Specific provisions for drawal of samples have not been issued in GST Laws except for Section 154 of CGST which is as follows:
Section 154 of CGST Act’2017:Power to take samples.-
“The Commissioner or an officer authorised by him may take samples of goods from the possession of any taxable person, where he considers it necessary, and provide a receipt for any samples so taken.”
Intent of this Section is to provide Power to the Commissioner, or an Officer authorized by him to take samples of the goods from the possession of any taxable person where they consider it is necessary.
As Rules or any procedure for this section is not prescribed anywhere and I didn’t found any article on this section therefore I’m taking help of procedure and case laws of other regime to understand how this section might work in future?
RULE 56 OF THE CENTRAL EXCISE RULES’1944
In erstwhile Indirect Taxes Regime Under Rule 56 of The Central Excise Rules’1944, the Central Excise Officer was empowered to take samples for the purposeof testing the samples.
Relevant Extract of Rule 56
56. Taking of samples for excise purposes.-
(1) The manufacturer shall permit any officer to take samples of any manufactured or partly manufactured goods or of any intermediate or residual products resulting from the manufacture thereof, in his factory.
(2) The officer referred to in sub-rule (1) shall conduct the test from the samples taken under that sub-rule and communicate to the manufacturer the result of such test.
(3) (a) Where the officer is of the opinion that the samples after completion of the test can be restored to the manufacturer, officer shall send a notice in writing to the manufacturer requesting him to collect the samples within such period as may be specified in the notice.
(b) If the manufacturer fails to take delivery of the samples within the period specified in the notice referred to in clause (a),the samples shall be disposed of in such manner as the Commissioner of Central Excise may direct.
(4) Where a manufacturer is aggrieved by the result of the test, he may, within ninety days of the date on which the result of the test is received by him, request the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise that the samples be re-tested.
TEST REPORT OF SAMPLE IS BINDING ON BOTH DEPARTMENT & ASSESSEE
The Department has a well-defined established system for collecting of samples. Unless proved beyond reasonable doubt that there was gross negligence or fraud or intricate process has not been followed, results of such tests binding both on department and assessee. Since testing is binding on assessee, by principle of equity, they are binding on Department also.
CAN SAMPLE BE DRAWN IN ABSENCE OF ASSESSEE OR ITS REPRESENTATIVE?
In Tata Chemicals ltd. vs Commissioner of Customs (Preventive), Jamnagar, [ (2015) 58 taxmann.com 126 (SC)] matter reached Supreme Court where the assessee claimed that sample was taken without following procedure and IS 436 of Indian Standard Institute and, therefore, report thereof could not be relied. Assessee further alleged that its Representative was estopped from challenging ‘taking of samples’.
Apex Court held that If method of testing of any item is not mentioned, then Indian Standard Institution’s method should be applied. Since samples were drawn contrary to express provisions of IS 436, test reports based on same cannot be looked at. Further, on facts, no representative of assessee was present at time of taking samples. Supreme Court ruled in favour of the assessee.
COMMITTEE OF EXPERTS FOR GIVING OPINION
Can a “Committee of Experts” be formed for giving opinion regarding quality of goods? This question was answered by Madras High Court in case of V.A. RAMRAJ vs COLLECTOR OF CENTRAL EXCISE, MADRAS [ (1980) 6 ELT 459 (Mad.)] that Officer may not be expected to have the necessary expertise to render his opinion whether the alleged substituted goods are of the same quality as those goods which entered into the warehouse on a lawful permit. In order to secure an analytical report, the practice appears to be to call a committee of experts in the same trade to render an opinion thereon. This is neither an unreasonable method of ascertaining the quality of the goods in the warehouse, nor could it be said to be an illegal exercise of power in the Central Excise Official who is acting in the course of his investigation to detect an irregularity or illegality committed by the warehouse keeper.
Therefore, the practice of securing an analytical report regarding the quality of goods from the committee of experts in the same trade is neither unreasonable method of ascertaining the quality of goods in the warehouse nor could it be said to be an illegal exercise of power in Officer who is acting in the course of investigation to detect an irregularity or illegality committed by the warehouse keeper.
