
    (e)    The said officer shall return the documents, books or things seized or produced by a taxable or any other person on which no reliance has been placed for issuing notice, within a period of 30 days from the issue of notice. However, the documents books or things relied upon while issuing the notice will be retained.
    (f)    The person from whose custody documents are seized is entitled to take photocopy or extract of such documents in the presence of a GST officer at the place and time as predetermined. Copies or extracts may be denied if he is of the opinion that such an act will prejudicially affect the investigation.
    (g)    The goods so seized can be released on a provisional basis. In order to release the goods, the person has to furnish a bond or security or applicable tax, interest and penalty.
    (h)    If no notice has been issued within 6 months or an extended period of another 6 months, the seized goods/exhibits ought to be returned.
    (i)    The officer can dispose of certain notified goods immediately after the seizure, if those goods are of perishable or hazardous nature, or would depreciate in value by passage of time or there are constraints of storage space or any other relevant considerations as may be prescribed.
    (j)    The officer who seizes the goods is liable to maintain the inventory of the said goods.
    (k)    The provisions of Code of Criminal Procedure, 1973 relating to search and seizure shall be applicable to the GST Laws and in section 165(2) thereof, the word ‘Magistrate’ should be read as ‘Commissioner ’.
    (l)    The officer can even seize accounts, registers or documents of any person; in case he has a reason to believe that the said person has evaded or is attempting to evade the taxes. However, he has to record the reasons in writing and also shall grant receipt of such seizure. There is no time limit prescribed for such retention by the officer.
    (m)    The Commissioner or officer authorized by him can authorize any person for purchase of any goods / services to check issue of tax invoices / bills of supply. The goods so purchased by such person through appointed person, if returned, the taxable person from whom the goods were purchased shall refund the amount so paid and cancel the tax invoice. There is no time limit prescribed for return of the goods. It should be noted that this provision deals only with return of goods so purchased and there is no provision of return of services so purchased.
    (iv)     The analysis of above provision in a pictorial form is summarised as follows:
    For initiating the proceedings Joint Commissioner or any superior officer should have a ‘reason to believe’ that the assesse has done any of the following:
    Suppressed any transaction of supply goods or services     Stock in hand    Claim of excess input tax credit     Has contravened any of the statutory provisions of this Act or Rules made thereunder

    Then the Proper Officer can:
    Inspect: any place of business of the assessee who has evaded the tax or of the transporter who transported     such     tax evading     goods     or
    godown/warehouse operator in which such tax evading goods or accounts relating thereto has been stored
    67.2. Comparative review
    Search & seizure: the goods or any documents or books or things which are liable for confiscation and which will be instrumental in the proceedings under this act during the enquiry period.
    Electronic devce
    Seal or Break: open the door of any premises, storage, box or receptacle where goods, books of accounts etc. are concealed and when access to the same is denied to the said officer.

    (i)    Similar powers relating to inspection, search and seizure is present in all the current indirect tax laws viz., Finance Act, 1994 (Service Tax), Central Excise Act, 1944 and in most of the State VAT laws.
    (ii)    Interestingly, under the CE Act, provision has been made to safeguard the interest of the assessee against harassment by way of irregular search and seizure by the tax officers. Section 22 of the CE Act prescribes fine upto Rs. 2,000/- on an officer who conducts vexatious search, inspection etc. This provision is conspicuously absent in the CGST Act.
    67.3. FAQs
    Q1.     Under what circumstances there can be inspection, search or seizure operations?
    Ans. Initiation of action under this section is when the proper officer not below rank of Joint Commissioner ‘has reason to believe’ that
    (a)    the taxable person has suppressed any transaction of supply of goods or services or stock in hand or claimed excess input tax credit or has contravened any of the statutory provisions.
    (b)    any person engaged in the business of transportation of goods or an owner or operator of a warehouse or godown or any other place where goods are stored, which have escaped tax payment or has kept his accounts or goods in a manner likely to cause tax evasion.
    Q2.     What is the meaning of the phrase ‘reason to believe’?
    Ans. The phrase ‘reason to believe’ has been interpreted by various courts distinguishing it from ‘reason to suspect’. In the case of Crompton Greaves Ltd. vs. State of Gujarat, 120 STC 510 the Court observed that, “these words suggest that belief must be that of 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 rumor. The powers under the present section are wide but not plenary; the words of the section are ‘reason to believe’ and not ‘reason to suspect’.” Q3.  Whether goods so seized can be released on provisional basis?
    Ans. The goods so seized can be released on provisional basis if bond and security as may be prescribed is furnished or upon payment of applicable tax, interest and penalty.
    67.4.      MCQs
    Q1.     Initiation of action under this section is by proper officer not below the rank of
    ____________________
    (a)    Superintendent
    (b)    Inspector
    (c)    Joint Commissioner
    (d)    Commissioner
    Ans. (c) Joint Commissioner
    Q2. In how many days, the officer shall return the seized goods / documents which are not relied upon while issuing notice?
    (a)    15 days
    (b)    30 days
    (c)    60 days
    (d)    90 days Ans. (b) 30 days

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.