Section 67 of the CGST Act, 2017 empowers officers for inspection, search, and seizure in places of business or residences. This article delves into the nuances of this section, examining the scope, authority, and legal implications.
SEC 67 – POWER OF INSPECTION , SEARCH , SEIZURE
Sec 67 of CGST ACT, 2017 deals With the inspection , search & Seizure of any places of business or any other place which includes residence also
– of the taxable person or
– The persons engaged in the business of Transporting Goods or
– An owner or operator of a warehouse or a godown or
– where goods have kept which proper office believe that it has escaped payment of tax.
Now, belief of proper officer depends on case to case, but it should be material fact which shows tax has not been paid or Input tax has been wrongly availed.
1. Who is empower to search and inspect under the Act and cross empowerment U/s 6 of State/ Centre GST Act, 2017?
See 67 empowers a Proper Officer not below the rank of Joint commissioner to issue GST FORM INS 1 (search warrant ) it is mandatory under the Act that Joint Commissioner can only carry out search , seizure or officer authorized by him in writing otherwise the search , seizure conducted will be illegal.
Allahabad High Court Writ Tax No- 1378 of 2022 dated 13.12.2023 Gaurav Saurav traders and contractors V/s State of U.P.
This application under Article 226 of the Constitution of India has been filed by the petitioner aggrieved by the action of search and seizure carried out on the premises of the assessee on September 2, 2022. Case of the petitioner is that the mandatory provision with regard to Section 67 (1) of CGST Act has not been complied with by the Joint
Commissioner while granting the authorization for search and seizure. The entire search and seizure that has been carried out is based on an illegal authorization and is accordingly quashed and set aside. The Authorities are directed to release all goods and documents that they may have detained or confiscated within a period of 15 days from date.
but inspection can be done by any officer authorized by Joint Commissioner on his behalf in writing, mentioned in INS-1.
Circular No. 3/3/2017 GST Dated 05th July 2017 deals with the list of proper officers relating to provisions other than registration &composition under the CGST Act 2017.
Proper officers list relevant to sec 67
(only extract of above Circular) Table
| Sr no |
Designations of The officer | Sections under the Act or rules made thereunder. |
| 1 | Principal Commissioner /Commissioner of central tax | SEC -67 (7) |
| 2 | Additional or Joint commissioner of central tax. | Subsection (1)(2)(5)&(9) of section 67 Sub Rule (1)(2)(3)&(4)of Rule 139 Sub Rule (2) of Rule 140 |
| 3 | Superintendent of central tax | Sub section (11) of Sec67 |
2. Section 67 (2) read with rule 139 (4)
If any goods, documents or things are liable for confiscation or seizure, then proper officer should issue GST FORM INS-2 by mentioning list of documents seized.
If It is not practicable to seize any such goods (depending on case to case)the proper office or authorized officer may serve on the owner or custodian of goods an order of prohibition in FORM GST INS -03 that he shall not remove or part with or deal with the goods without previous permission of such officer but said person can take copies of any documents seized in the presence of proper officer.
3. See .67 (3) –
If documents , book or things seized are not relied upon for the issue of notice under this act shall be returned within 30 days of issue of the said notice.
4. Section 67(4)
The officer authorized above 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, register or documents of the person suspected to be concealed . where access to such premises, almirah , electronic devices, box or receptacle is denied.
5. Section 67(5)
Gives right to the person from whose custody such documents are seized, to make copies of it.
Bombay High Court Writ Petition No. 2836 & 2837 of 2023 date 13.12.2023.
Search and Seizure – The petitioner challenged the SCN dated and 10.04.2023 issued under Section 74 of the Act. The counsel for the Petitioners submitted that raids were conducted in terms of Section 67 of the said Act, during which all their documents have been attached and seized. The Petitioners have applied to the Respondents for the release of the documents or at least furnish of copies of such documents in order to enable them to file effective responses to the impugned notices. The court observed that the Respondents are duty-bound to comply with the requirement of Section 67 (5), which provides that the person from whose custody any documents are seized 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.
Held that:- The Hon’ble High Court directed the Respondents to dispose of the Petitioners` representations.
6. Section 67(6) , read with rule 140(1) –
The seized goods may be released on a provisional basis upon execution of bond for the value of goods in Form GST INS – 04.
7. Section 67(7) –
If no notice is issued within 6 months from the date of seizure , all the seizure goods , documents or things must be returned to the owner.
This 6 months can be extended further 6 months but only with the prior approval of principal commissioner as mentioned in above circular.
8. Section 67(8) read with rule141-
Where the goods or things seized are of perishable or hazardous in nature & if the taxable person pays on amount equivalent to seized goods then such goods must be released forthwith in order FORM GST INS -5. And if the taxable person fails to pay the amount in respect of said goods or things then the proper officer may dispose off such goods or things and amount so realized shall be adjusted against Tax, Interest and Penalty. Officer must alos prepare the inventory of such goods seized as per section 67(9).
That means if goods are perishable in nature proper officer not bound to release goods on provisional basis as mentioned under section 67(6).