REQUEST FOR RETEST OF THE SAMPLE BY ASSESSEE
What happens when Assessee request for retest of the sample but Custom Authorities rejected the same asremanent sample was not available? This was the question before Mumbai CESTAT in case of Veenu Agency vs Commissioner of Customs (Exports), Mumbai [ (2008) 232 ELT 527 (Mumbai – CESTAT). Appellant in this case got sample tested by private research institute and CESTAT held that benefit of test report shall be granted.
CAN TESTING LABORATORY BE PENALISED FOR MIS DECLARATION BY THE PARTY?
Can testing Laboratory be Penalised for giving the test report vague and not upto the mark was the question before Mumbai CESTAT in case of Geo-Chem Laboratories (Rajkot) (P.) Ltd. vs Commissioner of Customs (Export), Mumbai, [ (2010) 250 ELT 547 (Mumbai – CESTAT)]. It was held that the job of testing laboratory is only to analyse the samples and accordingly to prepare a test report. The testing laboratory has nowhere any role in misdeclaration or undervaluation done by the owner of goods from which sample was drawn. In fact, when the testing laboratory has given the vague report as it was not up to the mark as prescribed by the literature and on the basis of that vague test report, the department was able to find that the impugned goods are mis declared of the quantity and the value.
CAN GOODS TAKEN FOR SAMPLES BE RETURNED?
Samples taken out should be returned when no longer required. This is similar to provisions under Rule 16 of erstwhile Central Excise Rules.
PROCEDURE FOR DRAWAL AND ACCOUNTING OF SAMPLES
Department can draw two types of samples:
1. Samples for Test Purposes
2. Samples for Market Inquiry
In GST, objective of drawal of these samples could be either classification issue or valuation issue.
When samples are drawn for Test Purposes, they would be send to in-house laboratory for testing quality and/or specification thus classification would be established. In case there are no in-house laboratory they should be send to Government approved/associated Test Centres.
RESPONSIBILITY OF THE OFFICER DRAWING THE SAMPLES:
Officer drawing the samples would be responsible for preservation of the samples and is required to deliver the samples to the Laboratory in good condition. The samples drawn by the Range staff but not sent for test to laboratories for test to laboratories should be preserved for 6 (six) months from the date of analytical report on the sample tested. In case of any discrepancy being noticed, the samples have to be preserved till the period of Appeal or Revision application is over or till disposal of Appeal/Revision Application.
Officer is also responsible to maintain accounting record of the samples. While drawing the sample Officer has to issue “receipt” to the assessee with respect to samples drawn.
Except where there are special instructions for particular kind of samples, the representative samples from such or any lot must be drawn in quadruplicate in the presence of the owner/manager of the taxpayer.
QUANTITY OF THE SAMPLES:
Quantity of the samples is not specified in GST Laws whereas this was specified in Excise Laws. The quantities of goods or materials taken for testing should be the minimum necessary for testing and the Commissioner will, in consultation with the Chemical Examiner concerned, specify for each kind of excisable goods or materials the size of samples for this purpose. However, in some cases a specific quantity was asked that was to be supported by requisition order from Chemical Examiner.
COST OF SAMPLES WHEN DRAWN BY THE DEPARTMENT
In respect of samples drawn by the officers of the GST Department for ascertaining the identity of goods/its classification or any other official purposes relating to GST, the cost of samples may be reimbursed on assesses request out of the contingency by the divisional officer. The cost of the containers required for drawl of samples may not be much and if the same cannot be borne by the assesse through persuasion the same should be borne by the Department.
SAMPLES TO BE SEALED:
The samples should be sealed with GST Department seals and a declaration obtained from the owners to the effect that the samples drawn are representative of the lot and that he is satisfied with the manner of drawing of the sample. The assessee, if I so desires, may also be permitted to affix his seal on the samples.
When we analyse Power of Sample, we can safely conclude the following:
GST was implemented on July’2017 and we will complete 5 years of GST in few months from here. But even after so many years GST Department has forgot to issue Guideline for such an important provision or power. With this article I request GST Department that this should be addressed immediately on an urgent basis and relevant procedure to be notified soon.