Adv. Dinesh Verma
Taxation is the one of the most source of revenue to the government. Our government has performed various methods to stop tax evasion but tax evasion is the major problem in India. The authority to levy tax is derived under Article 265 of the Constitution of India which states that ‘No tax shall be levied or collected except by the authority of law’. To decrease tax evasion govt. has implemented the concept of inspection, search, seizure and arrest. In this article we can understand about what are Search, Seizure, Inspection and Arrest under GST.
The term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.
In Law Dictionary ‘seizure’ is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.
It is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.
The term ‘arrest’ has not been defined in the GST act. However as per judicial pronouncements it denotes ‘the taking into custody of a person under some lawful command or authority’. In other words a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant.
5) Section 67 of CGST Act, 2017
a) Suppressed any transaction of supply
b) Suppressed stock of goods in hand
c) Claimed excess in input tax credit
d) Contravened any provisions of the Act/Rule to evade tax.
a) The taxable person.
b) The transporter.
c) Owner/Operator of a warehouse/godown.
Certain safeguards are provided in respect of power of search and seizure. These are:
7) Section 68 Inspection of Goods in Movement
8) Section 69 Power to Arrest
(a) Supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;
(b) Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
(c) Avails input tax credit using such invoice or bill referred to in clause (b);
(d) Collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
(e) Evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);
(f) Falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
(g) Obstructs or prevents any officer in the discharge of his duties under this Act;
(h) Acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;
(j) tampers with or destroys any material evidence or documents;
(k) Fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(l) Attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section,
Certain safeguards provided under Section 69(3) for a person who is placed under arrest:
i. If a person is arrested for a cognizable offence, he must be informed of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest;
ii. If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner of CGST/SGST can release him on bail and he will be subject to the same provisions as an officer in charge of a police station under section 436 of the Code of Criminal Procedure, 1973;
iii. All arrest must be in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to arrest.
In the case of D.K. Basu v. State of West Bengal reported in 1997 (1) SCC 416, the Hon’ble Supreme Court has laid down specific guidelines required to be followed while making arrests:
In any tax administration the provisions for inspection, Search, Seizure and Arrest are provided to protect the interest of genuine tax payers (as the tax evaders, by evading the tax, get an unfair advantage over the genuine tax payers) and as a deterrent for tax evasion. These provisions are also required to safeguards govt. legitimate dues. Thus these provisions act as a deterrent by checking evasion provide a level playing field to genuine tax payers.
It may be mentioned that Search, Seizure, Inspection and Arrest are exercised, only in exceptional circumstances and as a last resort, to protect the Government revenue. This power can be used only after keeping in mind of Principle of Natural Justice, issue of Show Cause Notice & other legislative law.
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The Articles are for academic interest only.The comments/content in the article are purely a matter of interpretation and not binding on regulatory or tax authority.