Adarsh Tobacco Co. Vs. state of U.P. (Allhabad High Court) 17.03.2023
Seized perishable goods not become non- perishable for non-release of goods within 15 days.
Notification No. 27/2018 – Central Tax dated 13.06.2018 notifies the goods or the class of goods which shall as soon as may be after its seizure under section 67(2) be disposed off by the proper officer having regard to the perishable or hazardous nature, depreciation in value with passage of time, constraints of storage space.
List of Perishable or hazardous goods:-
(1) Salt and hygroscopic substances
(2) Raw (wet and salted) hides and skins
(3) Newspapers and periodicals
(4) Menthol, Camphor, Saffron
(5) Re-fills for ball-point pens
(6) Lighter fuel, including lighters with gas, not having arrangement for refilling
(7) Cells, batteries and rechargeable batteries
(8) Petroleum Products
(9) Dangerous drugs and psychotropic substances
(10) Bulk drugs and chemicals falling under Section VI of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)
(11) Pharmaceutical products falling within Chapter 30 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)
(12) Fireworks
(13) Red Sander
(14) Sandalwood
(15) All taxable goods falling within Chapters 1 to 24 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)
(16) All unclaimed/abandoned goods which are liable to rapid depreciation in value on account of fast change in technology or new models etc.
(17) Any goods seized by the proper officer under section 67 of the said Act, which are to be provisionally released under sub-section (6) of section 67 of the said Act, but provisional release has not been taken by the concerned person within a period of one month from the date of execution of the bond for provisional release.
9. Now the question arises Whether the supply of used vehicles , Seized and confiscated goods , old and used goods , waste and scrap by government departments are taxable under GST?
Yes. Clarification has been issued by the board in respect of same through circular No. 76/50/2018- GST Dated 31st Dec 2018, wherein it has been clarified that the same supply is liable for GST under RCM if it is supplied to Registered person , as mentioned in Notification No. 36/2017 – CT and Notification No. 37/2017- IGST dated 13.10.2017 .
10. Can officer do spot recovery at the time of inspection , search and seizure ?
No. without determination of tax liability U/s 73 or U/s 74 spot recovery can not be made.
Instruction No 01/2022-23 (GST –Interest ) at 25.05.2022
It is further observed that recovery of taxes not paid or short paid, can be made under the provisions of Section 79 of CGST Act, 2017only after following due legal process of issuance of notice and subsequent confirmation of demand by issuance of adjudication order. No recovery can be made unless the amount becomes payable in pursuance of an order passed by the adjudicating authority or otherwise becomes payable under the provisions of CGST Act and rules made therein.
Therefore, there may not arise any situation where “recovery” of the tax dues has to be made by the tax officer from the taxpayer during the course of search, inspection or investigation, on account of any issue detected during such proceedings. However, the law does not bar the taxpayer from voluntarily making payment of any tax liability ascertained by him or the tax officer in respect of such issues, either during the course of such proceedings or subsequently.
Therefore, it is clarified that there may not be any circumstance necessitating ‘recovery’ of tax dues during the course of search or inspection or investigation proceedings. However, there is also no bar on the taxpayers for voluntarily making the payments on the basis of ascertainment of their liability on non-payment/ short payment of taxes before or at any stage of such proceedings. The tax officer should however, inform the taxpayers regarding the provisions of voluntary tax payments through DRC-03..
Division bench of Gujarat H.C. in Bhumi Associates vs UOI 2021 (4) GSTL-36 Pass the order to regulate powers of officers carryings search /seizure no recovery in any mode at the time of search inspection or seizure proceedings U/S 67 even if Assessee come forward to make voluntary payment by filings DRC -03 the Assessee should advice to file DRC -03 Next day or after end of proceedings .
Delhi High Court in the case of Sapphire Intex Limited V/s Union of India dated 14.12.2023 Since the deposit made by the petitioner has been held to be involuntary and the respondents are directed to forthwith process the petitioner’s claim for refund, this court does not consider it apposite to adjudicate other issues raised by the petitioner. It is also clarified that the respondents are not precluded from taking any other necessary steps in accordance with law.
The provisions of Code of Criminal Procedure 1973 relating to search & seizure also applicable to search & seizure under this Act. Section 100 of Code of Criminal Procedure , 1973 deals the same.
Same has been given in INST NO 01/2020-21 date 02/02/2021
11. Can cash be seized U/S 67 considering it as a things ?
No. cash can not form part of stock.
Supreme Court has in the case State Tax Officer (IB) v. Shabu George dismissed the Special Leave Petition filed by the Revenue department against the Kerala High Court decision holding that in an investigation aimed at detecting tax evasion under the provisions of the GST, cash cannot be seized especially when it is the admitted case that the cash did not form part of the stock in trade of the assessee’s business.
The Hon’ble Gujarat High Court in the case of M/s. Bharatkumar Pravinkumar and Co. v. State of Gujarat [Special Civil Application No. 26222 of 2022 dated October 26, 2023] allowed the writ petition and held that cash would not be considered as goods for the purpose of seizure proceedings, and it is not justified to retain cash seized by the Revenue Department for more than six months, without issuance of Show Cause Notice (“SCN”)
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